What expense category do delivery services come under?

Figuring out where delivery services fit into your business expenses can be a bit tricky. Are they transportation costs, operating expenses, or something else entirely? Let's break it down to help you categorize these costs properly.

Classifying delivery service expenses

Delivery service expenses can fall under several categories, depending on how they relate to your business. Here are the main ways to categorize these costs:

• Shipping expenses: Costs directly associated with sending products to customers, like postage, packaging, and courier services.
• Delivery expenses: Broader costs related to delivery operations, including fuel, vehicle maintenance, and driver wages.
• Cost of goods sold (COGS): If delivery is integral to fulfilling customer orders, these expenses might be included here.

Examples of delivery expenses

Here are some common examples of delivery expenses your business might incur:

• Postage and shipping fees: Costs for mailing products to customers.
• Packaging materials: Boxes, envelopes, and packing materials used to ship items.
• Courier services: Payments to companies like FedEx, UPS, or local couriers.
• Fuel costs: Expenses for gas or diesel for delivery vehicles.
• Vehicle maintenance: Repairs and upkeep for company delivery vehicles.
• Driver wages: Salaries or wages paid to employees who deliver goods.

For example, if you spend $500 a month on courier services to ship products, that amount would be considered a delivery expense.

Tax implications of delivery expenses

Properly categorizing delivery expenses can affect your taxes. Here are some key points to keep in mind:

• Deductible business expenses: Delivery costs are generally tax-deductible as ordinary and necessary business expenses.
• COGS vs. operating expenses: If delivery is essential to your sales, these costs might be included in cost of goods sold, affecting your gross profit calculations.

Keep detailed records of all delivery-related costs to support your tax deductions. A tax advisor can help you categorize expenses correctly and maximize deductions. Accurate classification ensures compliance with tax regulations and can improve your bottom line.

Let Ramp automate your expense process

Keeping track of delivery expenses doesn't have to be a hassle. Ramp's expense management software automates the categorization and tracking of your delivery costs, saving you time and reducing errors. Let Ramp simplify your expense process so you can focus on growing your business.