I decided to just ask my own questions instead of spending hours reading through everyone else's.
I am to the point where my hobby seems to be getting attention and I think I may need to take it to the next level. I started decorating cakes just for my kids' birthdays, then friends started asking me to do cakes for their kids, a few times I have been given money. I don't want to get myself in trouble so I feel like I should probably look into getting licensed in my home kitchen. I would probably only do maybe 2 cakes a month. Where do I go from here and does anyone know if the health dept. does research or asks you if you have ever accepted money for cakes prior to being licensed?

Every state has different laws, so call the health department and ask about how you start with the inspection process. They usually don't care about the previous sale thing, they just want people to be legally inspected. They usually have packets of information that they can send you with what they'll need from you to do an inspection. You probably need to start by getting a business license through your county, then sales tax numbers, then get the inspection. In Virginia they're really helpful at the inspectors' office, so don't be afraid...I'm assuming that you can get licensed from home in Washington, but that might not be the case. You'll have to check.