Many people turn their hobbies into a business operation. Not so much to make a living or make big profits, but more to help offset the costs of the hobby. Whenever you go to one of those community fairs, the vendors at the respective booths are mostly folks selling a product that is direct outcome of their hobby. The bands that play on stage, they make some money, but never enough to offset the cost of instruments, gear and transportation. But they enjoy entertaining folks and they hope someday they’ll get discovered.
Hobby based businesses are home based operations whereby the owner provides a service or product related to cultural and/or custom. In general, hobby based businesses are not in it for profit, but more for educational and cultural advancement. Local and state governments require the hobby based businesses to conduct themselves in a similar fashion as regular business operations. Section 183 of the Internal Revenue Code provides the guidance in relation to federal taxation.