Your banana bread could be sold from home last year, but your cheesecake could not — the cream cheese frosting made it a TCS (time/temperature control for safety) food that required a commercial kitchen. In 2026, nine states moved that line.
From Cottage Food to Food Freedom
Traditional cottage food laws allowed only shelf-stable foods: breads, cookies, jams, and dry mixes that don't need refrigeration. The new wave — often called Food Freedom or expanded cottage food — adds TCS foods under conditions: direct sales only, labeling with allergens and a disclaimed-inspection notice, and sometimes a food handler card and a water test, but still no commercial kitchen.
The nine states that expanded in late 2025 and 2026 include several that now allow cream-cheese-frosted cakes, cheesecakes, and refrigerated pies under direct-to-consumer sales, with annual caps ranging from $50,000 to $250,000 in gross revenue before you must migrate to a licensed facility.
What Still Needs a License
Even in expanded states, the freedom has limits:
- Only direct sales: Farmers market, home delivery, or on-site pickup. No wholesale, no consignment, no shipping across state lines under cottage status.
- Labeling: Product name, ingredients by weight, allergens, net weight, and the statement that the product was made in a home kitchen not inspected by the state department of agriculture.
- Revenue cap: Track gross sales by the calendar year or fiscal year as the statute defines it. Cross the cap and you must license as a retail food establishment or food processing facility.
Bookkeeping for a Home Bakery
- Separate the streams: Cottage sales are often not subject to sales tax as food for home consumption, but prepared food for immediate consumption may be. Tag each sale by product and channel.
- Deferred revenue on custom orders: A wedding cake deposit paid two months early is deferred until delivery.
- Ingredient costing: Butter, cream cheese, eggs, and flour are variable COGS. Track waste and yield — a cheesecake that fails to set is shrinkage, not marketing.
Keep Your Finances Organized From Day One
Food freedom expands what you can sell, but the cap and the direct-sales rule still decide whether you are a cottage bakery or a licensed food business. Track gross by the statute's year and label every product as if an inspector will read it.
Beancount.io keeps each cottage sale as a transaction with product, cap progress, and deferred revenue, all version-controlled and ready for the market manager and the inspector. Get started for free and make the new freedom a growth plan, not a compliance risk.