I suspect receipts from the business would still meet the definition of "gross income" under IRC Section 61 "...all income from whatever source derived...."  So you might want to focus on the issue of how to report it (i.e., is it a trade or business, or just a hobby), rather than on whether or not to report it.  Just a thought.

And for the record, I'm a dog....so I don't qualify for Level 1, 2, 3 or otherwise.  Never have.