Need Help For Maybe Home Based Business
Business By Donita1978 Updated 3 Jul 2014 , 8:16pm by crabilld
AOkay....I work 6 days a week at the local small town grocery store. I have a fiancé and two kids ages 10 and 4. I've done a few cakes in my kitchen on the side for a little extra cash for others. I'm trying to put together a price list for my cakes and a list with what cakes I have done for others as well as for my kids's birthdsys. I have pictures of all my cakes in an album that I show. Is it alright that I make out a price list for the public in case they are interested in me doing a cake for them? What about a cake contract even though I'm out of my home and this is more of a hobby than an actual business? I live in southern Tennessee in a small town but haven't asked about a license. Should I? I don't have business cards floating around either. It's more as a word of mouth. Any help in what I should do?
Donita, you may wish to start here
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Mimi, can you please explain what is not accurate about that link? Of course it's always good to talk to the health or ag dept no matter what.
I can speak for the Virginia section...Laws here vary by county and city , so while you might be able to operate as a home-based food business in one county, the city or county next door might prohibit it. You need to check with your local authorities to see what's legal in your area regardless of whether there's a cottage food law or not.
Also, under the VA section, you DO have to collect sales tax, often a local sales tax in addition to the state one. There are different rates for catered food (which includes home-produced cakes), groceries, and meals, depending on which county you live in. I have to collect 5.3% and remit it to the state, and one of my friends who lives about 50 miles away has to collect something around 7% because of additional road taxes her county is collecting. It varies by location, which is why @MimiFix 's advice to call your local authorities to confirm details is the best way to go.
Mimi, can you please explain what is not accurate about that link? Of course it's always good to talk to the health or ag dept no matter what.
David, I live in New York and am quite familiar with our home process permit. I've found several glaring mistakes on New York's page, notably that NYC does not allow any cottage food operations. Several of my students and clients live in the five boroughs (counties) and are currently operating under the Home Processor permit. There are several more mistakes on NY's page and a few I have found on other states' pages as I've worked with clients around the country.
Your work is commendable, but it's a huge (and I think impossible) task to document with complete accuracy the laws in each state.
Amost of TN is pretty easy about doing cakes from home -- taxes though yes indeed we never met a tax we didn't want to levy -- but as has been said each county and even areas within a county have different regulations -- so start with your local health dept--
best of the best to you and for the record half the state would be considered southern TN -- lol
This is excellent feedback. NY and VA happen to be two of the most vague states... states whose health depts offer little online info about the cottage food law.
In most states, zoning codes or county ordinances can override the cottage food law. Obviously I can't keep tabs on every one and I do rely a lot on people in areas to tell me those things. Specifically, the info about NYC came from a user who confirmed that they had talked with both the ag and health depts which said that NYC doesn't allow CFOs. That's pretty solid evidence until another user (like you Mimi) can disprove it if it's not true.
I would like the site to have community support and I always listen for suggestions and improvements. Of course it is impossible for the site to be completely accurate, but hopefully the community can help keep it close. It does seem to be meeting a growing need for online info that most govt depts are doing little to meet. There are now over a thousand people that get info from the site daily (just yesterday the NY and VA pages had over 100 visits combined), so even a small improvement of the info there can have a dramatic impact on the whole. If you know something is wrong on there, please tell me! You will literally help thousands of people by doing so.
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Also, under the VA section, you DO have to collect sales tax, often a local sales tax in addition to the state one. There are different rates for catered food (which includes home-produced cakes), groceries, and meals, depending on which county you live in. I have to collect 5.3% and remit it to the state, and one of my friends who lives about 50 miles away has to collect something around 7% because of additional road taxes her county is collecting. It varies by location, which is why @MimiFix 's advice to call your local authorities to confirm details is the best way to go.
I believe the info currently on the site is consistent with this info. Perhaps what I've written there is too confusing? Please let me know why it appears that the site says that sales tax is not necessary.
