I started thinking about this, and I think you are correct in the most hilarious of ways. You would need to have a business license, some sort of LLC or DBA, and then likely pay sales tax on that. As a small business, retained earnings would be the final profit, and that would be taxable. If this was a larger operation that is selling bulk to other dealers, then you may need to 1099 some of that money for proper records. No one ever asks what product was sold, only how many dollars worth were sold, and how much was profit and how much goes out as salary ( everything in a bank account) .
Now I do think doing this would be stupid, as the account would get shutdown easily upon suspicion, but the fact stands, simply paying taxes on illegal income would probably not be the thing that gets the operation shut down.