California's two cottage food classes set different sales caps, channels and permits
California's cottage food law sorts home-kitchen sellers into two classes, with different sales caps, sales channels and permits, and limits shipping to the state's borders.
California allows some foods made in a home kitchen to be sold to the public under state cottage food rules. The business is called a cottage food operation. Its sales cap, sales channels and paperwork depend on whether it is classed as Class A or Class B.
The rules come mainly from Health and Safety Code section 113758, and county environmental health departments handle registration and permits. They matter to people who make food at home and want to sell it in California, and to the stores, cafés and restaurants that might buy from them. The dollar figures below are the statutory base amounts unless a section says otherwise, because the caps are adjusted each year.
Two classes with different limits
Health and Safety Code section 113758 sets out the two classes. A Class A cottage food operation may not have more than $75,000 in verifiable gross annual sales. A Class B operation may not have more than $150,000 in verifiable gross annual sales.
The class decides both the revenue ceiling and the routes a product can take to a buyer. A business that sells only to customers directly stays in Class A. A business that wants to sell through another company's shelves or menu needs Class B, which brings a different permit process.
Staffing is also limited. The statute allows no more than one full-time equivalent cottage food employee. Family and household members do not count toward that limit.
A business that wants to supply stores or restaurants therefore faces the Class B permit and the kitchen inspection that comes with it.
How the sales cap is measured and adjusted
The cap applies to verifiable gross annual sales. Gross sales are not profit: they include the product price and any shipping charged, but not the sales tax collected.
The statute requires both caps to be adjusted each year for inflation using the California Consumer Price Index. The amount that applies in a given year can therefore be higher than the base figure of $75,000 or $150,000, and it can change from one year to the next.
Operators should check the current adjusted amount with the California Department of Public Health and their county environmental health office before relying on any number.
Each cap is a ceiling for its class. An operation that goes above its class cap is no longer a cottage food operation under the statute's definition.
Where Class A products can be sold
Class A operations may engage only in direct sales. Direct sales can take place at the home, at certified farmers markets, at events and bake sales, and online with pickup, local delivery or shipping.
The statute defines a direct sale as one that may be fulfilled in person, by mail delivery or through any other third-party delivery service. The definition applies to transactions within the state.
Selling through another business's shelves or menu counts as an indirect sale. Class A operations may not use that route, so a Class A product reaches the buyer from the operator.
A stall at a certified farmers market is one of the venues listed for direct sales, so a Class A operation can sell there without a Class B permit. Class B keeps the same direct-sales venues as Class A and adds indirect sales on top of them rather than replacing them.
What Class B adds to the sales channels
Class B operations may engage in both direct and indirect sales. An indirect sale goes through a third-party retail food facility, such as a grocery store, coffee shop, gift shop or restaurant that buys for resale.
The statute lists offsite events and third-party retail food facilities among the venues a Class B operation may use. It defines both direct and indirect sales as transactions within the state, and the statute text sets no county-level limit on either.
The practical difference is the route to the buyer. A Class B operator can supply a retailer, while a Class A operator must sell to the customer directly.
Class B is also the class that carries the permit and inspection described below, so the wholesale route comes with those added requirements.
“The class decides both the revenue ceiling and the routes a product can take to a buyer.”
Permits, inspections and food safety training
Class A operations register with the county. Class B operations need a county permit, and the county inspects the home kitchen before issuing it.
The Class B kitchen inspection is repeated each year.
Anyone who prepares or packages cottage food must complete an accredited food processor course within three months of registering. The course must be renewed every three years under Health and Safety Code section 114365.2(d).
The course is online, takes about 90 minutes and typically costs under $20. The training requirement applies to both classes.
Shipping and the state border
The statute says a direct sale may be fulfilled in person, by mail delivery or through any other third-party delivery service. Shipping is therefore part of the direct-sales route for both classes.
Shipping is limited to California. Both classes may ship with USPS, UPS or FedEx within the state, and shipping to other states is prohibited. For an online seller, the state border is the outer limit of what these rules allow.
Because the statute defines direct and indirect sales as transactions within the state, the same boundary applies across both sales channels, whether a product goes to a customer's door or to a retailer's shelf.