Quite frankly, I'm not a fan of the cottage food laws, since the people who have started up around here after the law was passed have driven prices down by virtue of the fact that they just don't know enough about running a business for profit. There's no reason, in a state where you have the option to have an inspection, to not do that, other than just not wanting to do the legwork.
I have friends in other parts of the country who have been driven out of business, or close to it, by the flood of unlicensed cottage bakers who have junked up the market with craigslist pricing. It's not beneficial to tell someone they can operate under a cottage food law if they then turn around and charge what amounts to $2 an hour, or even operating at a loss. That doesn't benefit the economy or any of the people who are underselling themselves. The number of cottage bakers who actually do price to make a living are few and far between, and I'm not afraid to make that generalization because I've seen it on here, on facebook, and in real life.
The health inspectors here aren't fans of the law either, since they have to respond to complaints, but they don't have any power to inspect people and head off problems that could have been easily avoided. I've been doing wedding cakes here for 15 years and the only benefit that I'm seeing from the cottage food law passing is that venues are wising up and making it a requirement that bakers who bring in cakes be licensed and inspected. They don't want to take on the liability of the uninsured cottage bakers and they've had too make problems resulting from people who don't know what they're doing delivering collapsing wedding cakes.
If you want ot be totally accurate with a website that attempts to address cottage food laws, you should just put "check with your local health depratment and department of taxation" for the answer to every question. There are too many variables, and there are too many people searching for the answers that they want, not necessarily the right ones.
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I believe the info currently on the site is consistent with this info. Perhaps what I've written there is too confusing? Please let me know why it appears that the site says that sales tax is not necessary.
Because you link to a page that says you probably don't have to collect sales tax, and that if you're not sure, you can pretty much assume that you don't have to.
I believe the info currently on the site is consistent with this info. Perhaps what I've written there is too confusing? Please let me know why it appears that the site says that sales tax is not necessary.
Here you go: (emphasis mine)
"Usually sales tax comes in multiple forms: state, county, and maybe even city sales tax. Taxes vary widely between regions, but as a very general rule, most states do not require CFOs to collect state sales tax because their items are consumed off of the premises where they were produced. There are a few states that do collect sales tax from CFOs, but if you are having trouble finding info or are getting conflicting info from the government, just assume that you don’t need to collect state sales tax."
I'm also interested in what your qualifications are to be answering questions for every state, when it's clear that you're not 100% sure about the facts for each one. This pretty much amounts to giving legal and tax information, which you should probably be careful about doing. The first person who takes your advice to assume they don't need to collect sales tax, then gets hit with a hefty back-tax-plus-fine bill from the state, isn't going to be happy. I wouldn't want to be the one handing out that information in any way, shape, or form.
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Here you go: (emphasis mine)
"Usually sales tax comes in multiple forms: state, county, and maybe even city sales tax. Taxes vary widely between regions, but as a very general rule, most states do not require CFOs to collect state sales tax because their items are consumed off of the premises where they were produced. There are a few states that do collect sales tax from CFOs, but if you are having trouble finding info or are getting conflicting info from the government, just assume that you don’t need to collect state sales tax."
I'm also interested in what your qualifications are to be answering questions for every state, when it's clear that you're not 100% sure about the facts for each one. This pretty much amounts to giving legal and tax information, which you should probably be careful about doing. The first person who takes your advice to assume they don't need to collect sales tax, then gets hit with a hefty back-tax-plus-fine bill from the state, isn't going to be happy. I wouldn't want to be the one handing out that information in any way, shape, or form.
It specifically says STATE sales tax, which people are usually exempt from. The problem is that people have talked to me after getting the run-around from their govt. Seems nobody in any dept knows what's what. So that's why I say that if people can't get an answer from the govt, then follow the general rule, but only for state sales tax. However, I do see that this could be confusing if people read over the word "state"... I'll modify it a bit.
