How do I invoice clients for mixed service and product sales in the US?

Understanding mixed invoices: services and products on one bill

In the United States, it’s extremely common to sell a combination of services and physical goods (or digital products) to the same client. A typical example is an IT consultant who installs new equipment (products) and charges for configuration and training (services). Another is a contractor who provides labor (services) and supplies materials (products). The challenge isn’t just “how do I write the invoice,” but how to structure it so the client can easily understand what they’re paying for, your accounting stays clean, and you handle sales tax correctly where required.

A mixed invoice is simply a single invoice that includes line items for both services and products. The core principles are straightforward: clearly separate services from products, describe each item precisely, apply the correct taxes to taxable items, show subtotals that make sense, and include the right payment terms and proof-of-delivery information. When you do this consistently, you reduce disputes, speed up payments, and make it much easier to prepare your books at month-end and year-end.

This guide walks you through how to invoice clients for mixed service and product sales in the US, with practical formatting approaches, tax considerations, recordkeeping habits, and client-friendly wording. The goal is a professional invoice that your client can approve quickly and that you can reconcile without headaches.

Start with the right mindset: clarity, consistency, and compliance

A mixed invoice should accomplish three things at the same time:

First, it should be clear to the client. They should be able to scan the invoice and immediately understand what they bought, when they bought it, how many units or hours are included, what it costs, and what they need to do to pay.

Second, it should be consistent for your business. Your line items should map cleanly to your internal categories (service income, product income, shipping income, discounts, taxes), so your reporting is accurate and your future invoices are faster to build.

Third, it should be compliant with applicable rules. In the US, invoicing rules vary by state and sometimes by locality. The biggest compliance issue is sales tax, which may apply to products and sometimes to certain services or bundled transactions. Even when sales tax doesn’t apply, you still want invoices that accurately reflect the transaction and match any contracts, purchase orders, or statements of work.

When in doubt, optimize for clarity and auditability: the invoice should “tell the story” of the sale.

Decide what “products” and “services” mean for your business

Before you create your template, decide how you define products and services in your system. This sounds basic, but it matters because you’ll use those definitions for reporting, tax handling, and client communication.

Products can include physical goods (equipment, parts, merchandise), digital goods (downloads, software licenses, templates), and consumables (materials, supplies). Services usually include labor, consulting, design, implementation, training, repair, installation, and ongoing maintenance.

Mixed sales also often include other charges that don’t fit neatly into either category, such as:

• Shipping and handling

• Travel expenses or mileage

• Rush fees

• Convenience fees (where allowed and disclosed)

• Deposits, retainers, or progress payments

• Discounts or coupons

Your invoice should treat these items consistently. For example, travel might be an expense line item, while shipping might be its own category. The more consistent you are, the easier it is to track profitability and taxes.

Essential invoice information for US clients

Whether you sell services, products, or both, most professional US invoices include the same basic fields. Make sure every invoice includes:

• Your business name, address, and contact information

• Your client’s name and billing address (and shipping address if different)

• Invoice number (unique and sequential is best)

• Invoice date

• Due date or payment terms (for example, Net 15, Net 30, Due on receipt)

• Line items with descriptions, quantities, and unit prices

• Subtotals, taxes, discounts, and the total amount due

• Payment instructions (how to pay, what methods you accept, and where to send checks if applicable)

• Notes/terms (late fees if you use them, return policy if selling goods, warranty references if relevant)

If you have a tax registration number (such as a state sales tax permit), some states or clients may expect you to show it on the invoice. If you’re working B2B, clients may also require their purchase order number on your invoice to process payment. Including a “PO Number” field can dramatically reduce payment delays.

Structure the invoice so services and products don’t blur together

The number one best practice for mixed invoices is to separate services and products in a way that’s obvious. You can do this in a few different formats:

Option 1: Separate sections for services and products

This is the most readable format. Use headings such as “Services” and “Products” and group line items accordingly. Each section can have its own subtotal. Clients love this because they can verify hours in the services section and verify quantities in the products section.

