Gift Exchange--Legal??

Business By MrsNancyB1 Updated 29 Sep 2009 , 10:40am by costumeczar

MrsNancyB1 Posted 28 Sep 2009 , 2:33am
post #1 of 24

It is illegal in CA to sell cakes from my home kitchen. I am wondering if it's legal to make a cake from someone, and instead of accepting money I could accept gifts such as goods or services. For instance, what if I make someone a cake and in exchange they give me a gift card to pottery barn, or buy me a KA mixer for example. Is this legal?

This may seem like a silly question to some, but I sincerely want to remain on the right side of the law. I always say that if down the road I want to open up my own cake business, I do NOT want any type of shady legal dealings to follow me.

Anyways, is the scenario I outlined above legal? TIA!

23 replies
Carolynlovescake Posted 28 Sep 2009 , 2:45am
post #2 of 24

Something for something is still a business transaction.

DefyGravity Posted 28 Sep 2009 , 3:56am
post #3 of 24

If it was legal, I think you could only get away with it for so long. I mean, I think you'd have a hard time telling a stranger that yes, you'll make her a wedding cake, but you need a new recliner in trade. icon_wink.gif

Best of luck icon_smile.gif

LaBellaFlor Posted 28 Sep 2009 , 4:03am
post #4 of 24

Yes, it is illegal to sell cakes out of your home in California. I don't know what it would be considered if yu bartered/ traded goods.

Brandy982006 Posted 28 Sep 2009 , 4:14am
post #5 of 24

I don't see why it would be illegal, you are not accepting cash which would be something the IRS would want their cut from BUT what I would worry about is doing a cake for someone you may not know and they got sick or something horrible happens and you lose more than having shady dealing follow you...This is why I won't make a cake for someone I don't know. The reason the state doesn't want you to do cakes from your home, I believe, is because of the health codes and laws and stuff. Be careful and only do cakes for those people you know.

cakemaker30 Posted 28 Sep 2009 , 10:18am
post #6 of 24

I'm not an accountant so I can only tell you what my accountant told me, but bartered goods must still be claimed with the IRS as income. I'm not quite sure how it works because I don't do it, but an accountant could probably explain it better to you. As far as trading cakes, I believe since the IRS still considers that a business transaction that the health department would to.

Carolynlovescake Posted 28 Sep 2009 , 3:50pm
post #7 of 24
Quote:
Originally Posted by cakemaker30

I'm not an accountant so I can only tell you what my accountant told me, but bartered goods must still be claimed with the IRS as income. I'm not quite sure how it works because I don't do it, but an accountant could probably explain it better to you. As far as trading cakes, I believe since the IRS still considers that a business transaction that the health department would to.




I just looked into this for a child care client. I would have to claim the cost of their "barter" with me and pay taxes on that.

So if I give them 5 hours of child care free that were to equal $50, and they gave me a cord of wood for $60 in return I have to have a signed agreement on it, and then report the $60 "cost of goods" to the IRS come tax time.

A trade of goods, services, or money is a legal business transaction. So swapping a cake from an unlicensed kitchen for a material good can still get you in deep water if anyone gets sick and wants to legally go after the baker.

costumeczar Posted 28 Sep 2009 , 5:55pm
post #8 of 24

If you barter goods and services you're still supposed to declare the value on your income taxes as income.

MrsNancyB1 Posted 28 Sep 2009 , 8:28pm
post #9 of 24
Quote:
Quote:



A trade of goods, services, or money is a legal business transaction. So swapping a cake from an unlicensed kitchen for a material good can still get you in deep water if anyone gets sick and wants to legally go after the baker.




That puts it clear as mud for me. I'm not happy about it, but I want to be completely legal so I think it will be a no-go.

Thanks!

Carolynlovescake Posted 29 Sep 2009 , 12:01am
post #10 of 24
Quote:
Originally Posted by MrsNancyB

Quote:
Quote:



A trade of goods, services, or money is a legal business transaction. So swapping a cake from an unlicensed kitchen for a material good can still get you in deep water if anyone gets sick and wants to legally go after the baker.



That puts it clear as mud for me. I'm not happy about it, but I want to be completely legal so I think it will be a no-go.

Thanks!




Sorry to be the funsucker and deliver that news but that is what I have been told by those in a position of power (accountant, lawyer types etc).

I would like to follow that up with, it's always best to check with your local people. It really varies from county and state. A phone call to your own local authorities on this could get you an answer that is different than what I was given and they might not care like my area does.

