The starting point for computing your income tax is, of course, your gross business receipts or sales. From this you will subtract your cost of goods sold (if any) to arrive at your gross profit. You need to know what can and can not be reportable business income, and the distinctions between various types of income that must be reported in different places on your tax forms.

The general rule is that any income you receive that's connected with your business is considered "business income" and should be reported on your business tax return.

• Gross income from sales is the gross income you receive from sales of your product or service to customers.
• Miscellaneous business income refers to miscellaneous types of income that are not sales revenue.
• Cost of goods sold must be computed if your business uses inventory, in order to complete the business income portion of your tax return.