Example structure:

Services:

• On-site installation (4 hours @ $125/hr)

• Configuration and testing (2 hours @ $125/hr)

Products:

• Wireless router model X (1 unit @ $189)

• Ethernet cable 25ft (3 units @ $12)

Then show:

Services subtotal

Products subtotal

Shipping (if any)

Tax (applied to taxable items)

Total

Option 2: Combined list with clear item types

If you prefer a single list, make sure the descriptions include “Service:” or “Product:” prefixes, or use a dedicated “Type” column. This can work well when the invoice is short, but it’s slightly harder to review at a glance.

Option 3: Bundle items, but only when it’s appropriate

Some businesses sell bundles, like “Install Package” that includes hardware and labor. Bundling can be convenient, but it can complicate tax treatment and client transparency. If you bundle, your invoice should still make it clear what’s included. A common approach is to show the package as one line item, then list included components in the description (without separate pricing) or show separate lines with a discount applied.

Bundling is often the area where sales tax rules can get tricky, so many businesses choose the safer approach: list products and services separately and apply a discount if needed.

Write line item descriptions that prevent disputes

For services, the description should answer: what was done, when it was done, and what it relates to. For example:

• “Website maintenance and updates (January 2026) – security patches, plugin updates, backups”

• “Consulting – discovery workshop, 3 hours on 01/15/2026”

• “Electrical labor – install 6 recessed lights, per estimate #1042”

For products, the description should include identifiers and relevant details:

• SKU or item code

• Model number

• Size/color/variant

• Serial number for high-value items (optional but helpful)

• Condition (new/used/refurbished) if relevant

• Warranty period (optional)

If you ship products, consider including shipping method and tracking reference in a notes section. If you deliver in person, a delivery date is useful. These details reduce “we didn’t get it” disputes and help reconcile returns.

Quantities and units: hours, pieces, and everything in between

Mixed invoices often fail because units are inconsistent. Standardize your units so clients can verify charges quickly.

For services, use units such as:

• Hours

• Days

• Sessions

• Milestones (for fixed-fee work)

• Monthly retainer (for ongoing work)

For products, use:

• Each (EA)

• Packs (PK)

• Boxes (BX)

• Feet/meters (for cable or materials)

• Licenses/seats (for software)

Always show the unit price and quantity, not just a lump sum, unless you are intentionally invoicing a fixed-fee service. When you do use a fixed fee, make the scope reference crystal clear (for example, “Fixed fee per signed proposal dated 01/02/2026”).

Pricing strategy on mixed invoices: keep it simple and defensible

Clients are more likely to pay quickly when pricing feels straightforward and matches what was agreed. Consider these practices:

• Use your standard hourly rate consistently for services, and list any discounted rate explicitly (for example, “Rate discount applied per annual contract”).

• For products, list the unit price clearly and apply any discounts as separate line items so clients can see the value.

• If you mark up products or materials, you don’t need to disclose your cost, but you should ensure the final price matches your proposal or estimate. Surprise markups trigger disputes.

• If you include “materials and supplies” as a line item rather than listing each product, be prepared for clients to ask for details. Many businesses avoid this by listing products individually or attaching a packing list.

Defensibility matters. If a client questions a charge, you want a clean invoice that aligns with your contract and any estimates.

Discounts, coupons, and promotions: apply them transparently

Discounts are common when you sell both services and products, but the invoice should make it clear what is discounted and why. There are a few common approaches:

• Line-item discounts (discount applied directly to a specific service or product)

• Section discounts (discount applied to the services subtotal or products subtotal)

• Overall discount (discount applied to the entire invoice)

For mixed invoices, line-item or section discounts are usually best because they preserve clarity and can help with tax calculations (since discounts often reduce the taxable base for items that are taxable).

Also decide whether discounts apply before or after tax, based on how you normally compute totals and what your local rules require. Most businesses calculate discounts before tax so the customer isn’t paying tax on the discounted amount when tax applies to the item.

Shipping, delivery, and handling: separate the charge and describe it

If you charge shipping or delivery, add it as its own line item and describe what it covers. For example:

• “Shipping (Ground) – 2 boxes, packed and insured”

• “Local delivery – job site drop-off, 12 miles”

• “Handling and packaging – protective materials for fragile items”

Shipping and handling can be taxable in some states or under certain conditions, so it’s best to keep it separate instead of hiding it in product prices. Separating it also reduces sticker shock and shows professionalism.

