I tried to run my soapmaking as an actual business, for three years (04-06) For me, it started as a hobby, so it was very difficult to organize it properly as a business - the computer I used for business was the one I'd had for some years, and the kettles are the same ones I dye in, etc. But, I did try to keep it as clean and organized as I could manage.
I would be *very* wary of making up numbers for the IRS. They have very little sense of humor. You won't only have to show a net profit; you'll have to invent an entire Schedule C form to accompany your 1040, and it has to detail several things about your business, your supplies expenses, your marketing costs, inventory, etc. You can't just say "made five hundred dollars profit on soap this year." Mine was always a loss; not a big one, but after the deductions that accompanied running the business, it never made money. It basically kept me in soap supplies - which is one of the main reasons I stopped trying to do it as a business, because I knew I couldn't prove profitability.
If you're claiming retail sales, you'll have to have a lot of small receipts, bank account paperwork, business ledgers. I wouldn't make up wholesale sales, because they keep track of wholesalers and you would have to invent them... with retail sales, you would also have to file for a Sales Tax and Use Permit with State of Texas, and report your sales (annually, quarterly, or monthly, depending on your business levels) and you'd have to pay the 8.25% on any retail sales you make.
And would the tax exemption from the soap sales "business" be applicable to the agriculture purchases? Your business records (which the IRS can audit, going back as far as 3 years, and if they find discrepancies, then investigating as far back as 7 years) would have to show the purchases, and you might be put in a position of having to explain why you're showing an inordinate profit on soap, while the supplies you're purchasing seem to be mostly animal feed and fencing supplies.
And one other thought - cheating to lose is still cheating. Why do you want the tax exemption? It sounds like the main point is to avoid paying (sales) tax. Is it going to be much more than the income tax you'll be paying on the profit you show from soap? I realize that it might get there if you're buying a tractor or building a barn, but for most supplies, the taxes probably won't make up the amount of money you'd have to spend running the soap sales.
To me, it sounds like a really, really bad idea.