So they aren’t registering their businesses correctly, because they literally can’t as the business is itself prohibited.

Then, because the sale of these works is prohibited, the authors sell under-the-table and collect untaxed income. Declaring income from their smut would be illegal, so they have to do fraud to hide it as income from other sources or just hide the income entirely.

And now they’re guilty of multiple crimes, selling obscene works and tax fraud, and so we see the prison sentences.