AMy advice would be that if you really love doing cake, don't start doing it as a business. It will, at some point, suck all the joy out of it. Once you get successful, you'll spend more time working on your website, you accounting, returning emails, and other ancillary projects by far than in your kitchen. You'll end up making cakes that you hate because the money is good. You'll spend endless amounts of time explaining why you can't donate cake to virtually every Cub Scout, little league, or other non profit that everyone you ever met is involved in. And, if you say, I'll just stay small, it's really almost impossible to make any decent money without a pretty substantial commitment. Website hosting costs the same whether you sell 2 cakes a month or 200. You need full sets of cake pans, etc.etc.
AOf course it's state sales tax...local and county are on top of that but state is what most people have to deal with. Last time I checked there was no national sales tax...other than income tax, which is another issue people tend to ignore if they think they can get away with charging cash only.
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Quite frankly, I'm not a fan of the cottage food laws, since the people who have started up around here after the law was passed have driven prices down by virtue of the fact that they just don't know enough about running a business for profit. There's no reason, in a state where you have the option to have an inspection, to not do that, other than just not wanting to do the legwork.
I have friends in other parts of the country who have been driven out of business, or close to it, by the flood of unlicensed cottage bakers who have junked up the market with craigslist pricing. It's not beneficial to tell someone they can operate under a cottage food law if they then turn around and charge what amounts to $2 an hour, or even operating at a loss. That doesn't benefit the economy or any of the people who are underselling themselves. The number of cottage bakers who actually do price to make a living are few and far between, and I'm not afraid to make that generalization because I've seen it on here, on facebook, and in real life.
The health inspectors here aren't fans of the law either, since they have to respond to complaints, but they don't have any power to inspect people and head off problems that could have been easily avoided. I've been doing wedding cakes here for 15 years and the only benefit that I'm seeing from the cottage food law passing is that venues are wising up and making it a requirement that bakers who bring in cakes be licensed and inspected. They don't want to take on the liability of the uninsured cottage bakers and they've had too make problems resulting from people who don't know what they're doing delivering collapsing wedding cakes.
If you want ot be totally accurate with a website that attempts to address cottage food laws, you should just put "check with your local health depratment and department of taxation" for the answer to every question. There are too many variables, and there are too many people searching for the answers that they want, not necessarily the right ones.
It's good to hear this resistance. I think some people can get too caught up in the easiness of the cottage food law in some states. I'm also glad to hear the resistance from someone other than a health dept... it is a good indication that the cottage food industry is in a major growth phase and is not at it's prime yet. I think things are a little different here in CA: cottage foods seem very highly priced, I think partly because CFOs ignorance prevents them from knowing how to buy competitively priced ingredients.
"Check with your xyz dept" is something I write A LOT, either due to my ignorance or because the law is too vague to answer it. However, I don't agree about using that as a blanket answer. The truth, it seems, is that most people will not call their dept. That may be an unfortunate truth, but it appears to be a truth nonetheless. You can disregard it or deal with it... I choose the latter so that hopefully people will have some knowledge of the laws before proceeding illegally.
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Original message sent by AZCouture
What do you mean by "cottage foods seem very high priced?"
AMy wife and I are in the first phase of opening a storefront in a busy area of Knoxville with very little competition as far as storefronts go. We were blown away at the difference in the time it takes to get through the process (applications, food safety course, workers' comp., liabiliy insurance, etc.) compared to home bakers. Home bakers are actually allowed to continue business while they're waiting for their course. That's unthinkable for storefront owners. I still can't wrap my brain around uninspected bakeries, but the market is flooded with them. They make it difficult to gain SEO placement, even though half of them now have disconnected phone numbers. I'll stop now before I make enemies of any home bakers on here. Fortunately, we will be located in the middle of a large retail district, and the closest home bakers are many miles away. The void of cake shops and the distance from home bakers are our hopes for survival the first year or two. It'll be a rough ride. It usually is for storefronts.
