I’m assuming you’re talking about people that are selling homemade goods and are not licensed. But even if the are licensed as a cottage food operation and are breaking the law, my advice would be the same.
In general, a good place to start is to talk to the person. Many people don’t know that it’s illegal to sell homemade food. Also by talking to them, you may learn their reasons for not getting licensed. It’s very common for people to run these illegal businesses, especially when they are only selling to family and friends and are just advertising through a Facebook page or something. When the individual moves on to sell at a farmers market or a similar venue, that’s where licensing becomes more important.
If the person is knowingly breaking the law, and especially if they are posing a health concern, you can contact your local health department to report them. Bear in mind that many health departments are so overloaded that they can’t even get around to regulating licensed facilities, so they may choose to turn a blind eye to the complaint if it’s not posing a health risk.