Questions for Etsy Sellers

I have a shop on Etsy.com and a couple of smaller shops on a couple other sites. I do have a tax ID because I will sometimes sell at craft fairs and vendors really need to have a tax ID to sell at fairs and shows, or run the risk of being shutdown should the tax man show up. I also look to consign/sell wholesale/rent space, to sell my jewelry in boutiques and gift shops and a taxID is needed for this also. I do claim my all of my sales and expenses on my tax return and I also pay taxes quarterly for all of my in-state sales. Paypal & Etsy fees are fairly easy to track and state taxes are built into the prices of my items (should they sell in state) I don't know how the IRS determines what is a business and what is only a hobby. My tax adviser told me I needed to claim my sales. Basically, he said that if the items are made to be sold for a profit, it is considered a business not a hobby. Should the business lose money three straight years, the IRS may consider it to be a hobby at that point (and the word "may" means- who really knows, IMO)I'll continue to use an adviser to guide me on this matter. But yes, I do run it like a business, with a notebook full to record all in-state sales and sales tax paid by quarter, along with a file containing all order confirmations for all of my purchases.