@DianeW777 wrote:
then the cost of goods, ... cannot be backed out before reporting the income.
The IRS is very clear on this point.
That is wrong. Yes, the IRS is very clear on the point that COGS is deductible.
Tax Code Section 183 is about hobbies ("activities not engaged for profit") and Regulation §1.183.1(e) says: The taxpayer may determine gross income from any activity by subtracting the cost of goods sold from the gross receipts so long as he consistently does so and follows generally accepted methods of accounting in determining such gross income.
https://www.law.cornell.edu/cfr/text/26/1.183-1#e