-K8memphis Posted 29 Sep 2009 , 12:10am
post #11 of 24

Y'know what if someone gets sick from your cake it doesn't matter if you're legal or not--you're in deep sh*t.

-K8memphis Posted 29 Sep 2009 , 12:13am
post #12 of 24

She didn't ask about hurting someone with her cake.

If you do this bartering like once a year or once a blue moon or something for a cake-no worries. If you conduct a part time or full time business this way no it's not ok.

-K8memphis Posted 29 Sep 2009 , 12:28am
post #13 of 24

You are so busted--just as I thought~~
You are a cake making addict--a cakin' junkie~~ like me

Asked & answered, Girlfriend, by you!!

http://cakecentral.com/cake-decorating-ftopicp-6516516-.html#6516516

Oh yeah everything changed since August fifteenth

icon_lol.gificon_lol.gif

-K8memphis Posted 29 Sep 2009 , 12:29am
post #14 of 24

Y'know that game at Chuckie Cheese where the beaver pokes his head up randomly out of like nine different holes & you whack him with a mallet??

Down, Nancy, Down!!! rotfl icon_lol.gificon_lol.gificon_lol.gif

Ruth0209 Posted 29 Sep 2009 , 12:56am
post #15 of 24

As previous posters have said, if you barter goods the IRS considers it income and still requires you to report the value of what you received. I suspect that as strict as California is, if you receive something of value for your cake, then you have essentially been paid. It's a business transaction.

As for the "sell a bow that just happens to have a free cake under it", it's just plain dishonest. You can try to work every shady angle out there, but sometimes you just have to wait until you can do it right.

Ruth0209 Posted 29 Sep 2009 , 1:12am
post #16 of 24
Quote:
Originally Posted by K8memphis-

You are so busted--just as I thought~~
You are a cake making addict--a cakin' junkie~~ like me

Asked & answered, Girlfriend, by you!!

http://cakecentral.com/cake-decorating-ftopicp-6516516-.html#6516516

Oh yeah everything changed since August fifteenth

icon_lol.gificon_lol.gif




K8, you sly dog. What would we do without you?! You just crack me up.

Brandy982006 Posted 29 Sep 2009 , 1:52am
post #17 of 24
Quote:
Originally Posted by K8memphis-

Y'know what if someone gets sick from your cake it doesn't matter if you're legal or not--you're in deep sh*t.




If your legal and someone gets sick and wants to sue you, they sue the company...If you are not legal and someone gets sick they can sue you and you can lose EVERYTHING!

She may not have asked about getting someone sick but the answer to being legal or not should extend past the IRS and the tiny little slap on the back of the hand for running a little "under-the-table" business.

I Just feel that anyone who wants to make cakes for those other than friends and family and do not have the proper licensing and permits and stuff should think past trying to "get around the system"

I don't want to start anything here but i feel it is important that everyone think about the whole picture when doing things illegally. icon_smile.gif

Texas_Rose Posted 29 Sep 2009 , 2:10am
post #18 of 24

From what I understand, if you barter then it's treated as income, and you can deduct your costs as an expense...but a lot of the cost of a cake is your time and effort and you can't deduct for that.

I can see where this was a different question than the bows one...and I do understand your frustration. It's almost like we ended up with the most frustrating hobby in the world...just about anything else could be made at home and sold at craft fairs, but not cake. Sometimes I look at all the cake junk I have and at the things I can make and I wonder why I didn't focus on something that I could make money doing.

Anyhow, I've traded cake for things before...not major things. For example, to get my daughter's Halloween costume this year, I traded two dozen cupcakes for an antique wedding gown. That's the only time I've ever traded with someone I absolutely did not know. I didn't tell her that I make cakes all the time, she thought I was just a mom trying to come up with something to get her kid's costume.

Ruth0209 Posted 29 Sep 2009 , 2:20am
post #19 of 24
Quote:
Originally Posted by Brandy982006

Quote:
Originally Posted by K8memphis-

Y'know what if someone gets sick from your cake it doesn't matter if you're legal or not--you're in deep sh*t.



If your legal and someone gets sick and wants to sue you, they sue the company...If you are not legal and someone gets sick they can sue you and you can lose EVERYTHING!

She may not have asked about getting someone sick but the answer to being legal or not should extend past the IRS and the tiny little slap on the back of the hand for running a little "under-the-table" business.

