The correct terms are "revenue" and "expense." "Income" (or loss) is the result of revenue minus expense.
Maybe that will help you understand? Yes, only the fee is "income" but the reimbursement you got is part of the gross revenue. When you deduct what you spent from that, you are left with the same "gross income" that you would have if you didn't count the reimbursement or the initial outlay in the computation at all.
Example:
$5 fee, $20 reimbursement shop.
You can call $5 the income and ignore the rest and pay tax on the $5.
Or, you can call $25 gross revenue, deduct the $20 somewhere (I use the "returns and allowances" line; you can put it on cost of goods sold or just claim it down below as a deduction, it really doesn't matter much where you take it) and pay tax on the $5.
Either way, you're paying tax on only $5.
And it really, really doesn't matter how you get there.
The reason I claim everything I get paid as Gross revenue is because that figure will match up with the sum of the bank deposits I have. It will match or exceed what my 1099's add up to. The IRS likes to see that you are putting all your money on the tax return. It's far better to argue with them about the validity of what you deducted from that figure than it is to argue with them about why your 1099 from an MSC said they paid you $1250 and you only put $1200 on the tax return. By putting it all on the tax return, you don't have to explain anything. It's all right there for them to see.
Time to build a bigger bridge.