I would really appreciate any advice on this issue. I really enjoy baking/decorating and for years I've been making my family/friends cakes. A little over a month ago I made a cake for my niece and my daughter took it to work to surprise her.
Well all the sudden a bunch of her co-workers (and even friends of theirs) are requesting that I do cakes for them and they are insisting they pay for them. I know it is not legal for me to run a cake business from my home kitchen and I don't want to do anything that could get me in trouble.
I know I'm not in any position to just go out and start a cake business. I have a full time job, and right now and this is a hobby. I would love for it to become something more someday, but I need A LOT more experience before I go there. So right now I'm just really loving the chance to get all the practice.
So I want to say yes to these requests and it's nice to at least be compensated for my expenses. So my question is (FINALLY 
) Can I just tell everyone that I don't charge to make cakes but I will accept a "thank you" gift in whatever amount they think appropriate?
I'm really not in it for the money right now so I'm not worried about people taking advantage of me. If it turns out I'm spending way too much on supplies and not getting enough compensation, I'll worry about it then.
I just want to make sure this approach is legit. Thank you very much for your advice and sorry if I ramble too much!
Any type of compensation - be it money, gift cards, or gifts - technically is considered payment and may not be permitted depending on where you live.
To be absolutely certain you're not breaking any laws, consult your local health department or county clerk's office and ask what is allowable.
Good luck and keep baking!
I am not sure if it is or not. I always hear people say no exchange of money, not even for the cost of ingredients, at least that is how it is in my state. As far as accepting donations. I think you are going to be very dissappointed in them. Not to be negative, but people are CHEAP. They want a great cake for nothing and I am afraid that is what you will get for donations, next to nothing. In my experience, people won't cover your cost IMHO.
Usually if it's not legal to sell a cake, it's not legal to accept a donation either. I tried this once or twice some time back, and like the previous poster said, I was disappointed. The donation usually came in as $10 on a cake that I would have sold for several hundred (had I been allowed to). So I didn't even suggest it anymore after that.
My cakes are expensive to make, so I do ask for the exact cost of the ingredients, but only from good friends and family (and yeah, I get it, that's technically not allowed either, but my mom isn't turning me in any time soon. Not saying you should do this, but this is what I am comfortable with).
I am not sure if it is or not. I always hear people say no exchange of money, not even for the cost of ingredients, at least that is how it is in my state.
Not true for your state, Aurora. I don't know where the original poster is from, so I can't answer to that. But in Kansas, home bakers fall under the Farmer's Market clause and do not have to be licensed. You have to sell to the end-user (so you can't sell to restaurants or grocery stores for them to resell to their customers), and you can only make "low risk" foods (things that don't have to be refrigerated as an end product). That being said, counties or cities may have more stringent codes. And sometimes you can run into zoning restrictions so you have to check there too.
Can I just tell everyone that I don't charge to make cakes but I will accept a "thank you" gift in whatever amount they think appropriate? I'm really not in it for the money right now so I'm not worried about people taking advantage of me. If it turns out I'm spending way too much on supplies and not getting enough compensation, I'll worry about it then. I just want to make sure this approach is legit. Thank you very much for your advice and sorry if I ramble too much!
Excepting money, no matter term you use for it, would be illegal if you were not allowed to sell cakes out of your home in your area.
As others said, check with your Health Department and find out what the laws are in your area.
Have you sat down and figured out how much cakes cost you? I so wouldn't not take donations. I would rather do a cake for free than do a big nice cake and have someone hand me a $20 bill and act like they are doing me a huge favor by paying me that much.
Also as I said in another post, plan now for the future. It is really hard to go from free cakes or very free cakes to charging a decent amount because they will be use to cheap or free cakes.
Thank you all very much for your advice. I will do some checking around with my county clerk and health department. BTW, I'm in Colorado. Another thought was to find a bakery that may take me on as an intern. That way I can learn more from an experienced professional AND get my baking/decorating fix 
But I'd continue to bake from home for close friends and family...for free of course 
If you are accepting "donations" be sure that you do not have to be registered as a"non-for-profit" organization... the IRS could bite you on this..
