klma Posted 11 Feb 2011 , 10:06am

I enjoy baking and decorating cakes, and would like to make a little profit to support my costs of buying new supplies. I do not want to start a fulltime bakery business, that requires more work than play. Right now I bake for my family and for school or social functions, I have never charged any money, though I have spent days making one cake, and regretted wasting my time. I am considering asking for donations or pricing my cakes just enough to cover my ingredients, and sell only to friends or friends of friends. Do I still need to get some sort of vendor's license or food license or home-based-business license. I want to keep baking enjoyable, and not worry about it being a bunisess where I have to do accounting or income taxes or marketing. I want to keep it simple and just announce I want to bake cakes on a website or Facebook and just wait for my friends to request a cake.

127 replies
brensmom12 Posted 11 Feb 2011 , 10:18am

That's what I do right now. My kitchen is certified, but I do not have a business licence. My husband and I own a business and the area we live in eats small business alive with taxes. I only sell to family, friends and friends of friends. Maybe if I decided in the future to get larger then I would get the appropriate licensure but for now no way.

noahsmummy Posted 11 Feb 2011 , 10:44am

my council is ridiculous to get a straight answer out of. I have been making cakes for family and friends at cost for around a year now. I simply cannot afford to pay for these myself, so i charge the amount it costs me to make, or i make them as birthday gifts instead of buying them something else. I dont have any sort of license's, some of you may eat me alive for saying that, but thats not through lack of trying to get even a simple yes or no answer out of my council.

i say go as legal as you can afford to for now, and as your progress, and your business grows then so you should up your regulations and such, for your own liabilities sake if something goes wrong. If for now you stick to making cakes only for friends and family (people you TRUST), and dont charge massive amounts of money, stick doing doing only a few a month (mine probably averages out to be about 2 a month) then i think you should be fine. again depends on your council, the vibe im getting from mine is a sort of "dont ask dont tell" sort of situation.. =/

jason_kraft Posted 11 Feb 2011 , 11:13am

If you do not have a licensed and inspected commercial kitchen (and do not live in a state with a cottage food law) then you legally cannot accept any compensation in exchange for a cake, even just the cost of ingredients. That said, if you are very careful about who you sell to (only family and close friends) and you do not advertise your business at all (even on facebook) the risk is relatively low.

I would certainly not accept any money for any product that will be eaten by kids other than the kids of your family members and close friends. If you are sued for an issue arising from this type of commercial transaction (food poisoning, ingesting a foreign object, allergies, etc.) you have no protection from liability insurance and could end up losing your personal assets.

If the health department finds out there are usually not too many consequences (other than that you have to stop baking until you get legal) but failing to report business income and pay your state sales taxes is tax evasion and can lead to serious penalties, including forfeiture of assets and jail time for egregious cases.

jason_kraft Posted 11 Feb 2011 , 11:21am
Quote:
Originally Posted by brensmom12

That's what I do right now. My kitchen is certified, but I do not have a business licence. My husband and I own a business and the area we live in eats small business alive with taxes. I only sell to family, friends and friends of friends. Maybe if I decided in the future to get larger then I would get the appropriate licensure but for now no way.



This is an extremely dangerous way to operate...there was a thread on CC recently about a bakery that decided not to pay state and local taxes and was closed by the state (I can't find the thread but the story is linked below). The bakery in question was a licensed business, but if they had been "under the radar" the state probably would have started seizing personal assets and/or suing to recover lost revenue, followed closely by the fed.

http://www.pickensprogressonline.com/index.php?option=com_content&;view=article&id=947:popular-jasper-bakery-seized-by-ga-dept-of-revenue&catid=42:news&Itemid=18

It would almost be safer to not have a certified kitchen if you plan on evading taxes, at least then no government department would have you on the books.

