Service call cost: 8 IRS and state tax references

• You can figure your deductible car expense with one of two methods: the standard mileage rate method or the actual expense method.
• Which method applies to your specific van determines the deductible car expense, not the cost of a single trip.
• The standard mileage rate method applies a fixed rate for each mile, while the actual expense method uses the car's actual costs.
• Use the IRS standard mileage rates for the half of 2026 in which each trip falls, as set out in Announcement 2026-11.
• Compare delivery charges on a bill with the New York examples, such as $94.95 ($89.95 + $5.00).

The Internal Revenue Service notes that for 2026 there are different standard mileage rates for the first and second halves of the year, directing readers to IRS Announcement 2026-11 Internal Revenue Service . This split requires you to identify which half of the year a service call falls into before applying the rate. The agency refers you to Standard mileage rates or Publication 463, Travel, Gift, and Car Expenses, for the specific cost of operating your car for business Internal Revenue Service . These publications define the measurement track for the van portion of your job cost. To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business Internal Revenue Service . This initial choice locks in your method for that vehicle's first business year. In later years, you can choose to use the standard mileage rate or actual expenses Internal Revenue Service . Knowing whether you are in the first year or a subsequent year determines which rule applies to your current costing worksheet.

Check the date on your odometer log to see if the trip crosses the mid-year line. If it does, you need both rate references from Announcement 2026-11. Confirm whether this is the first year the van has been available for business use.

When you choose actual expenses instead of the standard mileage rate, the Internal Revenue Service specifies how to handle the van's value over time. According to Internal Revenue Service , the Modified Accelerated Cost Recovery System (MACRS) is generally the only depreciation method car owners can use for any car placed in service after 1986. This rule applies specifically to cars owned by businesses or individuals who track their own costs rather than using the mileage-based deduction. If your service van was first used for business work after that date, MACRS generally governs how you write off its cost.

The same IRS page directs readers to Publication 463 for further details on these calculations. That publication explains the depreciation limits, the special depreciation allowance, and special rules applicable to leased cars. For a shop that owns its fleet, checking those limits ensures you do not claim more depreciation than the law allows for that specific year. You should review Publication 463 before finalizing your expense report to confirm which portion of the van's cost is deductible now or in later years.

If the van serves both business and personal purposes, the deduction shrinks to match your actual usage. The IRS states that if you use the car for both business and personal purposes, you may deduct only the cost of its business use. Only that business share of the depreciation amount qualifies for your tax return. Keeping a clear log of business miles supports this split, allowing you to isolate the exact fraction of the van's cost that belongs on your business books.

Suppose a van logs 150 business miles and 50 personal miles in one month. Under the business-use rule, the deduction is based on the 150 business miles, and the 50 personal miles are excluded.

New York State Department of Taxation and Finance explains that charges for shipping or delivery included on a bill are taxable if the product or service being shipped is taxable. New York State Department of Taxation and Finance notes that the terms "shipping" and "delivery" also cover charges identified as transportation, handling, or postage. This rule applies to Shipping and Delivery Charges specifically. When you build a quote, the taxable base is not just the labor rate; it can include shipping or delivery charges billed with a taxable service.

The department provides three specific worked totals to illustrate how these components combine into the final amount subject to tax. These figures show exactly where the delivery fee sits within the calculation, allowing you to verify your own billing structure against a published example. You can use these numbers to check whether your invoicing software groups these charges correctly before the tax engine runs its calculation.

In the first example, the amount subject to tax is $94.95, which consists of $89.95 plus a $5.00 delivery charge. The second example states that sales tax must be computed on the total charge of $3,750.00. The third example shows an amount subject to tax of $250,250, described as item 5 plus $250 for its delivery. These are not prices for a standard service call; they are illustrative totals demonstrating how delivery costs integrate into the taxable base. Do not treat these specific dollar amounts as benchmarks for what a customer should pay for a typical repair. Instead, use them to confirm that your system adds the delivery fee to the pre-tax subtotal rather than listing it separately from the tax calculation.

When reviewing your own invoices, look for lines labeled "transportation," "handling," or "postage." If the underlying service is taxable in New York and the line is a shipping or delivery charge, it joins the main charge in the taxable total. This distinction prevents under-reporting of the tax base when multiple fee types appear on a single document. Check your price book settings to ensure that any shipping or delivery charge on a taxable service is tagged to that service line. If your software allows you to split these fees onto different lines, verify that the tax rules applied to each line match the jurisdiction's definition of what constitutes a delivery charge. For totals and rounding, see Invoice total calculation .

The Texas Comptroller of Public Accounts states that when a business location has a local tax rate under 2 percent and taxable service is provided in other local taxing jurisdictions, local use tax may also be due. This rule applies specifically when the business location's rate is under that two-percent line while the work happens elsewhere. For details on collecting these amounts in those other areas, the agency points to Publication 94-105, Local Sales and Use Tax Collection – A Guide for Sellers, and Rule 3.334, Local Sales and Use Tax. These documents outline the process for handling local use tax when the service crosses jurisdictional lines within the state. For related checks, see repair quote sales tax checks .

Beyond the tax total, the profit figure on your invoice requires careful distinction between two common percentages. ConstructionOnline notes that using the exact same numbers produces a percentage for margin that is considerably less than the markup percentage. These two percents are not one figure on the call. Reporting a markup percentage as margin therefore overstates the margin for the same numbers. Keep the definitions separate when reviewing the bottom line of a service quote.

The following table lists eight reference items for checking a service call, sourced directly from IRS and state tax pages. Each row names the publisher and the specific document where the figure appears. Use this as your checklist before finalizing a quote.

Check each source document listed above to verify the current status of these rules for your specific jurisdiction.

Related guides: Check 4 agency due dates before you deposit payroll tax · Auto repair invoices: 7 checks before you bill a job · Field service settings to verify: 8 job checks .

Which figures should you measure a service call cost against?

Measure the taxable bill amount against published state tax examples that show how delivery charges are included in the total. These two tracks keep vehicle costs separate from sales tax calculations on the invoice.

Does the standard mileage rate apply when the van is also personal?

Only the business use of the car is deductible, according to Internal Revenue Service . The full mileage rate does not apply to the personal portion of the trip.

What New York totals show delivery inside the taxable amount?

The New York State Department of Taxation and Finance lists an example where the amount subject to tax is $94.95 ($89.95 + $5.00). Another example shows the amount subject to tax is $250,250 (item 5 + $250 for its delivery). These figures demonstrate that shipping or delivery charges are added to the base before tax is calculated.

Is the margin percent the same figure as the markup percent?

No, ConstructionOnline notes that using the exact same numbers produces a percentage for margin that is considerably less than the markup percentage. They are distinct calculations even when derived from identical input figures. Do not substitute one for the other when analyzing job profitability.

Who publishes the 2026 half-year mileage rates?

The Internal Revenue Service publishes these rates through Announcement 2026-11 and Publication 463. The agency specifies different standard mileage rates for the first and second halves of the year. Check this announcement to find the specific rate in cents for each mile for your current half-year period.