Sales tax basics for mixed service and product invoices

Sales tax is the area where mixed invoices most often go wrong. In the US, sales tax is generally administered at the state level, and many states also have local sales taxes. Whether you must charge sales tax depends on multiple factors, including where you have sales tax nexus, what you sell, where your customer receives the goods or services, and whether the customer is tax-exempt.

Here are the practical invoicing principles that apply broadly:

• Physical products are often taxable, but not always (some items may be exempt or taxed at different rates).

• Services are sometimes taxable, sometimes not, depending on the state and the type of service.

• Shipping can be taxable in some places, especially if it’s part of the sale of taxable goods.

• Digital products and software can have special rules.

• Bundled transactions can change the taxability of the entire invoice or require allocation between taxable and non-taxable components.

Because rules vary, the safest invoicing approach is to track taxability at the line-item level. That way, your totals will be correct even when products and services are mixed.

Line-item taxability: the cleanest method for mixed invoices

The most reliable way to invoice mixed transactions is to mark each product and service line item as taxable or non-taxable according to your rules. Then the system calculates tax only on taxable lines. This avoids the common mistake of applying tax to the entire subtotal.

For example, you might have:

• Service labor: non-taxable in your state (tax = $0)

• Hardware: taxable (tax calculated)

• Shipping: taxable or non-taxable depending on your state and scenario

This approach is also much easier to explain to a client. If the client asks why tax was charged, you can point to the taxable items.

Where to apply sales tax: based on destination and nexus concepts

In many situations involving physical products, sales tax is based on where the product is delivered (the destination). For services, rules vary: some states tax based on where the service is performed, where it’s received, or where the customer is located. These differences are precisely why mixed invoices can become confusing if you don’t keep products and services separated and properly labeled.

From an invoicing perspective, the most practical guidance is:

• Always collect the customer’s full delivery address when products are involved.

• If you provide services remotely, capture the customer’s address and note the service period on the invoice.

• Keep your invoicing system configured so it can apply the correct rate where required.

If you’re unsure about charging tax in a particular state, it may be wise to consult a tax professional or your state’s revenue department guidance. The invoice should reflect the tax you are required to collect, not a guess.

Tax-exempt clients: how to invoice correctly

Some clients may be exempt from sales tax (for example, certain nonprofits, resellers, or government entities), but exemption typically requires proper documentation. The practical invoicing steps are:

• Ask for the customer’s exemption certificate (or resale certificate) before you invoice, if possible.

• Keep the certificate on file for your records.

• Mark the customer as tax-exempt in your invoicing settings so tax is not charged on taxable items (or is handled according to the certificate’s terms).

• On the invoice, it can be helpful to note “Sales tax not charged – exemption on file” in the notes or tax section.

Even with exemptions, you should still list products and services clearly. The exemption affects tax, not the clarity of what was sold.

Deposits, retainers, and progress billing in mixed transactions

Many businesses require an upfront deposit when they provide both products and services, especially when ordering hardware or custom materials. From a client’s viewpoint, deposits reduce risk and signal commitment. From your viewpoint, they reduce cash flow strain.

There are several ways to handle deposits on invoices:

• Request a deposit invoice first (for example, “Deposit for project initiation”) and then issue a final invoice that includes all line items and subtracts the deposit as a credit.

• Include a deposit line item on the same invoice and show “Amount due now” vs. “Remaining balance,” if your workflow supports it.

• Use progress invoices for milestone-based projects, billing parts of the work over time.

For mixed sales, the cleanest practice is often: invoice the deposit separately, then apply it as a credit on the final invoice that lists the products and services. That way, the final invoice still shows the full detail of the transaction.

Be careful with how tax is handled on deposits when products are taxable. Some jurisdictions treat deposits differently depending on whether they are applied to taxable items, whether goods have been delivered, and how the deposit is structured. Line-item detail in the final invoice is your friend.

Returns, refunds, and service adjustments

Products and services have different dispute and adjustment patterns. Products may be returned; services may be partially completed or revised. Your invoicing process should account for both.

For products:

• Include a return policy reference in your invoice notes if applicable.

• If a product is returned, issue a credit memo or refund that references the original invoice and the specific line item.

• If sales tax was charged, adjust the tax accordingly on the credit.

For services:

• Use change orders or written approvals when scope changes.

• If you reduce service charges after the fact, document the reason in a note or in internal records, and issue a credit that references the original service line item.

