Exactly..... I pay my excise taxes on rods that I build for people and I report all of those expenses (including my fly tying expenses) but most of them I do not claim as a loss for a business, I simply claim them as income most often time atthe end of the year I am in the "hobby" section but I have had to pay out a couple times. Also do remember that you can use your time as a cost...... if you spent time you have to figure what your time is worth.
Steve