Bartering-type transactions and income reporting

[mtwaynew]

We are a retailer of goods that pays a variety of our contractors for their services with the goods that we sell, rather than cash.  Examples:  advertisers, IT contractors, etc. 

We realize we need to issue 1099's to our contractors to represent the value of the goods we sent them, and that they are required to report that as income.  However my question is this:

Do we also need to report the value of the services we received (in exchange for these goods) as "income"?  This doesn't make sense to me because if we paid cash we would just code these as business expenses on our end, and we are looking to do the same with the value of the goods we are spending for these various business expenses (various contractor services).

[AmeliesUncle]

No, you don't claim any income.

Just be careful about claiming the deduction.  You will already be getting the deduction by claiming cost of the items (or by lower inventory), so you DON'T enter the deduction again as a payment to a contractor.

[Critter-3]

Actually the barter income is reported on the Sch C and the expenses are deducted even if they are a wash.  Since you have to issue a 1099 to them that will balance out the Sch C correctly.   The rules are clear ... read them here :    https://www.irs.gov/taxtopics/tc420#:~:text=Reporting%20Bartering%20Income,from%20Business%20(Sole%2...).

[AmeliesUncle]

If I'm reading thing correctly, the OP doesn't have any income.   If it was paid in cash, the OP wouldn't be claiming income, just the expense.   The contractors have the income (and no expense, so it balances out from an overall accounting/tax perspective).