Deducting expenses from income for sole proprietorship


A quick tax question for NY/USA.

Say an online shop sends me a 5k check in my name and not under a corporation, to order 300 glass cups.

And I'm sort of the middle man and I will be using 4k that I got to order the 300 cups from the factory in China. That would leave me with 1k profit after all expenses are paid.

Since I'm receiving the money as a sole proprietor, will I be taxed on the 5k or 1k?


asked Aug 3 '12 at 03:54
Gulp Sanjes
1 point
  • Welcome to I would suggest to talk to an accountant. Logic dictates that 1k is your taxable income. – Karlson 10 years ago

2 Answers


Generally, it may look like this:

Profit = (all sales) - (all expenses)

That is to say, your sale of 5000 USD is broken down as

1000 USD = (5000 USD) - (4000 USD)

So the 1000 USD "gross" profit you earned is only then subjected to taxation.

The 4000 USD you spent is basically your cost/expenses.

answered Mar 2 '13 at 13:44
Yasker Yasker
47 points


Generally you deduct your business expenses from your business income, and pay taxes on the net profits remaining. In the US, for a sole proprietor, this is calculated on Schedule C of your yearly tax return (form 1040).

answered Aug 3 '12 at 06:04
5,090 points

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