It's good to hear this resistance. I think some people can get too caught up in the easiness of the cottage food law in some states. I'm also glad to hear the resistance from someone other than a health dept... it is a good indication that the cottage food industry is in a major growth phase and is not at it's prime yet. I think things are a little different here in CA: cottage foods seem very highly priced, I think partly because CFOs ignorance prevents them from knowing how to buy competitively priced ingredients.
"Check with your xyz dept" is something I write A LOT, either due to my ignorance or because the law is too vague to answer it. However, I don't agree about using that as a blanket answer. The truth, it seems, is that most people will not call their dept. That may be an unfortunate truth, but it appears to be a truth nonetheless. You can disregard it or deal with it... I choose the latter so that hopefully people will have some knowledge of the laws before proceeding illegally.
it seems he is referencing his immediate locality in california--he did not make the statement you guys are rebutting
My wife and I are in the first phase of opening a storefront in a busy area of Knoxville with very little competition as far as storefronts go. We were blown away at the difference in the time it takes to get through the process (applications, food safety course, workers' comp., liabiliy insurance, etc.) compared to home bakers. Home bakers are actually allowed to continue business while they're waiting for their course. That's unthinkable for storefront owners. I still can't wrap my brain around uninspected bakeries, but the market is flooded with them. They make it difficult to gain SEO placement, even though half of them now have disconnected phone numbers. I'll stop now before I make enemies of any home bakers on here. Fortunately, we will be located in the middle of a large retail district, and the closest home bakers are many miles away. The void of cake shops and the distance from home bakers are our hopes for survival the first year or two. It'll be a rough ride. It usually is for storefronts.
i really like your attitude about it--
ceaselessly whang banging legitimate competition is a waste of energy not to mention boring -- especially in light of the fact that previous to the recent creation of new cottage food laws--the existing home bakers/bakeries are the ones that helped put the hurt on mom & pop bakeries either taking them out of business entirely or made them seriously scramble to evolve and hang on--the whining gets old --
who moved my cheese
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Original message sent by -K8memphis
ceaselessly whang banging legitimate competition is a waste of energy not to mention boring
I have yet to realize the "legitimate" part of cottage laws.
Original message sent by -K8memphis
--the whining gets old --
I bet it does......I bet it does.
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This is the issue...The cottage laws are usually brought in with the argument that they'll allow people to start businesses and earn a living. The reality is that the majority of the ones that I and my frends across the country have seen opening don't work that way. There are definitely cottage law bakers who know what they're doing and operate at a profit. There are far more, however, who end up on facebook groups in a negative bidding war to see who can do an order for the lowest price. Those people aren't earning enough to cover their expenses, but they seem to have no idea, or they don't care. As someone who is a strong proponent for women being able to earn a living wage and more than that as the best situation, I don't see cottage laws achieving that goal. My feeling is that states would do more good to their citizens by allowing people to become licensed home bakers by going through the process of doing the paperwork and learning a little bit about how to run a business before they start trying to run one with no experience. It's not "whining" to say that what I've seen of cottage laws in action is detrimental overall to the home baking industry, not helpful.
And by the way, the cottage laws here have been in effect for four or five years, maybe...My profits continue to rise every year and I'm not afraid of "competition," because none of the people I see working under cottage laws here are competition. I'm not worried about cottage bakers taking business from me, but I think it's sad to see them working for nothing and burning out so quickly, like @snarkybaker said, only to be replaced by the next bunch who will burn out in a year.
I have yet to realize the "legitimate" part of cottage laws.
redneckruffle--the government made them legit not that they are efficient or productive --
Originally Posted by costumeczar
sure who wouldn't like for all the wrongs to be made right -- it's business--that's how it goes-- i'm very glad that you are doing well -- you diversified too -- smart business move -- you adapted & went & found some other cheese -- (referencing the book, "Who Moved My Cheese)
cottage laws were put into effect in order to help fill waning tax coffers due to the squeaky wheel effect and a little recent momentum --
so the ceaseless angst bordering on bitterness on here about jobbyists and cottagists (in general) is simply due to wanting a better life for others not to mention the grief of watching them burn out -- wish we could cultivate more of that magnanimity to a consistently respectful cake central board for all of us -- for whoever makes cakes
... I do rely a lot on people in areas to tell me those things. Specifically, the info about NYC came from a user who confirmed that they had talked with both the ag and health depts which said that NYC doesn't allow CFOs. That's pretty solid evidence until another user (like you Mimi) can disprove it if it's not true.
