Leon wrote:



Source:

http://en.wikipedia.org/wiki/Profit


From you source above,

In accounting, Gross profit or sales profit or gross operating profit is the
difference between revenue and the cost of making a product or providing a
service, before deducting overheads, payroll, taxation, and interest
payments.

Net sales are calculated:

Net sales = Sales - Sales returns and allowances
Gross profit is found by deducting the cost of goods sold:

Gross profit = Net sales - Cost of goods sold
Gross profit should not be confused with net income:

Net income = Gross profit - Total operating expenses


In business and finance accounting, net profit is equal to the gross profit
minus overheads minus interest payable plus/minus one off items for a given
time period (usualy: accounting period).

I think you're confusing gross receipts with gross profits.

From the IRS web site:
http://www.irs.gov/publications/p334/ch07.html


"7. Figuring Gross Profit

Table of Contents

* Introduction
* Items To Check
* Testing Gross Profit Accuracy
o Example.
* Additions to Gross Profit

Introduction

After you have figured the gross receipts from your business (chapter 5)
and the cost of goods sold (chapter 6), you are ready to figure your
gross profit. You must determine gross profit before you can deduct any
business expenses. These expenses are discussed in chapter 8.

If you are filing Schedule C-EZ, your gross profit is your gross
receipts plus certain other amounts, explained later under Additions to
Gross Profit.

Businesses that sell products. If you are filing Schedule C, figure
your gross profit by first figuring your net receipts. Figure net
receipts on Schedule C by subtracting any returns and allowances (line
2) from gross receipts (line 1). Returns and allowances include cash or
credit refunds you make to customers, rebates, and other allowances off
the actual sales price.

Next, subtract the cost of goods sold (line 4) from net receipts (line
3). The result is the gross profit from your business."



Note the cost of good sold is subtracted from the net receipts to
determine the gross profit.

And
http://www.irs.gov/publications/p334/ch06.html



"Figuring Cost of Goods Sold on Schedule C Lines 35 Through 42

Figure your cost of goods sold by filling out lines 35 through 42 of
Schedule C. These lines are reproduced below and are explained in the
discussion that follows.

35 Inventory at beginning of year. If different from last year's
closing inventory, attach explanation
36 Purchases less cost of items withdrawn for personal use
37 Cost of labor. Do not include any amounts paid to yourself
38 Materials and supplies
39 Other costs
40 Add lines 35 through 39
41 Inventory at end of year
42 Cost of goods sold. Subtract line 41 from line 40.
Enter the result here and on page 1, line 4"

Note line #37

--
Jack Novak
Buffalo, NY - USA