Intuit’s Small Business Blog published Do You Have a Hobby or a Business?, touching on how the IRS determines how to classify the effort.
As far as the federal government is concerned, a hobby is not a profitable endeavor. If a potter spends all day crafting bowls and vases, gives most of the inventory away, and only occasionally sells a piece, then making ceramics is clearly a hobby. But if that same potter opens the studio to the public in the hopes that shoppers will pay fair market value for the handmade goods, the enterprise is a business. That’s because the artist intends to earn a profit on the sales of the bowls and vases.