PattyT Posted 11 Feb 2011 , 12:17pm

klma (OP) - I see this is your first post. If you are in the U.S., licensing varies from state to state and has been discussed at length many, many times on the forums. You should read ALL those threads to see the different positions. Start in the business forum and read the sticky thread about "states that license" (I think this what it is titled). There are many others too - in the forums section search for the word license or legal. Take the time, as the threads are informative, and sometimes heated and will help you a great deal. I am a hobby baker, but I still read them all to keep current.

nelikate Posted 11 Feb 2011 , 12:27pm

Here in Australia we have the ability to earn small amounts of money and have that considered a hobby rather than a business so you don't get taxed on it. However you still have to check if you need a licenced kitchen and which way - hobby or business is best for your tax/family situation.

There is small business information offered by the Victorian & NSW governments - not sure if the other states offer it too.

Noahsmummy - i've been trying for a while to get in contact with the health inspector in my council. When I last spoke to him, it was also a bit of dont ask dont tell. But he did say do a food safety/supervisor course so that I would know how to operate a healthy and safe kitchen.

The Victorian Cake decorating association offers group public liability insurance. Your association might offer this too.

As to how legal should you be? - how big a risk taker are you? find out the costs and minimal requirements for your area, find out the penalties for not abiding and work out which will cost you less in the long run and which will make you happier.

Nel.

brensmom12 Posted 11 Feb 2011 , 12:50pm
Quote:
Originally Posted by jasonkraft

Quote:
Originally Posted by brensmom12

That's what I do right now. My kitchen is certified, but I do not have a business licence. My husband and I own a business and the area we live in eats small business alive with taxes. I only sell to family, friends and friends of friends. Maybe if I decided in the future to get larger then I would get the appropriate licensure but for now no way.


This is an extremely dangerous way to operate...there was a thread on CC recently about a bakery that decided not to pay state and local taxes and was closed by the state (I can't find the thread but the story is linked below). The bakery in question was a licensed business, but if they had been "under the radar" the state probably would have started seizing personal assets and/or suing to recover lost revenue, followed closely by the fed.

http://www.pickensprogressonline.com/index.php
option=com_content&view=article&id=947:popular-jasper-bakery-seized-by-
ga-dept-of-revenue&catid=42:news&Itemid=18

It would almost be safer to not have a certified kitchen if you plan on evading taxes, at least then no government department would have you on the books.




Considering I may do 1 or 2 cakes a month it is still a hobby for me. Originally I wanted to branch out an become bigger but for right now I have decided not to do that. Since there is no record of sales and I do not itemize my cake stuff for tax purposes I see no point in acquiring a business licence for the little work I do. Evading taxes is a serious thing and I think before you accuse any one of evading taxes you should know all the facts about that persons situation. The business in the article was a store front which I do not work out of a store front, but my home kitchen. Second this was a business that collected state sales taxes, again something I do not do. There is no comparison between someone like me working from my home to make a few bucks to support a hobby and a store front business evading taxes.

indydebi Posted 11 Feb 2011 , 3:27pm

I'm sure you're not going to like this post. Most who have your viewpoint don't:

- Not collecting sales tax on taxable items is a crime.
- Just because one does not keep records, doesnt' make it legal to do so. In fact, not keeping records can be a flag for INTENTIONALY tax evasion.
- Just because one doesn't itemize, doesn't make it legal.
- Just because one doesn't make a profit, doesn't mean its not a business. The govt doesn't care if a business can't figure out how to do a pricing struture right so they make money. If money exchanged hands, its a business transaction.
- Working illegally from home "to make a few bucks" is just as illegal as working from home to make a lot of bucks. If that was the standard, I could turn my 2nd bedroom into a pot growing room .... less work and more profit. you know ... just to make a few bucks. Illegal is illegal.

