David Crabill
@david
active 2 days, 12 hours agoForum Replies Created
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The regular cottage food law, which only allows sales at farmers markets, probably is allowed in Cook County. The law for home kitchen operations, which allows sales from home, probably isn’t. I don’t know for sure, and you will need to call their health dept.
The $5,000 limit only pertains to those operating under the cottage food law (only making at home and selling at events/farmers markets). If you’re not using that law, then you need to get a commercial license and use a commercial kitchen, and you will need to go through the setup process with the health dept before you do any sales. http://forrager.com/faq/#commercial
You will need to use a commercial kitchen to start your business. http://forrager.com/faq/#commercial
Sales tax and yearly income tax are entirely separate. Sales tax greatly depends on where you live and what the requirements are for your city, county, and the state of Florida. Everyone has to pay income tax, regardless of how much it is. If you make enough, you’ll need to pay estimated taxes throughout the year, similar to a self-employed independent contractor.
I’m pretty sure the statement has to be on the primary label. Only certain items, like ingredients, can go on the secondary label based on federal regulations. You should call your health dept and see what they’ll allow you to do.
By definition, a business intends to make a profit. That’s why the IRS will classify you as a hobby if you take a loss for too many years in a row. It is for that reason that I don’t think your gifts or donations could be deducted as a “loss” for your business. If you take the sales you’ve made and deduct the variable expenses for ingredients/packaging, are you still operating at a loss? Only those sales/products constitute your business, and you can deduct large equipment expenses over time. In most places, to be operating as any kind of business requires you to get a business license, regardless of whether there is a need to collect sales tax.
By the way, I know that there are ways for businesses to make charitable donations and take deductions on their taxes from those — so your donations wouldn’t be out of the equation in your business — but I’m totally ignorant about how that all works.
It’s good to hear that the person thought you needed an inspection. I’ve been picking up pieces about VA from various people. I think that home food production used to be allowed before the cottage food law came into play, and although those rules still are used, depts may not be familiar with the new law that introduces many more restrictions, but requires less/no interaction with them to start a business.
Did you contact Heath Gerber at the ag dept (he’s listed on the law page here). If he doesn’t know about the cottage food law, then I’d really like to know that!
Yes, that’s doable but usually quite expensive and complicated. It’s likely that the commercial kitchen would have to be separate from your primary kitchen. Unless NJ has very lenient standards, you can expect to pay thousands or tens of thousands of dollars for that remodel. I would personally recommend renting at first and proving your business concept, but you have to determine what’s right for you.
Setting aside the sales tax question temporarily, I just want to make sure that you’ve gone through the steps to make sure you’re running your business legally. Are you sure that your county doesn’t require you to get a business license for your chocolate business? More general info: http://forrager.com/faq/#starting
From what I understand, a hobby classification is more intended for a business that has no intent to profit from it, or has not profited from it for the majority of the past five years. Hobbies cannot take business deductions because of this. Any activity for which you intend to make a profit is considered a business, no matter how small it is. Even if you are classified as a hobby, I don’t think that would affect the way that your state or county classifies you.
Getting back to sales tax… if govt officials aren’t sure about sales tax requirements, then I wouldn’t fully trust any answer you get from someone online. They are the ones enforcing the rules, and they need to know these things. Generally, if you are selling something that is consumed off the sale premises, there can be exemptions (especially at the state level) for sales tax, but often each county and city has their own tax rates that don’t include exemptions. I don’t know more than that, but I do know it can be frustrating to hop from one official to the next and get conflicting answers.
All of the prep needs to happen in the commercial kitchen… you can’t use your home for production. Once you go through the process of becoming a commercial food processor, you can sell anywhere (assuming you have the appropriate permits to sell there).
You can do dry spices under the cottage food law and you can’t ship them. If you want to ship, you need to use a commercial kitchen. http://forrager.com/faq/#commercial
