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To report these for tax purposes you will record $100 as revenue, then $90 as cost of goods sold which will leave you with a net income of $10. Only the $10 is taxable, but you want to show how you got there.
This way, if you're audited your revenue matches your deposits.
By reporting the full amount as income, I believe we would pay local taxes on the full $100.00 as a business tax. Am I correct about the normal way local taxes are collected, or do they allow for a deduction of "Cost of Goods Sold"?
What state are you in?
You would be able to deduct the cost of goods sold for your Virginia state taxes
I am thinking local Fairfax County business tax. On their business application they ask for "Gross Sales". Would we have $100 or $10 in gross sales in this example?
Gross sales would be $10 because that is what you sold.
Yes, I see this now. Thank you very much for you advise!