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Quote:

Since there is no record of sales and I do not itemize my cake stuff for tax purposes I see no point in acquiring a business licence for the little work I do. Evading taxes is a serious thing and I think before you accuse any one of evading taxes you should know all the facts about that persons situation. The business in the article was a store front which I do not work out of a store front, but my home kitchen. Second this was a business that collected state sales taxes, again something I do not do. There is no comparison between someone like me working from my home to make a few bucks to support a hobby and a store front business evading taxes.


brensmom12 Posted 11 Feb 2011 , 4:40pm

This is obviously a very volatile topic. I guess if the above is true my babysitter should get a business license or risk being in trouble with the feds. I guess if you sell anything (not just cakes) on Craigslist you should claim it as income and pay taxes on it. I believe there is a minimum on earnings to where you don't pay taxes.
Comparing making a cake for sale vs growing pot is just ridiculous.

jason_kraft Posted 11 Feb 2011 , 4:59pm
Quote:
Originally Posted by brensmom12

This is obviously a very volatile topic. I guess if the above is true my babysitter should get a business license or risk being in trouble with the feds.



The comparison to babysitters is apt...if someone only babysits friends and neighbors and does not advertise their services they are relatively safe, but once they start accepting business from strangers and expanding they should become licensed and insured (insurance is even more important here because they are directly responsible for the welfare of small children).

Regardless, they must pay income taxes on the money they receive for babysitting. And even when babysitting for friends and neighbors they are still exposed to a huge amount of liability if uninsured, the main difference is that most casual babysitters don't have much in the way of personal assets...a babysitter can't lose her home in a liability suit if she doesn't own one.

Quote:
Quote:

I guess if you sell anything (not just cakes) on Craigslist you should claim it as income and pay taxes on it.



If you are reselling a household item on CL chances are you are taking a loss, so that's not really a concern. But if you are manufacturing an item from raw materials and selling that item to a consumer, that's a commercial transaction and you must declare the income, although you only pay tax on net income.

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I believe there is a minimum on earnings to where you don't pay taxes.



Incorrect. You may have deductions that reduce your taxable income, but you must declare all income on your tax return. There are many business deductions you can take, and in some cases businesses will end up showing a loss on their tax return. That loss can usually offset personal income, so you may wind up actually getting money back from the government when you file your corporate taxes.

cheatize Posted 11 Feb 2011 , 5:02pm

She's comparing the legalities.

Man, think of the money I could make selling pot! No one argues about pot prices, right? LMAO. Kidding, just kidding!

jason_kraft Posted 11 Feb 2011 , 5:05pm
Quote:
Originally Posted by brensmom12

The business in the article was a store front which I do not work out of a store front, but my home kitchen. Second this was a business that collected state sales taxes, again something I do not do. There is no comparison between someone like me working from my home to make a few bucks to support a hobby and a store front business evading taxes.



The only difference is that the business in the article had business assets that could be seized to help pay for back taxes. In your case, you probably don't have as many business assets, so depending on the amount of back taxes owed your creditors might have to go after your personal assets to pay your tax bill.

Crazboutcakes Posted 11 Feb 2011 , 5:05pm

[quote="klma"]I enjoy baking and decorating cakes, and would like to make a little profit to support my costs of buying new supplies. I do not want to start a fulltime bakery business, that requires more work than play. Right now

