"Nova" wrote in message
news:r6I%j.4146$QW.3022@trndny04...


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

No, I'm not confused.


As far as you comments below, I have been filing quarterly tax returns and
filing Schedule C and Schedule SE anually since 1995. I know how all that
works.

Jack, with all due respect I think we both know what we are talking about,
it's just that some where along the line one or both of us have left out a
comment that may have deriled one or both of us. I have been dealing with
running businesses since 1976.



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inventory, attach explanation 36 Purchases less cost of items withdrawn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