Also be sure that the bakery dosen't consider you a 'threat" to their business.. some don't allow you to bake on the side from home..
ok so is there anyway around it, or do you just hope you don't get caught?
No there is no way around the law, that's why it is what it is. Now as was said some states/counties are not as strict so call and talk to someone in the proper channels in your area and see what is allowed.
the biggy..... ZONING!!! that's where you get into all the red tape... because they state it like this... if they allow you to make cakes at home.... then Joe Schmoe next door technically can sell video games from his house... then people start cramming your quiet neighborhood with cars and traffic (both people and cars) and now you as are disturbing their peaceful living.... that's why it's so hard in most states...
However, when you work out the total cost of the cakes, you might be surprised...perhaps they could be friendly and drop by a few bags of powdered sugar, some butter...let them know what you need for ingredients. That way, you are helped with the cost, get the experience, and it might not be considered payment. (I'm in NZ though so don't count on it lol)
Cookiemeister
Thank-you. I did not know that. I think I would still be afraid to try it, though, just me.
All the cakes I make are for fun or gifts. Yes, always check with your HD. My local city hall was thrilled I wanted to open a biz but they had no clue about the HD restrictions which are VERY strict in my area. As others said, you would definitely be disappointed by the amount people would "donate" in appreciation. Your idea to work at a bakery would certainly give you more insight on running a business - might be a very good learning experience.
Elcee
Debbie, I'm sorry to tell you that there is no way to sell cakes out of your home kitchen in Colorado. All the cakes I make are for fun or gifts.
Yes Elcee, sadly I'm aware of this. That was the reason I was asking if it was legal to accept a gift. If I was to really get serious about it, I suppose I could get a license and rent kitchen space by the hour somewhere to start. But that's far into the future and I know there's a lot more to it than that.
BTW, I peeked...you have beautiful cakes Love the farm animal one for the Colorado Fair!
If you are not running a business, its not illegal to sell a cake to a coworker once a month or something like that. That's crazy...churches have bake sales all the time and stuff....and people make cakes for other people all the time...if people want to pay you for your trouble, I don't see what the deal is.
Now if you start making it an every weekend business thing, then you'd want to start worrying about being legal. If its an occasional favor that they pay you for, it can't possibly be illegal.
Of course there's always those "Don't spit in public" laws hidden in the books...LOL.
If you are not running a business, its not illegal to sell a cake to a coworker once a month or something like that. That's crazy...churches have bake sales all the time and stuff....and people make cakes for other people all the time...if people want to pay you for your trouble, I don't see what the deal is.
Now if you start making it an every weekend business thing, then you'd want to start worrying about being legal. If its an occasional favor that they pay you for, it can't possibly be illegal.
Of course there's always those "Don't spit in public" laws hidden in the books...LOL.
You'd think, huh. But it is definitely considered illegal in the strict states. I argue all the time that if you intend no profit and ONLY get reimbursed for the cost, you can't be considered a business either. But if they want to get really ridiculous, they could still fine you for that. Like I said, my mom or sister or best friend won't be turning me in... but a stranger might.
If your state won't license you as a home baker, the other problem is that you can't get liability insurance. Without that, if you sell to people, you are open to lawsuits that can take your home. I am more afraid of that than I am of being caught by the HD. All it takes is for one loser at your friend's co-worker's wedding to get the idea to sue you.
It sucks for us who live in these states. You could try to find out how the rules might get changed... I'm currently looking into that for my state. (I know some people here have tried to get laws in their state changed - in my state it's a rule (administrative code), not a law, and the process is apparently quite different).
Technically...not sure if this is true or not...but technically I heard that you can't win a lawsuit against an unlicensed baker (or business) because if they are not claiming to be licensed, then you are taking the risk into your own hands and it is therefore your own fault if something happens.
I read that several years ago, not sure how much merit there is in that.
Anyway I don't see what the difference is between making a coworker a cake as a favor, or making the coworker a cake as a favor and then they slip you a wad of cash to say "thank you". There is NO way that is illegal.... only if you do it regularly!
Any type of compensation - be it money, gift cards, or gifts - technically is considered payment and may not be permitted depending on where you live.
