wanted to bump this up a bit considering the time of year...

PythonWallace is correct. For tax purposes, you don't need a business license. Not saying you don't need one at all to be running this type of business, you'll have to check with your city for that info. But if you are making income from this, and are doing it with the intention of making money, then you need to file as a sole proprietorship (Schedule C). In this case, you can write off expenses, and even write off a loss. You just don't want a loss more than two years in a row, or the IRS will question your profit motives.

If you aren't doing this as a business, but are still making a bit of money (say you have one clutch, and sell the babies off, but do it more for your pleasure), that would be considered hobby income. You do technically have to report this on your tax return. If you itemize your deductions (mortgage interest, medical bills, etc.), you can write off a hobby loss, up to the amount you earned, so you can break even and not pay taxes on that income, but you can't have a loss.

Either way, make sure you have accurate records that can back you up in case of an audit.

-Brittany
(your friendly neighborhood tax advisor)