Friday, January 2, 2015

The Liability of Bartering for Photographic Services

If I were Shantanu Starick I would be a bit worried about the taxing authorities in my home country right about now.

Starick achieved a degree of notoriety for the two years he set as a goal to spend zero actual currency, and instead exchanges his photographic services for good and services in return, hoping to visit all 7 continents. So far? 5 out of 7.

One BIG problem?

EVERY good and service he received is taxable, and he must pay taxes on them at their fair market value. It gets worse in that he's travelled to several different continents doing this, all of which have taxing authorities that want their piece of the pie.

First, let's agree that it's not fair that you cannot donate your services to a charity - with, say, a fair market value of $1,000, and get that value in return as a charitable donation. If your deliverable was a CD of images, and nothing more, you could only deduct the actual cost of that CD. Even Picasso couldn't get a deduction for a painting's value beyond the cost of the canvas and oils. However, when you barter something with someone, your receipt of goods or services is deemed to be income by not just the Internal Revenue Service in the US, but, unfortunately for Shantanu, the Austrailian taxing authorities.

For reference: IRS Website - Topic 420 - Bartering Income
Bartering is the exchange of goods or services. Usually there is no exchange of cash. An example of bartering is a plumber exchanging plumbing services for the dental services of a dentist. You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.
For Mr. Starick's reference:

Austrailian Taxation Office - Home>Non-profit>Income, sales, fundraising & donations>In detail>Other income
What is the tax treatment of bartering transactions?
Barter transactions are assessable and deductible for income tax purposes to the same extent as other cash or credit transactions.
(Continued after the Jump)

The good folks over at PetaPixel posted this article - Photographer Shares How He Spent Two Years Living on Photos Instead of Money - and they didn't pass any judgement, per se, on the project.

I can offer you some insights on this project - it devalues photography. Period. The value of a wedding is anywhere between $2,000 and $5,000, with many brides paying far more, and yes, some paying much less. I can't think of how the many brides and grooms he bartered with provided him with even $2k in services during his time with them. There's also a big problem with that. If he bartered with a company and provided them with $10,000 in services for an ad campaign, he may well have to pay taxes on that income and he won't have any receipts to show expenses related to the providing of those services, and so he'll pay taxes on the fair market value. Further, and I know his hippie parents would be proud (his characterization of them, not mine - watch the video) he wants this mindset to spread far and wide.

Bad idea.

The next photographer will come along with a mortgage to pay and a family to feed, and the NYC restaurateur will want to barter the night's meal for photography! "No appetizers or alcohol, and pasta only, the Filet Mignon is not on *your* menu misseur! Mon Dieu!"

So the bar owners in NYC that gave him their apartment for two weeks, and an "all you can drink" tab at their watering hole? He will have to pay fair market value for 14 days of lodging in NYC (at, what, about $500/night depending upon where their apartment was) and the bar tab - that'll all be taxed as income he received. The restaurant in NYC that let him eat for free on day 5 of his lengthy stay? He'll have to pay taxes on the fair market value for each of those meals.

Oh, and here's even a bigger headache - EVERY recipient of photographic services is required to report as income the fair market value of his photography. So, if that same restaurant that provided him with 20 free meals which they might have grossed $400 for could very well be required to pay taxes as if they received $1,000 in income. So, An IRS agent who covers New York City would call up a New York City food photographer and say "hey, how much would you charge to do a chef's portrait and 8 dishes done by the chef?" And if the answer was $1,000, that could be what they would have to report as having received a barter income - just like the income from multiple diners in their place of business.

It also comes across that he hasn't spent a dime on anything else. As such, it's also worrisome that in the past two years he hasn't expended any money for, say, liability insurance in the event he has an on-shoot accident, or gear insurance in the event something is stolen, or health insurance - good thing he looks healthy, but, well, one never knows when they'll trip down a flight of stairs and be laid up. Heck I'm guessing he'll have to make sure his arm cast is molded around a camera grip so he can barter with the ambulance EMT's for their Facebook and LinkedIn portraits, and the hospital he's laid up in for staff portraits, surgery documentation and facilities images during his stay. I'm guessing though, they'll just rather get paid the $20k or so for what that short simple stay will be than barter for his photography.

Just sayin'.

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