To be absolutely certain you're not breaking any laws, consult your local health department or county clerk's office and ask what is allowable.
Good luck and keep baking!
what about bartering? I am making a bday cake in exchange for our accountant friend to do our taxes...
Some states will allow you to bake and sell a couple days a month without being licensed. I would check to see if your state does that. NC you can call them and tell them that you are going to bake and sell on such and such day and it is perfectly legal. (Was informed by agriculture dept of this). You do not actually have to call them and inform them but if someone turns you in then you are covered because they already know about you. So if you just want to do it as a hobby with a paid cake here and there this would be the way to do it.
i make cakes for family/friends. im not legal so i cant sell them. i ask that for the holidays/birthday etc. to get me gift cards from either my favorite websites or craft stores. making cakes is expensive! and i know my time will never be compensated, but atleast if i can purchase items that i use then im ok with that.
there have been a few times when someone asks for very specific type of cake and i give them the list and let them go get it. its a hassle but atleast i dont have to worry about the legality of doing their cakes and money being exchanged.
what makes this even more confusing is when i called my local HD i got a very conflicting answer.
i know ALOT of people who sell their cakes illegally. but im not about to rat them out to the HD.
the bottom line is....
If you make 100.00 on a cake... Uncle Sam WANTS his $30.00 !
If you make 1.00 on a cake... Uncle Sam wants his .30 cents!
The goverment has made hundreds of thousands of rules and laws and regulations to make sure that there isn't a penny out there that is exempt from being taxed in one way or the other.... this is the real reason behind all the permits, codes, zoning, etc...
Yes, but what do they want of you if you make $0 because you only got the ingredients from the person? That's where I think the law is ridiculous.
In my state, the reason is that it is a public safety hazard to sell from home... even to your friend.... (but, it is NOT a safety hazard to sell hundreds of cakes for a non-profit group... nor is it a safety hazard to serve food in a bed and breakfast with a standard kitchen... or a daycare in a home for small children. Go figure). So they're not claiming it's an issue of tax $$ (though of course if you profit, it is), but that any cake from a home is apparently going to kill people.
some of the laws are a bit crazy! but i can understand that if you are selling cakes from home- you should be licensed. what being licensed entales is sometimes a bit much.
when i called my HD he told me that if you sell a cake or two a month. the HD wont do anything about it. (even if they are aware of it). but if you are advertising at cake shows/ newspapers/ and having your home operate as a bakery then they will investigate and shut you down. and take appropiate action.
in my state of CT you have to have a separate kitchen to be licnesed.
so like i said in a previous post- i got a confusing answer from the HD.
when i told him what i do - to avoid actual money exchanging hands. he laughed and said that i was going to the extreme. that selling a cake once in awhile was fine.
really? that doesnt seem right-to give such a loosey-goosey answer.
to me its either you can or you cant!
Please keep in mind, & I heard this in other post but not said this way... not only does your baking affect the HD or Dept of Ag but the IRS as well...
While the HD or Dept of Ag might not come for you the IRS will espeically if they think you are making more than you are claiming...
On bartering I am not 100% positive but I believe that even if you barter the IRS wants a piece of that too... the problem becomes when you claim & they don't (or visa versa)...
If you are a small time hobby baker you are not going to make any profit to give Uncle Sam...if you count your pans, electricity, gas, cake toys, and everything, plus ingredients, even if your coworkers give you a "thank you gift" of money, its not going to profit anything, but just pay you back for your supplies and tools.
Even if you did report it that way on your taxes, the deductions would net to zero taxes due.
Doing honest taxes is the main reason I got licensed, and secondary to be "legal". I knew doing 2-3 cakes per month wasn't paying me a profit. But once I started making profit, I knew I needed to become legal and pay my taxes. So I did.
The OP's occasional cake for a coworker is not going to profit her financially.
The OP's occasional cake for a coworker is not going to profit her financially.
You're right that it may not profit her financially, but regardless of profit, in our state is is against the law to sell cakes out of an unlicensed kitchen and it is virtually impossible to license a home kitchen. The exchange of money, profitable or not, is considered selling. It doesn't matter whether any of us agree with the laws or not, that fact won't change.
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