How to Bill Expenses and Materials on an Invoice
Most jobs involve costs beyond your own time — materials, parts, travel, software, a subcontractor's bill. Getting those onto the invoice cleanly is how you avoid quietly paying for a client's project out of your own margin.
This guide covers agreeing an expense policy, billing costs at cost or with a markup, laying out expense lines, handling mileage and travel, and how tax applies to costs you recharge.
Agree the rules before you spend
Put your expense policy in the quote or contract: which costs are billable, whether they're passed through at cost or marked up, and when you need approval before spending. A line such as "materials billed at cost plus 15%; expenses over $250 approved in writing first" prevents most arguments.
Clients rarely object to expenses they expected. They object to expenses they're seeing for the first time on the invoice.
At cost or with a markup
Billing at cost means charging exactly what you paid, which is common in professional services where the expense is incidental — a courier, a filing fee, a stock photo. Billing with a markup adds a percentage to cover the time and risk of sourcing, handling, and standing behind materials, which is normal in the trades.
Materials markups in construction and repair work often fall somewhere between 10% and 25%, but there's no universal rate. Whatever you charge, be consistent, and be ready to explain it if a client compares your parts price with a hardware store receipt.
Lay out expense lines clearly
Keep costs separate from your fees. List each material or expense on its own line with a description and quantity — "Copper pipe, 22 mm x 3 m, 4 at $18.50" — or group small consumables into one line, such as "Sundries (fixings, sealant)".
Label pass-through costs so the client knows what they are: "Building permit fee (at cost)" or "Electrical subcontractor (invoice attached)". Keep every receipt, and attach copies for large items or whenever the contract asks for them.
Mileage and travel
Mileage is usually billed per mile or kilometer at an agreed rate. In some countries the tax authority publishes a standard rate that many businesses borrow, but you can charge whatever the client agrees to; show the distance and the rate on the line, such as "Site visits, 84 miles at $0.70".
For flights, hotels, and meals, bill the actual cost with receipts unless you've agreed a flat daily allowance. Say separately whether travel time itself is billable — it costs you even when the ticket doesn't.
How tax applies to recharged costs
In many VAT and GST systems, costs you recharge to a client become part of your own taxable supply. If you're registered, they carry tax at the same rate as the rest of the invoice, even when the original cost carried less tax or none. And if you reclaimed the tax on the purchase, recharge the net cost and add tax once on the total, rather than adding tax to a price that already includes it.
The narrow exception, often called a disbursement, covers costs you pay purely as the client's agent — such as certain official fees paid in the client's name. These may pass through without tax, but typically only at exactly what you paid, with no markup, listed separately on the invoice.
Under US sales tax, whether materials and reimbursed expenses are taxable depends on the state and the kind of work. In many states, a contractor who installs materials into a building pays sales tax when buying them and doesn't charge it on the invoice, while others tax the materials billed or even the whole job. Confirm the rules for your state and trade before you build them into every invoice.