Editing Local exchange trading system (section)

== Operation ==
A list of services offered by network members is put together to create a LETS scheme, and trading takes place between members using a local currency. The LETS foundation is a virtual currency, a check book, a directory as well as a transparent accounting system built on trust and community regulation.<ref name="Explorations in heterotopia: Local"/>
The first LETS required nothing more than a telephone, an answering machine and a notebook.<ref>{{cite podcast|url=http://media.blubrry.com/extraenvironmentalist/p/extraenvironmentalist.com/audio/low/Ep45_final_lowbitrate.mp3 |title=Opening Money |host=The Extraenvironmentalist |date=2012-11-07}}</ref> Since then, there have been several attempts to improve the process with software, printed notes, and other familiar aspects of traditional currencies.
# Local people set up an organization to trade between themselves, often paying a small membership fee to cover administration costs
# Members maintain a directory of offers and wants to help facilitate trades
# Upon trading, members may 'pay' each other with printed notes, log the transaction in log books or online, or  write cheques which are later cleared by the system accountant.
# Members whose balances exceed specified limits (positive or negative) are obliged to move their balance back towards zero by spending or earning.

LETS is a full-fledged monetary or exchange system, unlike direct [[barter (economics)|barter]]. LETS members are able to earn credits from any member and spend them with anyone else on the scheme. Since the details are worked out by the users, there is much variation between schemes.

LETS is not a scheme for avoiding the payment of taxation, and generally groups encourage all members to personally undertake their liabilities to the state for all taxation, including income tax and goods and services tax.  In a number of countries, various government taxation authorities have examined LETS along with other forms of [[counter trade]], and made rulings concerning their use. {{Citation needed|date=March 2012}}  Generally for personal arrangements, social arrangements, hobbies or pastimes, there are no taxation implications.  This generally covers the vast majority of LETS transactions.{{Disputed inline|Tax|date=May 2010}}  Taxation liabilities accrue when a [[tradesperson]] or professional person provides his or her professional services in payment for LETS units, or a registered or incorporated business sells part of its product for LETS units.  In such cases, the businesses are generally encouraged to sell the service or product partly for LETS units and partly in the national currency, to allow the payment of all required taxation. This does imply, however, that in situations where national-currency expenditures would be tax-deductible, LETS must be as well.

In a number of countries, LETS have been encouraged as a social security initiative.  For example, in Australia, [[Peter Baldwin (politician)|Peter Baldwin]], a former Minister of Social Security in the Keating government, encouraged LETS as a way of letting welfare recipients borrow against their welfare entitlement for urgent personal needs or to establish themselves in business.<ref>{{cite web|last=Wilson|first=David|date=2015-07-30|title=A cashless economy? Where's the catch?|url=https://www.smh.com.au/money/saving/a-cashless-economy-wheres-the-catch-20150730-gingrc.html|access-date=2021-01-18|website=The Sydney Morning Herald|language=en}}</ref>

Since their commencement over 30 years ago, LETS have been highly innovative in adapting to the needs of their local communities in all kinds of ways.  For example, in Australia, people have built houses using LETS in place of a bank [[mortgage loan|mortgage]], freeing the owner from onerous interest payments.{{Citation needed|date=March 2008}}