IRS Frees Banner Exchange Sites From Paperwork Burden

The Internal Revenue Service this week eased the tax reporting burden for companies that facilitate the exchange of products and services, like those that coordinate advertising banner
exchanges, as long as the items involved are worth less than $1.

Previously, ad barter sites would have had to report every transaction involving the exchange of something of value, because those deals might have tax consequences. However, since banner ad impressions are, almost universally, worth less than a dollar, this decision frees these companies from mountains of potential paperwork.

Companies affected include MSN
,, SmartClicks, Exchange-it, and Impressionz.
The new agency decision isn’t aimed at companies that exchange banner ads
between themselves without the help of an intermediary. Under IRS rules,
firms must report such transactions, if they’re valued at more than $600.

“The reporting burdens for either taxpayers or tax administrators should not outweigh the benefits of collecting information on transactions with
minimal value,” said IRS Commissioner Charles Rossotti.

“We welcome input from those involved in barter exchanges, and other
electronic commerce or Internet services, as we develop rules that will be workable and fair for all involved.”

The change reflects the IRS’s acknowledgment of the inadequacies of a tax
code written before the Internet age, since the easy exchange of items
worth fractions of a cent can now be done with minimal cost. The exchange
is so easy, that, the agency records, reporting requirements should be easy as well.

The agency is still seeking input on other regulations it is in the process
of considering. It’s questioning whether special rules should apply for the
bartering of electronic or Internet service. Additionally, it is trying to
decide whether this per-transaction exception should still apply if the
annual aggregate number is above a certain amount.

The deadline for public comment on the proposed changes is April 4.

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