Cottage food revenue caps by state, 2026 edition

Recent changes worth knowing

Three big cap changes in the last few years:

Texas SB 541 (2019, expanded 2023). The headline change: cap raised to $150,000 and the allowable-foods list expanded to include certain pickled and fermented foods (with pH below 4.6 documentation required). The 2025 cap is $150K with CPI indexing kicking in starting 2026 — meaning the number will drift upward each year. Texas is now one of the most permissive cottage food states in the US.

California AB 1144 (2021). Both class caps pegged to annual CPI adjustments and the approved-foods list broadened. The verified 2025 effective caps are $86,206 (Class A) and $172,411 (Class B) — both rise each year. California's two-class system remains unique among the launch-5 states.

Florida HB 663 (2021). Cap raised from $50,000 to $250,000 — the highest cap of any state in the launch-5. Florida became one of the easiest states to start cottage food sales in, regulatorily speaking.

New Jersey (2021). New Jersey legalized cottage food after years of delay, with a $50,000 cap.

Minnesota (recent expansion). Cap raised to $78,000 from a previous lower cap.

Direction of travel: caps are generally rising and food categories are generally broadening across the US. The state-by-state variance, however, isn't decreasing — every state still has its own rules, and cottage food entrepreneurs still have to know theirs.

What happens if you cross your cap

Crossing the cap means you're operating outside the cottage food exemption for sales past the line. The specific consequences vary by state:

• Most states: You're not legal under cottage food for sales past the cap. You'd need to either stop selling (let the rolling 12-month window drop below the cap) or transition to a commercial kitchen license. Continuing to sell beyond the cap without transitioning can trigger penalties — fines, market-vendor bans, or in repeat or egregious cases, prosecution.
• States with no cap (Tennessee, Ohio, Wyoming, others): You don't have a cap to cross — but you may have other thresholds (TCS food categories, sales-tax-permit thresholds, etc.) that constrain you in other ways.
• States with two paths (Ohio, California): Crossing the lower-tier cap (Class A in California, cottage food exemption in Ohio) often means upgrading to the higher-tier path (Class B in California, Home Bakery License in Ohio) rather than going all the way to a commercial license.

The practical move when you're approaching the cap: don't wait until you cross. Plan the transition. A commercial kitchen license is a multi-week (sometimes multi-month) process — kitchen build-out or commercial-kitchen-rental, permits, food handler training for any employees, business registration, sales tax accounts, etc. If you wait until the cap is hit to start the process, you have a gap during which you can't sell.

How to track YTD revenue against the cap

The cap is rolling 12-month, not calendar year, in most states. That means at any given moment, your "cap consumed" is the sum of your gross sales over the last 12 months — even if those sales spanned two calendar years.

The naive approach: a spreadsheet you update monthly. Works for low-volume operators; falls apart fast as order volume grows. The number you really want is "as of today, what's my rolling 12-month gross?" — and that requires re-summing every time you check.

CottageOps tracks rolling 12-month gross sales for every order you accept and shows the number on your dashboard, with 75% / 90% / 100% warnings against your state's cap. The number updates in real time as orders come in. You don't have to remember to update a spreadsheet. You don't have to do the math.

If you're under the cap, the number is informational. If you're approaching it (75%), it's planning territory. If you're at 90%, it's decision territory — slow down, or start the commercial-license transition. If you cross 100%, the platform alerts you and stops further cottage food publishes until you've made a decision.

When to consider transitioning to a commercial license

Reasons to plan the transition before you actually have to:

1. You're approaching your state's cap. 75-90% of cap is the decision window. Below 75%, no rush; above 90%, you're cutting it close.
2. You want to expand into TCS food categories. Cottage food in most states excludes TCS items (cream-filled pastries, fresh meat, certain dairy). If your menu wants those items, a commercial license is the path.
3. You want to sell wholesale. Most cottage food laws prohibit wholesale to retail stores or restaurants (with exceptions like California Class B). If wholesale is in your business plan, a commercial license unlocks the channel.
4. You want a brick-and-mortar storefront. A customer-facing retail bakery requires a commercial kitchen, almost without exception.
5. You're hiring employees who handle food. Cottage food laws generally limit production to the registered operator. Hiring usually means a commercial kitchen.

The transition isn't binary. Some operators run a commercial bakery for retail/wholesale AND keep a cottage food side for direct sales (where the rules permit). The right structure depends on your state, your menu, and your business shape — talk to a small-business accountant or attorney before committing.