Pretty sure the bolded text above is exactly what you need to do in order to document hobby income. Keeping reasonable records of transactions is typically what the IRS will require. And you only pay income tax on the profit, not the gross sale amount.
I'm not sure what the sales tax consequences might be as I have no experience with what kind of reporting PayPal has with the states. Or what individual statutes might be in each state. If you are not actually running a business, there would typically be de minimis rules that apply. Most states are not going to impose sales tax obligations on someone making a few sales of personal goods per year. I realize this is an evolving tax issue, so maybe there have been some updates recently that I'm not aware of. I'm professionally in the corporate income tax arena, but I do try to keep up with other tax issues. So you are certainly welcome to correct me if you have better information.