Many people have asked me the rules about activities being a hobby or a business.  The IRS says that hobbies are activities that are not pursued for profit.  Here are some things to consider:

Does the time and effort put into the activity indicate an intention to make a profit?

Do you depend on income from the activity?

If there are losses, are they due to circumstances beyond your control or did they occur in he start-up phase of the business?

Have you changed methods of operation to improve profitability?

Do you have the knowledge needed to carry on the activity as a successful business?

Have you made a profit in similar activities in the past?

Does the activity make a profit in some years?

Do you expect to make a profit in the future from the appreciation of assets used in the activity?

My experience is that if you can treat what you do as a small business owner, you will receive much better tax breaks, however, the key is what are your intentions with your efforts.