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"ONLY factors of production have costs."

When did you make that rule up?

So IOW sales and marketing, general and administrative, research and development are not "costs"? Aren't "costs" synonymous with "expenses"? Are you saying that none of those items, not to mention interest expense, are costs/expenses?

Since a service business has no "factors of production", does that also mean that it has no costs?

Lord no wonder this is so difficult. I wish I could have "made up" some to the fundamental concepts of Economics but they are a couple of hundred years old and universally accepted as useful by every economist I have ever heard of.

All those things you mention as not having a "cost" are a Factor most are Labor, and the equipment used like any other. Interest obviously a cost of Capital.

Taxes on Labor are labor costs. Income taxes are not costs like these things because they are not charged upon any Factor but are a charge on the PROFIT of the company. It might appear that it is a cost of capital but that ignores the fact that the profit confiscated would not necessarily have been spent on more investment.

Recall that the fundamental goal of Economics is Allocation of resources within the Production function. It is Costs which are used as the principle datum for deciding how much of a factor to use. Income taxes are not a cost because they are not associated with a Factor of Production nor give any information about the allocation of resources.

Service businesses have all manner of Factors in use: they may not have as much physical capital as a steel mill but they still have to decide how many trucks to use, what kind of computer to buy, how many workers to hire, whether to buy a building or rent. They are exactly like any other business, though tending to be Labor intensive, and must decide how much of each Factor to employ based upon their relative costs.