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Yes, it would be considered income, although they could take a deduction for mileage (assuming that this is not a straight mileage reimbursement).
So they would need to report it and pay income taxes on it, although they could take the mileage deductions that they spend traveling for work purposes (other than travel to and from the primary place of business at the beginning and end of the workday... that would still be on them)
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