So, I'm a newbie. I haven't made very many cakes and I'm still learning a lot. Anywho, I've made quite a few cakes recently for my extended family and I'm making a cake for a kinda-friend's son this weekend, and I've agreed to do a couple of more over the next couple of weeks. I love it, and I would continue to do it just because I love it, but my husband doesn't get that. He has put his foot down and said that it's too expensive and time consuming for me to just make cakes for everybody without payment, and that he doesn't want me to do it anymore unless it's for an immediate family member's birthday or something. So my question, is it illegal to ask for payment, even if it just covers the cost of the cake, without being licensed and stuff? I just want to be able to make cakes.

Anytime you ask for money it's considered a sale. Without a license it's considered an illegal sale. Better to look into what it takes to get licensed and go from there.

It depends on where you live. Have you seen this thread?

http://cakecentral.com/cake-decorating-ftopict-586218.html

Well I don't think I'm good enough, much less ready to have a licensed business, so I guess I'll just have to try to convince my hubby to let me bake... Any good manipulators out there?

I'm in NC. From what I understand, you can have a licensed kitchen in NC, but I was wondering if you absolutely have to have a license to sell a cake. I'm not trying to run a business - I'm really not good enough or ready for that step. I would still be doing it for friends and family and stuff, just asking them to cover the cost of the cake. If I'm not really making a profit, and I'm not doing many cakes, does it still matter? Could I conceivably get into trouble?

The logic of "i'm not really making a profit" is said all the time, and every time I remind folks that the IRS could care less if you are a lousy business person who can't figure out how to price their product to make a profit. Money exchanged hands which makes it a business transaction.

General Motors didn't make a profit but they were still considered a business.

Most people show a loss the first 3-5 years of opening their doors, but they are still considered a business.

Making a profit is not what defines "being a business".

Thanks for the insight I guess. I don't plan on going the business route, so I guess you guys won't be seeing much of me. Count yourselves blessed to be able to work at what you love.

I know this has been discussed to death and I totally understand the law, but I'm sorry, if my aunt wants to slip me a 20 for ingredients....I'm gonna take it, say thanks, and keep my mouth shut. My opinion.

kristanashley said: "I don't plan on going the business route, so I guess you guys won't be seeing much of me"

Just because you may not go the "business route" does not mean you don't belong here. This site has AMAZING information and members who can and will teach, inspire, just lend a listening ear or even chew you out if needed (lol).
Don't be a stranger!

Hey! I am new to the cake decorating world as well. My husband, like yours, thinks that I should be making money for my cakes. I, like you, just want to make cakes because it is what I love and I want the practice. I don't want to get into trouble for taking money so I did a little investigating into what is needed in North Carolina to become a homebaker. If you go to the NC Department of Agriculture it can provide some more information (I'm sorry I don't have the website right off hand). I did find out that you can not open a home bakery if you have a pet inside the house at anytime. You would also need them to come do an inspection of sorts before they will license you. You can private message me if you want to talk/share experiences since we are in the same situation!

I am not sure if I am quite ready to go the "business" route either. At this point I, like you, would just want to the the money for the materials but it is better safe than sorry. You don't want to get penalized for your passion! I plan on calling the Department of Agriculture tomorrow and find out what really goes into getting licensed and if you can "rent" a licensed kitchen (I have a dog so I am trying to find alternative means!) I will let you know what they say and what all the license entails!


Good Luck! Oh, and what part of NC are you from!?

hey mamakasst! Thanks for your reply - it's good knowing there is someone else in my boat. Strength in numbers Thanks for the information. I looked at the website, and it doesn't seem too unreasonable, but I have a dog, so it would never happen.... unless I threw him outside and lied and said he never comes in the house... but then the inspector would see the table leg that my dog chewed on as a puppy, or the scratch marks on my door, or a random rawhide laying on the floor... So yeah, it's definitely not going to happen for me. But let me know what you find out - I hope you can make it work for you. As far as renting a kitchen, I know a lot of people use church kitchens, but I don't really know what goes into that process. I'm in between Sanford and Ft. Bragg, btw - kinda out in the sticks. Good luck!