I Just feel that anyone who wants to make cakes for those other than friends and family and do not have the proper licensing and permits and stuff should think past trying to "get around the system"

I don't want to start anything here but i feel it is important that everyone think about the whole picture when doing things illegally. icon_smile.gif




Clearly, you've never had to deal with the IRS when they're mad. They don't slap people on the wrist. They beat you to a bloody pulp, because they can. icon_surprised.gif And as a person who pays more than her share of taxes, I figure that's what we pay them for.

When I read all of these posts about trying to get around laws and regulations, I can't help but think if people spent half as much time and energy figuring out how to do it right as they do looking for loopholes, they'd be well on their way to having their business established.

If you can't afford to start your business, get a second job and save up, or cash in your 401(k), or get a loan, or convince your mother to finance you, or move, or do it part time and work part time, or wait, or even forget about it. If it's meant to be, there's a way to do it right.

Carolynlovescake Posted 29 Sep 2009 , 3:01am
post #20 of 24
Quote:
Originally Posted by K8memphis-

Y'know what if someone gets sick from your cake it doesn't matter if you're legal or not--you're in deep sh*t.




True but by being legal and licensed I have insurance to cover any claims and pay out a settlement if it needs to be done as well as cover the cost of any medical bills they incur from illness. Most of the time once a settlement has been paid the person who was made sick is less likely to sue since they got financial compensation. Even if they did decide to do a civil suit, their settlement from insurance would be taken into consideration. IF they were found in favor and won the worst they could do is go after my business assetts. That's my cake pans, mixes on hand, used feather weight bags etc. At that point I close my business and they can't do anything nor get any money in addition to the assetts I sell off. They can't touch my house, my personal assets, the kids college funds, 401K's etc.

If I was doing an under the table and got caught (like my friend who's story I've shared before) I could kiss my home, my kids college funds, any assets (boats, other real estate, ski doos, extra vehicles etc), inheritances, tax returns and such good bye. I'd also be paying their medical bills out of my own pocket plus any law suit settlements, along with their legal fees. That's before the IRS got a hold of me and bent me over to take their cut of my unpaid taxes.

thumbs_up.gif

-K8memphis Posted 29 Sep 2009 , 3:24am
post #21 of 24

I just can't take the what if somebody gets sick thing and takes away your house and your kids have to sleep in the 7/11 parking lot scare one more time.

Yes of course it could happen. A Fedex plane may be plummeting toward my roof this very second too--it could happen.

But I mean we ain't selling hot meat sandwiches from the roach coach either.

The sky is falling the sky is falling

But more than 99.99% of the time nobody gets sick from cake--unless they are diabetic or it's a caker not following proper sanitation.

You don't have to be legal for an insurance company to abundantly insure you. They sell policies not licenses.

Y'know most accidents occur within two miles of home--we should all move huh.

Here's one more morsel for the ages--if someone gets sick from eating your cake then you suck you deserve to get sued and loose your fricken house.

Geez Louise.

-K8memphis Posted 29 Sep 2009 , 3:47am
post #22 of 24

And it's your business structure, like incorporating as opposed to sole proprietor that protects your personal assets not your insurance policy.

Dude, if you're doing cake illegal and get caught they don't take your house. All four of my girlfriends who got busted did not loose thier house or car nor did they pay any fines. Some people pay fines on it. Most people don't sell their houses and cash out the kid's college fund to pay it.

And if someone gets sick the insurance policy covers a certain amount of money it does not cover any (as in all) medical and stuff.

Far too much hysteria for me.

It's quite a stretch to go from doing cake illegal to people dropping like flies from eating it.

omg

MrsNancyB1 Posted 29 Sep 2009 , 4:28am
post #23 of 24
Quote:
Originally Posted by K8memphis-

You are so busted--just as I thought~~
You are a cake making addict--a cakin' junkie~~ like me

Asked & answered, Girlfriend, by you!!

http://cakecentral.com/cake-decorating-ftopicp-6516516-.html#6516516

Oh yeah everything changed since August fifteenth

icon_lol.gificon_lol.gif




This question was different.

But thanks anyways *insert sarcasm here* icon_rolleyes.gif

costumeczar Posted 29 Sep 2009 , 10:40am
post #24 of 24

I think the idea of what kind of an example do you want to set for your kids is a good rule of thumb. A few other people have mentioned this here, so thanks for that. If people think it's okay to pick and choose which laws to follow, then don't be surprised when your kids get to be teenagers and decide to do the same thing.

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