I am looking into my first AK build and have a question. I have heard there has to be a certain number of US made parts to make it legal, but then I have been told its not how many US parts you have on the gun it's how many foreign parts are on it. Can someone clear this up for me because it's driving me nut. thanks.

What it all boils down to is there is 16 countable parts that make an AK (15 if the muzzle of the barrel is not threaded).
Of those 16 or 15 parts there can be no more than 10 imported parts on the gun to be legal, the rest of the 5 or 6 parts have to be US made.
This is what is called compliance parts, using the check list that Aphex posted will help you figure your parts count.
If you are building a barrel-less kit, the barrel & receiver would be your first two parts, most builders will replace the FCG (fire control group)that is the trigger, disconnector, & hammer this is three more counted parts. For the last part or two these are cheap & easy to replace muzzle brake, gas piston, pistol grip, butt stock, or the upper & lower handguard(counted as one part).
If at all possible don't use the mag, mag follower, or mag base plate as the US parts count, because all it would take is to snap in a mag full of ammo with a imported mag into your gun & it would then be a illegal gun. I'm not saying it would be illegal to use a US mag as part of your parts count I'm just saying it could be risky. If all you have is US mags that is fine, but if you let buddy at the range shoot your gun & he grabs his imported mag full of ammo (has happened before) then all of a sudden your gun is illegal.
Good Luck with your build.