North Carolina is one of the lucky states! You can easily become licensed in your home kitchen in NC! Contact your local Ag Dept. for information on how to obtain your license. And good luck!

What if they buy your ingredients? just a thought??

That" solution" is brought up all the time around here.

It's not a solution.

If anything of value is exchanged it's business. The IRS requires you to pay taxes on the value of bartered items.

I don't see that whole them buying the ingredients as a barter or exchange 'cause the baker/decorator has nothing to keep as value for the services provided. Them buying the ingredients and someone else accepting those ingredients, baking, decorating with those ingredients and handing them a cake-to me- is the same as someone handing you a bag of groceries, you setting it on your table, pulling everything out then putting it all back in but neatly arranged in a different order and handing the bag of groceries back to them...you don't benefit from the exchange. I think it's BS! I do believe some clarifications to that arrangement should be made. Seriously, what if you went to their house and baked the cake and decorated it? would it still be bartering? they bought the ingredients for you to create the cake. I just don't get that one.

a barter is when two parties benefit from the exchange, isn't it? or is it?

If you went to their house and baked/cooked, you'd be a personal chef and around here at least, I'm pretty sure you need to be licensed for that as well. The licensing is not just something the Health Department/Department of Ag thought up to make your life more difficult. it's so that people who handle food that is to be consumed by other have training in sanitation and proper food handling. Licensing is a good thing. Otherwise there's be rampant cases of food borne illnesses.

I understand the going to their house thing, probably the wrong scenario to use as an example. I was referring to the purchase of items and getting them back...the decorator wouldn't have anything to show for their effort. I just don't think that that should be considered bartering or a transaction of any kind. If the decorator were getting double the amount of ingredients for making the cake, then the excess would be considered the bartering portion...JMMHO

If you bang my head against the wall, I'll do the same for you! How would we report that to the IRS...the exchange of services...oh, but wait....it's a non-commercial situation of like kind or something like that...LOL.

The information on the IRS website is worded in a way that it could easily be taken out of context (whatever that may be) to the benefit of the author or the reader. I say, it would be nice if IRS would clarify that point of bartering to include a scenario similar to the one previously mentioned in this thread.

I think I will attempt to make contact with the IRS on the matter. I didn't see an email contact link (could be that they don't want their responses in writing???...or I'm just blind...hey, tax credit there!) only phone numbers.

ETA: I must've misunderstood the OP. I thought she was asking about the legalities of payment without a license to sell.

As I understand it, at least in California, it is illegal to SELL cake from your home kitchen. That is why I gave away cake for four years and now (finally!!!!) have a commercial kitchen from which to sell.

The operative word is sell. If someone brings me ingredients and I bake a cake and give them the cake, how is that selling? Where is the business in that transaction? The person getting the cake clearly benefits, but where is the benefit to me? This is so not a business. It seems the opposite. The recipient of the cake could be said to be profiting from my hobby, but I'm clearly putting in hours and getting nothing but satisfaction. This is a hard case for the IRS to pursue. A similar scenario would be that I'm having a dinner party and am pushed for time. I give a friend tomatoes, lettuce and cucumbers and she brings me back a salad. This is not a business transaction and the IRS is not coming to get either of us.

I've been dealing with the health department for quite a while now, and if you are a hobbyist, that also seems a non issue. They are interested in people selling food. Someone mentioned a personal chef. At least in California, I can hire anyone to come to my house and cook. They don't need to be licensed as they are not selling food, they are selling their service of cooking food in my own kitchen. They can give me a list of what to buy, or I can buy and tell them what to cook, but the health department does not get involved. Think of housekeepers and nannies and even elder care workers who come and cook and clean in people's homes. They are not licensed by the health department. If you are making cakes for free for your friends and relatives, the health department does not care.

This topic always get out of hand on here. The only way to know for sure what you can or can't do is to talk to the people in the jurisdiction in which you are. Talk to the Health Department or equivalent (Here it is the Department of Environmental Health) and to the city about business licensing, etc. That way you can decide what you want to do with the proper knowledge of what the risks might be or if there even are any. By the way, I wouldn't take business advice from the health department or food advice from the business people, they often are confused about the rules for department other than their own.

As always, just my $0.02 and possibly not worth even that....