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Which taxes you are talking about, income tax, property tax, sales tax? Whenever this topic comes up there is always a variety of replies that mix the many details of various taxes in different areas.
Federal and state income taxes:
Hobby expenses are tax deductible if you also have hobby income. You are expected to declare your net hobby profit and pay taxes on it. You can't post a loss and reduce your tax liability from other income sources. This only favors the IRS. You get to pay if you make a profit, you can't use a loss to reduce your taxes.
If you run it as a business and try to make a profit (no matter how small your operation is), then it is a business. You can post a loss on your business and have it reduce your tax liability on income from other sources, but you can't necessarily do it year after year. You are expected to try to make it profitable.
The details are here on page 26:
http://www.irs.gov/pub/irs-pdf/p225.pdf
State sales tax: It varies by state. If you are in business to make a profit, many purchases, such as feed and certain supplies, can be exempt from states sales tax.
Property taxes: It varies by state. Land can be assessed as agricultural, at a lower rate, if it is used for agricutural purposes. Many states also give property tax credits if you meet requirements of a certain amount of land in production or a certain amount of gross receipts.
You don't necessarily need a business license to be a business. To start a business as a sole proprietor, you do just that, you do business, keep the appropriate records, and pay the appropriate taxes. That's it. You're a business. Business licensing is a general term for permits required for certain types of business, i.e., you may need an Egg Handling Permit from the state if you wish to produce and process eggs for sale away from your premises. That is a form of business licensing. Some municipalities may want to hit you with a fee for a business permit, but that permit is not necessarily what makes your activity a business, it's a formality of doing business.