How do you book cost of revenue on your taxes (1065 return or otherwise)?

As an accountant (CPA) myself, I can think of at least two different ways to handle your situation for income tax purposes, your financial accounting statements, as well as for informal internal accounting purposes (i.e., generating monthly or quarterly profit & loss statements).

Let's start with the assumption that you actually do have some ongoing costs, even if yours is a software as a service (SaaS) business.  It probably costs you something to provide the software services to others (your customers), and so that in itself could be called Purchase (or acquisition) costs, or even Cost of Goods Sold (COGS).  It shouldn't matter that you are selling an intangible good.

If we take this approach, then we can briefly examine what that would look like on a Form 1065 (Partnership) tax return, by opening up screenshot #1, attached to this answer below.

Here we do consider our costs for providing the software service as a COGS.  We just have no opening or closing inventory.  And we would then fill out our accompanying Form 1125-A as shown in screenshot # 2 (or we could use instead Form 1125-A, Line 5 to input our costs, in lieu of what is demonstrated).  No matter, because the costs will ultimately appear the same way when we take our Form 1125A data and transfer it back onto our main Form 1065.

Alternative number two would have you record your costs instead on Line 20 of your Form 1065, and then you can attach any customized statement that you like to further report and / or justify your deductible expenses for tax purposes.  Please see screenshot # 3 for an example to see what this would look like.

Basically, I should think that any reasonable accountant would be comfortable with using either of these two broad methods (or an acceptable, but similar, alternative).  All solutions resolve the basic accounting equation:  REVENUE - EXPENSES = NET INCOME

Thanks for asking this important question, and good luck with your business!