This is a serious flaw in how you collect and dispense information. The internet is filled with people who spread rumors. We see it on CakeCentral all the time. As well meaning as you seem to be, anyone who represents themselves as an expert needs to have more evidence than hearsay derived from an individual with no known authority, knowledge, or skill.
David, I just saw that your website is being updated this weekend. Excellent! Something that can help is to have a link for each state that goes to either their Dept of Ag & Mkts or to their applicable law. And PS - for NY, direct delivery of products is not allowed. Wholesale is allowed, which includes sales to restaurants and retail stores.
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Actually they are reasonably priced, considering the quality of ingredients most are using, and the value of their time. But I have yet to see cottage food products come close to undercutting their commercial counterparts. If I wanted to save money, there's no way I'd choose to buy from a CFO. This may also be because CFOs do most everything in small batches -- even local bakeries seem to have significantly lower prices... I'm still not sure how.
Almost every CFO I've seen does their business very part time. Many would like it to be a full time thing though.
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This is a serious flaw in how you collect and dispense information. The internet is filled with people who spread rumors. We see it on CakeCentral all the time. As well meaning as you seem to be, anyone who represents themselves as an expert needs to have more evidence than hearsay derived from an individual with no known authority, knowledge, or skill.
This is essentially the way Wikipedia works, albeit in a more advanced form today. I think what you're saying is that it's not clear to users that the info on cottagefoods.org isn't legal advice. Actually, the name of the site is a major contributing factor to this (some think we're in charge of the cottage food laws -- yikes!), which is getting addressed in this weekend's update. But I will work more after the update on providing more disclaimers. Thanks for your extra info about NY -- it's very helpful.
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David, I just saw that your website is being updated this weekend. Excellent! Something that can help is to have a link for each state that goes to either their Dept of Ag & Mkts or to their applicable law. And PS - for NY, direct delivery of products is not allowed. Wholesale is allowed, which includes sales to restaurants and retail stores.
I've now just updated the NY page with this new info, which will appear in the update. And just FYI, on nearly every page there is a link to the actual law and any other govt resources I can find. Those are the primary resources I used to construct the site's info and virtually all the info on there is based on them. It is only when a state has little to no info coming from the govt that it becomes more community driven.
And speaking of online info... Mimi, you once mentioned that NY has had their home processor rule since the 1970s. The update includes introduction and amendment dates for laws, when I can find them. And I can't find any history about NY's law. I know Part 276 of NY's law got added at some point... do you have any resources that could help?
Actually they are reasonably priced, considering the quality of ingredients most are using, and the value of their time. But I have yet to see cottage food products come close to undercutting their commercial counterparts. If I wanted to save money, there's no way I'd choose to buy from a CFO. This may also be because CFOs do most everything in small batches -- even local bakeries seem to have significantly lower prices... I'm still not sure how.
Almost every CFO I've seen does their business very part time. Many would like it to be a full time thing though.
i've seriously considered relocating to california-- as i understand the cfl you cannot use any commercial equipment--and that is a deal breaker for me for trying to operate under cfl-- and that is how cfo are automatically kept in check and rightly so -- it helps keep the commercial businesses protected some -- so if cfo wanna go full time then they need to get the commercial property to go with it -- that's fair --
and since you say local bakeries have significantly lower prices then they are making it by the hair of their chinny chin chins -- but there are some bakeries that are charging out the whazoo--'cause my sister tells me about the exquisite goodies and the prices she pays for them--but they have location location location they have to pay for too --
not an easy business any which way it goes--but we all love to bake/create -- the beauty is we all can do it small or large scale
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