I know that I am going to get a lot of crap for this but here it goes. I so understand where your coming from as keeping it simple. I am kind of in the same boat. I make cakes for friends and such and would really like to do more but my state is still looking into the cottage food law and understand the safety aspects of food handling and such and feel that my kitchen is so much cleaner than local store per say and a lot of restaurants, can be. I have worked in many kitchens and if you only knew what was under and around areas that you don't see really look like you wouldn't eat there! icon_eek.gif And when they know they are going to be inspected they will break down everything and even use a tooth brush, been there and done that! icon_confused.gif I know my kitchen is clean and is wiped down and cleaned before I even start a cake regardless if it is for me or someone else. I eat out of my kitchen and so does my family. People that work in these places come and go and I feel not all but some could care less! They want to finish their shift and haul A**, icon_surprised.gif I cannot afford to build a separate kitchen that my state says is required and nor can I afford to build a kitchen for my apt nor do I want to, I'd like too, but it's not even my house! Some people seem to think you/me don't know right from wrong, well indeed we do! And in time when my state wants to help us help ourselves to make it a little easier to make money in our states that have no jobs, than they will be a little easier to comply with, than do what you feel is the best under your circumstances and when and if you are compelled to have a license or not that is up to you, it just comes to a point where the government says pay me first regardless of what your making, or what your going through because of the lack of the government screwing up what was in the best interest of its people. icon_mad.gif What happened years ago when the farmer could sell his products to anyone without having permission from the government., we have people that sell boiled peanuts icon_twisted.gif in vender stands on the side of the road here in my state that show up everywhere, that seems healthy enough? icon_confused.gif I am just so feed up with everyone thinking it is ok for the government to say yes or no about how to live your life! I understand that being sued is always around the corner, but as long as your customer/family whatever knows what you are doing and they are ok, what is it to the government seeing they cannot do their job icon_mad.gif because that is where it comes down too. If you are baking 2 or three cakes a month you know what your state laws are and I would be willing to go to jail for making a cake than to stop enjoying making them. Insurance companies rob the government every single day and it's wrong but we pay for it don't we? Let's not talk about those who abuse the government system too, We are also paying for the people in jail to go get their GED's and go to college and to be able to have the rights to be their own lawyers at the expense of the state they live in. icon_mad.gif PLEASE We as a country need to step up for our rights we are not dealing drugs abusing the system or hurting anyone, we are designing 3 to 4 cakes a month! Really where should your anger be? What do you think needs to be fixed first? Just my opinion, like it or not!

jason_kraft Posted 11 Feb 2011 , 5:12pm
Quote:
Originally Posted by Crazboutcakes

We as a country need to step up for our rights we are not dealing drugs abusing the system or hurting anyone, we are designing 3 to 4 cakes a month! Really where should your anger be?



I know! Your only crime is violating the law. icon_wink.gif

Quote:
Quote:

What do you think needs to be fixed first?



If you think a law is unfair, contact your local/state/federal representatives and lobby to have the law changed. It would be nice if we could pick and choose which laws we wanted to follow and which laws we don't, but most countries follow the representative republic system of government rather than anarchy.

indydebi Posted 11 Feb 2011 , 5:40pm
Quote:
Originally Posted by brensmom12

Comparing making a cake for sale vs growing pot is just ridiculous.


yeah, that's pretty much the response that usually gets typed in when the person doesn't have a legit argument.

baking and selling cake out of an unlicensed kitchen - illegal.
growing and selling pot - illegal.
speeding down the highway - illegal
shoplifting a dozen eggs ("but I'm just trying to save a little money!") - illegal.
re-creating a Disney character and selling it without permission from disney - illegal ("oh but I only sold one so they won't come after ME!" ----- yeah, go on believin' that. icon_eek.gif )
downloading music w/o following the licensing laws - illegal

Please let me know where I can find the documentation that says I can pick and choose which laws I'm allowed to violate.

Being a little bit legal is about the same as being a little bit pregnant. No such thing.

brensmom12 Posted 11 Feb 2011 , 5:51pm

Everyone needs to take a deep cleansing breath and stop the hostility. I guess to answer the OP question you should ask your state health dept. What you can do and then what you should do to be legal before taking any advice from anyone else. If your state does not have a cottage law then it is a mute point and all this conversation has been is people getting up in arms for no reason. Happy caking to allicon_smile.gif

jason_kraft Posted 11 Feb 2011 , 5:56pm
Quote:
Originally Posted by brensmom12

If your state does not have a cottage law then it is a mute point



It is most definitely not a moot point. OP asked whether or not to accept money for cakes, and if there is no cottage food law in their state it is important for them to know what the consequences are for selling cakes without being inspected and licensed.

brensmom12 Posted 11 Feb 2011 , 5:58pm
Quote:
Originally Posted by indydebi

Quote:
Originally Posted by brensmom12

Comparing making a cake for sale vs growing pot is just ridiculous.

yeah, that's pretty much the response that usually gets typed in when the person doesn't have a legit argument.

baking and selling cake out of an unlicensed kitchen - illegal.
growing and selling pot - illegal.
speeding down the highway - illegal
shoplifting a dozen eggs ("but I'm just trying to save a little money!") - illegal.
re-creating a Disney character and selling it without permission from disney - illegal ("oh but I only sold one so they won't come after ME!" ----- yeah, go on believin' that. icon_eek.gif )
downloading music w/o following the licensing laws - illegal

Please let me know where I can find the documentation that says I can pic

and choose which laws I'm allowed to violate.

