I’m pretty sure if you are just a sole proprietor there isn’t much to do except report the income you make. Keep track of everything you buy, all materials, so you can subtract it from your earnings.
You could become an LLC, which is simple and costs maybe $50—$200 a year depending on your state, and create a business name. I doubt it’s worth doing that.
I would ask an accountant for advice if you start selling quite a bit of stuff. An accountant in your county will know if you might need a business license, or you can call the county for free.
People don’t usually need anything special if they are just selling a few things here and there.
Etsy might give you a report at the end of the year on how much you sold?? I don’t know. If they do, then it’s possible over a certain amount they have to report to the IRS.
I wouldn’t hide the income, especially if you are selling hundreds of dollars worth. No need to take the risk. You will have write-offs including deducting your electric bill and cable hook up.