Legal Question in Business Law in California

Yes, buying stuff wholesale and selling it to people for an expensive price is a business.

Yes, persons engaged in business must "let the government know about it" in at least two ways. First, most communities (cities and counties) would require the business operator to obtain a business license. Most, but not necessarily all.

Second, anyone who makes more than a certain (relatively low) amount each year must file a personal income tax return and pay taxes on both the income as such and for the tax on self employment that goes toward their Social Security account.

(By the way, there's no such thing as "THE government." In the United States, we have a Federal government. 50 state governments, and thousands of governments that are in charge of counties, cities, school districts, etc., each in its own right a "government.")

You can certainly file a lawsuit. You'll need to pay a filing fee, know her name, and then after filing, have a process server locate her and deliver the summons and complaint in person or by another authorized method. Maybe Small Claims Court is the best forum.

17-year-olds are not adults and have some rights and immunities in the contracts arena, and in drafting a complaint, you (and your attorney) need to be aware of this and design a complaint to attack her practices in areas where she can be found liable even as a minor.