Matt,
I don't want to be the bearer of bad news but if your selling baits or taking " donations".. you need to pay your taxes.There is a lot of bad advice that gets passed around by guys who don't want to pay up.When have you ever heard of the State or Federal government not wanting their cut of the pie.. no matter how small.File our form 637 with the Feds and pay your 10%.. And contact the State so you can collect your sales tax.
I can't believe the number of guys who put their financial well being at risk for a lousy 10%..I for one who doesn't want the IRS crawling up my butt... As for what permits you need to start your business...you will need to contact your City or County municipality for that info...Nathan