Keeping products and services clearly separated makes these corrections easier and keeps your records clean.

Best-practice layout for a mixed invoice

Regardless of your industry, a mixed invoice typically looks best when it uses a clean layout with:

• A header section with your business info and the client info

• Key invoice fields (invoice number, date, due date, PO number)

• A line-item table with columns like Description, Qty, Unit, Unit Price, Line Total, and Tax (if applicable)

• Grouping headings for Services and Products (optional but highly recommended)

• A totals section with clear breakdowns (subtotal, discount, shipping, tax, total)

• Payment instructions and notes

Clients pay faster when they can see exactly how the total was calculated. If they have to do math in their heads or guess whether tax was applied correctly, you increase the chance of delays.

Invoice wording that speeds up payment

The words on your invoice matter. They set expectations and reduce back-and-forth. Consider including:

• “Thank you for your business” (simple, human)

• “Please include the invoice number with your payment”

• Clear due date language: “Payment due by 02/28/2026”

• If you accept multiple payment methods, list them clearly: “Pay by bank transfer, card, or check”

• A short note on late fees only if you actually enforce them and your contract permits: “Late payments may be subject to a late fee of X% per month”

For mixed invoices, a helpful line is: “Products and services are itemized below for your review.” It signals transparency and encourages quick approval.

Common mixed-invoice scenarios and how to handle them

Different industries face different “gotchas.” Here are a few common scenarios and invoicing tips.

Consultants who resell software or equipment

If you’re a consultant who sells hardware or software licenses along with your time, keep your invoice extremely explicit:

• List licenses as products with term length (for example, “12-month license”) and number of seats.

• List implementation as a service with hours or a fixed fee.

• If you provide ongoing support, list it as a monthly service with start/end dates.

Clients often route product purchases through procurement and service work through different approvers. Clear separation reduces internal delays.

Contractors billing labor and materials

Contractor invoices frequently involve many materials. Decide whether you’ll list each material or group them logically:

• If the list is short, itemize each material.

• If the list is long, group by category (for example, “Electrical materials”) and attach a materials list in your records or provide it upon request.

Also, reference the estimate or signed proposal number in the invoice. This reduces disputes because the client can match your invoice to the approved scope.

Creative agencies selling deliverables plus printing or production

Design services are often billed as services, while printed items are products. Include:

• Service lines for concepting, design, revisions, project management

• Product lines for print runs, paper type, finishing options

Clients appreciate when the invoice mirrors the project plan and the production quantities they approved.

Repair shops selling parts and labor

Repairs are a classic mixed transaction. Invoicing tips:

• List labor separately with hours and rate or a flat labor fee.

• List parts as products with part numbers where possible.

• If you offer warranties on labor and/or parts, include a brief note (for example, “Labor warranty: 30 days; Parts warranty: manufacturer warranty”).

When clients return with questions later, a detailed invoice is often the best record of what happened.

Accounting and bookkeeping: map invoice lines to the right categories

Even if your invoice looks perfect to the client, you’ll feel pain later if your income is not categorized correctly. In most accounting setups, you’ll want to separate:

• Service revenue

• Product revenue

• Shipping income (if charged)

• Sales tax collected (a liability, not revenue)

• Discounts (either as reductions to revenue or a contra-income account)

This separation is crucial for profitability analysis. Services typically have different margins than products, and mixing them into one revenue bucket can hide the true health of your business.

When you create invoice items in your system, assign each to the correct category once, then reuse them. This prevents errors and makes recurring invoices far faster.

Recordkeeping: keep supporting documents aligned with the invoice

Mixed invoices often require supporting documentation. You don’t necessarily need to send all of it to the client every time, but you should have it available:

• Signed estimate, proposal, or statement of work

• Purchase order number and related emails

• Time logs for hourly services

• Delivery confirmation or shipping tracking info

• Serial numbers for high-value products

• Exemption certificates (if applicable)

Good recordkeeping helps with disputes, chargebacks, warranty claims, and tax questions.

When to use separate invoices instead of one mixed invoice

While mixed invoices are convenient, there are cases where separate invoices can be smarter:

• The client requires separate invoices for procurement reasons (products through purchasing, services through accounts payable).

• Products ship at a different time than services are performed, and the client wants billing tied to delivery.

