Automotive Services

Accounting for auto shops dealing with parts inventory, labor billing, and sales tax compliance.

The Industry

An auto repair shop stocks $40,000 in parts inventory. They mark up parts 40% when installed on jobs. Oil change packages get sold as memberships with revenue spread over months. Warranty work waits 60 days for reimbursement. A body shop bills insurance $8,500 for a repair, insurance approves $7,200, and the shop eats the difference. Used car dealers carry floor plan loans on inventory with daily interest accruing.

Automotive businesses deal with inventory that sits on shelves, gets marked up for jobs, and needs proper cost tracking. Revenue comes from both parts and labor. Some businesses have membership programs or insurance billing. Sales tax applies to parts but not labor in Arizona. Getting any of this wrong makes your financials useless for decision-making.

Who This Covers

Auto repair shops, body and collision centers, car washes, detailing services, tire dealers, used car dealerships, towing operations. Any automotive business in Phoenix dealing with parts inventory, labor billing, or service packages.

What Makes It Complex

Parts inventory accounting. Job costing that separates materials from labor. Sales tax on parts but not services. Insurance claim billing and adjustments. Membership and package revenue recognition. Floor plan financing for dealers. Payroll for techs with flat-rate or commission structures.

What We Handle

Automotive accounting requires tracking inventory properly, separating parts from labor revenue, and handling sales tax correctly. Parts need to be expensed when used on jobs, not when purchased. Job costing shows which services make money after accounting for both labor and materials. Sales tax filings need accurate separation of taxable parts sales from non-taxable labor.

Shops with employees need payroll that handles flat-rate pay or commission structures correctly. Tax preparation needs to capture vehicle depreciation, equipment purchases, and industry-specific deductions. Car washes with membership programs need proper revenue recognition. Body shops need insurance claim tracking that separates estimates from actual collections.

Inventory and Job Costing

Parts tracked when purchased and when used on jobs. Cost of goods sold reflects actual consumption, not purchases. Job costing separates labor from materials so you can see real margins by service type. QuickBooks configured for automotive with proper inventory and job tracking enabled.

Sales Tax and Payroll

Sales tax filed correctly with parts sales separated from labor. Monthly or quarterly filings handled on time. Payroll processing for techs with flat-rate, hourly, or commission pay structures. Tax preparation that captures vehicle and equipment depreciation, maximizes deductions specific to automotive businesses.

Common Problems

Auto shops that expense parts when purchased instead of when used can’t see real job profitability. Cost of goods sold becomes meaningless. You think oil changes make money until you properly allocate parts costs and realize margins are razor-thin. Body shops that don’t track insurance adjustments separately can’t tell if insurance work is as profitable as retail customers.

Sales tax gets complicated when you’re selling parts and labor together. Arizona taxes parts but not labor. Filing incorrectly means overpaying or underpaying, both of which create problems. Car washes recording membership revenue when sold instead of over the service period show inflated income in some months and artificially low revenue in others.

Parts Expensed Wrong

Recording parts as expenses when purchased makes your inventory value wrong and cost of goods sold useless. You can’t see which jobs are profitable because materials aren’t allocated correctly. Pricing decisions get made on incomplete data.

Sales Tax Issues

Parts and labor combined on invoices with sales tax applied to the total instead of just parts. Or labor incorrectly taxed. Either way, you’re filing wrong and risking penalties or overpaying. Membership revenue recorded immediately instead of over time inflates income and creates tax problems.

What Changes

Parts inventory gets tracked correctly. Job costing shows real profitability by service type after accounting for both labor and materials. You know oil changes barely break even while diagnostic work and complex repairs generate solid margins. Pricing decisions get based on actual cost data from similar past jobs.

Sales tax filings happen correctly and on time with parts properly separated from labor. No penalties, no overpayments. Payroll processes smoothly for techs regardless of pay structure. Tax prep captures every deduction you’re entitled to including vehicle depreciation and equipment purchases. April doesn’t bring surprise bills.

Real Profitability Visible

Job costing reveals which services make money and which don’t after accounting for all costs. Inventory management shows what moves and what sits too long. Stop stocking slow-moving parts. Focus on services with actual margins instead of services that just keep you busy.

Compliance Without Stress

Sales tax filed correctly every period. Payroll processed without errors. Tax returns that maximize deductions and avoid triggering IRS questions. Your books match how automotive businesses actually operate, not generic service business accounting that doesn’t fit.

The Valley's Trusted Accounting Firm