Being a little bit legal is about the same as being a little bit pregnant. No such thing.




Not that I need to defend my self but my kitchen is legal. Just because I don't have a business license doesn't make it illegal. You don't need to be so nasty. Why don't you take your criticism and redirect it in a positive way. Too much negativity on this post.

indydebi Posted 11 Feb 2011 , 6:04pm

I never accused you of running an illegal kitchen. I was addressing potential problems by your statements of not keeping records, not collecting sales tax (which varies by state). Having a legal kitchen is a great asset but it doesnt' justify any and all other illegal activity.

If you've taken the step to have a legal kitchen, then obviously you want to do it right. Just don't try to justify illegal activities with the "just trying to make a little money" argument. It won't hold up in court.

ryannrochelle Posted 11 Feb 2011 , 6:10pm

I agree that there is too much negativity on this post. I am a hobby baker that would like to do more. Almost everyone I know contacts me and wants to pay me as appropriate (which some people don't). I can't accept this from them due to the wonderful laws that surround cake decorating.

I see where IndyDeb is coming from on saying illegal is illegal but I do think comparing it to Pot is a bit rediculous. Marijuana is illegal period. Cakes are not illegal, so hence the rediculous comparison. Everyone on this post probably speeds every now and then even though it's illegal and some of you may have even been caught doing it. So that may be a "fair" comparison.

The bottom line is that the government is too BIG. They regulate too much. It was hobby bakers making pies and things when towns were established in this country and they are the ones who built the business world. Along with teachers, carpenters, mechanics. NONE of which had means for licenses and certifications. THEY built this country and now we all have to abide by laws. It is a hard pill to swallow that you do something that is making people happy, it's a cake not a drug and you can't do it without gicing the government a piece of a very small pie. It upsets me and I know it upsets other people.

I joined CC so that I could gain inspiration and knowledge from other bakers and right now, all I can see is the negativity and how down some people are on each other. Makes me rethink CC and cake decorating all together.

metria Posted 11 Feb 2011 , 6:13pm
Quote:
Originally Posted by indydebi

Being a little bit legal is about the same as being a little bit pregnant. No such thing.




I LOLd

Mb20fan Posted 11 Feb 2011 , 6:18pm

ImageImageImage

Crazboutcakes Posted 11 Feb 2011 , 6:18pm

Dear jasonkraft ....Let me see, Have you ever driven over the speed limit and not got caught? Had road range and call someone names, (if you were standing in front of them you could be arrested in some states for aggravated assult)? Have you ever had a scratch off ticket and won money and not turned it in? Have you ever paid the a neighborhood mechanic because he was cheeper? Hmm the list goes on and on, and I believe that every state has a limit to earn less than x amount of dolloars a year and you don't have to claim it! So if your doing automobiles to cakes there is no difference, it just seems that no one is perfect and it is a choice on what you choose to do driving, caking, babysitting, being a mechanic..and as far as the goverment, that is why we are having this conversation! It is because we as the people have trusted our govement officals to do what is right for the people... and for many years they have not done what was right for the people and has done what is right for the govemnet and their pockets and the hell with the rest of us including you!

jason_kraft Posted 11 Feb 2011 , 6:25pm

I'm not sure why people think there's so much "negativity" in this thread...it's an open and honest discussion about the pros and cons of conducting business according to your local/state/federal laws. Yes, some of the responses here (including mine) have been rather direct, but sugar-coating the consequences doesn't help anyone, this is a very serious issue.

metria Posted 11 Feb 2011 , 6:31pm

several posts are NOT being negative. they are being INFORMATIVE. this isn't a witch hunt; it's trying to keep everyone safe. just because you don't like what you hear doesn't mean it's negative. where some see shades of gray, others see black and white. personally, i'd rather be on the side of "i told ya so"...

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