First, all the items used are deduct in the same manner, it's just where you list them (in what category).
Cost of goods are those items used to produce those goods. I usually think of the cost of the items you sell and never get back. For instance, the paper (you will never get back once sold), the ink (you use more than once to make many prints), Photoshop (you use more than once). I've listed the items above and where I would classify them. Hopefully that helps:
Cost of Goods-Photo Albums, Paper
Software - Photoshop
Supplies - flash drives, memory cards, hard drives
Contract Labor - photographer, photo editing service
Advertising - website design
