I am reselling a product (office paper) to a business which will generate a 1099 (less than $5k). I purchase the retail product (add small mark up to cover costs of gas, time etc) resell and deliver to the business. I do this to generate airline miles. Cost vs sale of product will be less than $500 profit. If I deduct for auto expense/labor it will be less. I don't really want to have this as a business but am not sure if I can claim it as a hobby. My intent is to generate airline miles so I can travel...not make money.

If I can claim this as a hobby, where/how do I offset my (cost of goods?) to my 1099 misc income?

The reason I do not want to claim this as a business is I do not want to get involved with the city and a license. I am also not sure how long this will actually last. Perhaps another year but maybe even not that.

I am reselling a product (office paper) to a business which will generate a 1099 (less than $5k). I purchase the retail product (add small mark up to cover costs of gas, time etc) resell and deliver to the business. I do this to generate airline miles. Cost vs sale of product will be less than $500 profit. If I deduct for auto expense/labor it will be less. I don't really want to have this as a business but am not sure if I can claim it as a hobby. My intent is to generate airline miles so I can travel...not make money.

If I can claim this as a hobby, where/how do I offset my (cost of goods?) to my 1099 misc income?=======>>>>>>In general, the IRS presumes that an activity is carried on for profit if it makes a profit during at least 3 of the last 5 tax years, including the current year;however, your business claims a net loss for too many years, or fails to meet other requirements, the IRS may classify it as a hobby, which would prevent you from claiming a loss related to the business. It's something you do for fun, which sometimes brings in a little money. You would do it even if you lost money at it because it's something you enjoy. Technically, you are supposed to keep accurate records, report the amount you made from your hobby, and then deduct your hobby expenses on Sch A, the "Itemized Deductions" page.
You need to report the income on line 21 of 1040 as other income. Your expenses are miscellaneous itemized deductions subject to the 2% of AGI limitation. So, UNLESS you itemize deductions on your return, you can not claim your expenses on your return You can only deduct expenses up to the amount of income.

The reason I do not want to claim this as a business is I do not want to get involved with the city and a license. I am also not sure how long this will actually last. Perhaps another year but maybe even not that
====>When you start a business, you need to be clear about whether you are starting as a hobby or business.
it depends on the situation Whether or not you may claim it as business or hobby. hobby usually means a form of past time or any activity that is conducted during your leisure time for the purpose of pleasuring yourself , not for money and recreation. A biz, on the other hand, is work, something formal, concerns about tax or legal and most often than not, you expect returns usually in the form of money. When you run a business and make some profits, you would be required by law, liable for tax declaration and deduction ,if any.