Hi TaxGuru,

First off, thank you for this great service. For general tax questions, I am often not sure where to go, and this forum looks great.

On to my question. I wrote an iPhone application, and Apple makes it really easy for single developers like myself to make some money without needing to form a business. However, my application requires a third party tool which requires me to pay them 25% of my income (generated from the Application sales).

My question is this: If I continue as is, as a single programmer, will I be taxed on the total income before I pay the third party? Or can I write off the expenses to the third party as some sort of business related expense? Or would I need to license and form a business to write off these expenses?

Any help would be greatly appreciated.
Thanks,
Brett