• Tax treatment is complex and you want to reduce risk by isolating the taxable sale of goods from non-taxable services.

• You want different payment terms (for example, products due on receipt, services Net 30).

However, most small businesses prefer one invoice because it reduces administrative overhead. If you can keep the invoice clear and the tax lines correct, a single mixed invoice works very well.

Payment terms for mixed invoices: choose terms that match risk

Products and services expose you to different risks. Products cost money upfront and can be returned; services cost time and can be disputed. Your payment terms should reflect that reality.

Common approaches include:

• Require payment upfront for products, and allow Net 15 or Net 30 for services.

• Require a deposit that covers product costs before ordering materials.

• Use milestone payments for larger projects that include both materials and labor.

• Offer early payment discounts when it helps cash flow, but only if it’s sustainable for your margins.

Whatever you choose, put the terms on the invoice in plain language. Ambiguity causes delays.

Late fees and collections: set expectations without sounding hostile

Late fees are optional, but if you use them, they should be disclosed in advance (ideally in your contract) and clearly stated on the invoice. Keep the language calm and professional. For example:

• “Payments received after the due date may be subject to a late fee.”

You may also include a short note about how to resolve billing questions: “If you have any questions about this invoice, please contact us within 7 days.” This encourages clients to raise concerns quickly instead of silently delaying payment.

How to reduce client confusion: mirror the proposal and use consistent naming

Many invoice disputes happen because the invoice uses different wording than the proposal. If your proposal says “Implementation,” but your invoice says “Development services,” the client may wonder if they’re being billed for something new.

For mixed invoices, a strong habit is to:

• Use the same item names across your estimate, contract, and invoice.

• Reference the proposal or estimate number directly on the invoice.

• Use consistent units (hours, units, licenses) every time.

• Keep the same grouping style (services vs products) across projects.

Consistency builds trust and speeds approvals.

Professional polish: small details that make a big difference

Little touches can make your invoice feel more professional and reduce friction:

• Use a clean, readable layout with adequate spacing.

• Avoid overly long line item names; put extra details in the description field.

• Show subtotals so the client can confirm sections quickly.

• If you include taxes, label them clearly (for example, “Sales tax” rather than just “Tax”).

• Include your preferred payment link or instructions prominently.

• Use polite reminders instead of aggressive language.

When you do this consistently, invoicing becomes a smooth part of the customer experience rather than an uncomfortable afterthought.

A practical step-by-step workflow for creating a mixed invoice

Here’s a simple workflow you can follow every time you need to invoice mixed services and products:

1) Confirm the scope and pricing. Check the estimate, signed proposal, or email approval.

2) Gather service details. Pull time logs, milestone completion notes, or service dates.

3) Gather product details. Confirm quantities shipped or delivered, model/SKU, and delivery address.

4) Build the invoice with clear grouping. Add services first, then products (or vice versa), using consistent units.

5) Add shipping and other charges as separate lines when applicable.

6) Apply discounts transparently. Prefer line-item or section discounts for mixed invoices.

7) Apply sales tax correctly. Tax taxable lines only, and verify the rate for the delivery location if required.

8) Add payment terms and instructions. Make the due date and payment methods obvious.

9) Double-check math and readability. If you were the client, could you approve this in 30 seconds?

10) Send and track. Follow up with a friendly reminder before the due date if needed.

When you treat this as a checklist, errors drop dramatically, and clients get a consistent experience.

Final checklist: what a great mixed invoice includes

Before sending your invoice, scan this final checklist:

• Services and products are clearly separated or clearly labeled.

• Each line item has a precise description, quantity, unit, and unit price.

• Any shipping, travel, or fees are listed separately with clear descriptions.

• Discounts are transparent and applied in a consistent way.

• Sales tax is applied only where appropriate and calculated correctly.

• The totals section is easy to understand and matches the client’s expectations.

• The invoice references the relevant proposal, estimate, or PO number when applicable.

• Payment terms and due date are obvious and reasonable.

• Payment instructions are simple and complete.

• The tone is professional and friendly.

When you invoice mixed services and products with this structure, you get the best of both worlds: the convenience of one invoice and the clarity of separate, well-defined charges. That clarity helps your client approve quickly, helps you keep accurate records, and helps you scale your billing process as your business grows.