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Sales Staff Expense Allowances

Business owners discuss whether and how to reimburse salespeople for vehicle use, cell phones, laptops, et cetera. December 14, 2005

Question
Does anyone use a car allowance for their sales staff, and if so, what kind of rate do you use? We are considering a rate of $75 per week plus $.15 per mile. Any thoughts?

Forum Responses
(Business and Management Forum)
From contributor D:
I allow my salesman $100 a month in gas, whether they sell successfully or not. They drive their own cars, so all of their gas and car expenses are deductible. They get paid 10% commission and rarely have to resort to cold calling. I have never had a complaint from them about automotive expenditures. If they are selling as they should, then driving costs aren't a problem.



From contributor J:
Have you talked to the salespeople? I have found in certain situations the deductibility of non-reimbursed business expenses at the end of the year can outweigh the advantage of a small amount of reimbursement.


From contributor R:
Don't be cheap. Pay them the standard mileage rate or, better yet, lease them a car. A happy salesman will make you huge profits.


From contributor W:
In the past, I have paid sales reps a fixed amount for auto, cell phone and laptop expense. All sales reps were required to have a late model car or truck in clean condition, a cell and a laptop as a condition of employment. They were paid a monthly amount to cover these expenses. I later determined that it was better for the company to pay for the cell and laptop so it would be the company's property in case the sales rep left employment. We did not want an ex-employee to have a cell that our customers called to order product or to schedule meetings, etc. Also did not want an ex-employee to have sensitive data on his/her personal laptop. We set a reasonable limit on the cell phone cost and the sales rep had to pay for any overage.

I would never buy or lease a vehicle for a sales rep. They will not usually take care of it, since it does not belong to them, and you are stuck with an extra vehicle and the associated expense if the rep leaves employment and you do not rehire immediately. Pay them a reasonable auto allowance and let them drive the auto of their choice. I recently wrote a sales compensation plan that paid the sales reps a higher auto allowance as their monthly gross sales volume increased. I know of other companies that pay sales reps an increased commission to include auto expense. If a sales rep sells an order to a retail or one time customer for a price over the quote, split the extra with the rep for bringing in the extra revenue. Do not allow your reps to add extra to your regular customers.

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