If I make cakes for family and friends, but do not charge, can people give me "donations" and it be legal without a license? I'm just getting started with cake decorating, and would probably make 1-2 cakes per month for people I know. Those people have said that they would like to reimburse me for my time and effort, so can I just ask them to make a donation that they feel is appropriate?

I'm no lawyer, but I don't see how that could be a problem. As long as you don't specify how large the donation should be.

Yes. People can just give you the ingredients money and you make it. It's not like you are
making over $15,000 in donations a year.
I even donate cakes to auctions and have had
no problems.

Anytime money exchanges hands for services regardless of whether it is for ingredients or not, it's considered a "sale" therefore still making it illegal. As far a "donations" as far as I know, you need to to register your biz to accept such.

So is it illegal to participate in a church bake sale, etc.?

OK, just trying to take all this in and understand it completely. So, DIFFERENT scenario, but still getting money for services, what about a babysitter?? They are receiveing money for a service, and that is not considered illegal, is it? What is the difference? I understand if you are making cakes for a living and such, but when you're making 1-2 a month for a church or something? I don't see the "illegality" (ha is that a word?) of them offering you some cash for you time and ingredients.

The problem is that we are talking about food here, a baby sitter doesn't have to worry about food pison or other food matters, that's why is so hard to obtain a license and imposible to bake from home for business pourposes. I know how you feel, but unfortunately we just have to do it for fun. I guess if you give it to a friends a that friend gives you a donations I think there is not much risk on that, but if you give it to a church and that church give you a donation I think there are more chances of getting caught by the health department and I read here in another post that the fine is about $5700 and 12 months of probation.
I would say this is walking in thin ice.

I'm sure the law is different in every state. I would look it up or call your state's appropriate department and ask. You can remain annonymous and get information that you know is accurate.

but if you give it to a church and they do not pay you for it, the health dept can do nothing to you? it all seems a little overobard just for a donation of 20 bucks here and there. i understand, it's just weird. oh, and in reference to the babysitting thing, i was simply responding to the earlier comment of "Anytime money exchanges hands for services regardless of whether it is for ingredients or not, it's considered a "sale" therefore still making it illegal."