I think it is time to tackle the people who operate illegal bakeries. Yes, selling cakes from your home without a license is, in most places, illegal. It certainly means that your home business is not sanctioned by the governing agency.
Please note at the outset that I am not discussing in this blog people who have a license under Cottage Food Laws. I am also not discussing people who operate bakeries from their homes where it is allowed by their city/county and they have been licensed. This is just a message to and about those who sell cakes, but do not go through the process to have a legal shop.
Since I am from the great state of Oklahoma, many of my notes will relate primarily to what is permissible in my home state. You should always check with the proper authorities in your area.
Let’s start at the beginning. You make a cake, usually for someone in your family first. Soon, you are doing the cakes for everyone in your extended family and circle of friends. At first, you do it for free because you just want to make cakes! A few people start slipping you money to cover your expenses, because, after all, they would have had to pay for a cake if not for you. One day, you get the call you have hoped for and a little bit dreaded: a friend of someone you know needs a cake and wants to know how much you will charge. The first time you take money from a stranger, you become the operator of an illegal bakery.
In Oklahoma, this opens you up to involvement from the Health Department, the city/state taxing agencies, zoning issues in your neighborhood and liability issues. I will be honest, many people do this every day and never get caught. There was a time many years ago when I did it. Some very big names in our industry have done it.
On paper, this seems like a victimless crime. No one gets hurt. You are just baking a cake, after all – what is the big deal?
When I first started making cakes, the Internet was not as prevalent. If you wanted to advertise a business, you had to buy an ad in a newspaper or magazine. The unwritten rule in OK at the time was that the legit businesses would look the other way, so long as you did not advertise. This meant that unlicensed bakeries did not show up at bridal fairs, have web pages or have listings in the phone book. A few years ago, this all started to change.
I began to see women who did cakes from home at the exclusive bridal shows. Every home baker had a Facebook page for her cakes, some had listings on Craig’s list and lots started setting up web pages. All of a sudden, the unlicensed shops started aggressively pursuing cake business.
This aggression made them easier targets for governing agencies and legal bakeries that were just trying to get by. I know that legit shops have turned in these illegal operations. I even did it once. The playing field simply isn’t level when someone doesn’t follow the rules. It is so hard to make is as a bakery, the last thing you need is a cake maker undercutting your price because she works from home and doesn’t have the overhead. Every time she does that, it is money out of your pocket that could pay your employees, your overhead or your non existent salary.
I asked our health department what happens when someone is turned in for running an illegal operation. My agent said that she usually calls up to try to place an order – to see if the claim is true. The person then receives a warning that all of their kitchen equipment is subject to seizure. In extraordinary cases, they can come in and take it all. The agent told me that the threat of action from them normally takes care of things.
The agent told me that the real enforcer in a situation like this is the Oklahoma Tax Commission. The city licenses businesses to sell products and businesses are to collect sales tax on those sales. Home bakeries that operate without a license usually are not collecting sales tax. The tax commission will come after your little bakery business with a vengeance if they want. You could be subject to fines and interest, as well as the back taxes.
Then there are liability issues. If people get sick at the party or wedding and blame you, do you have business insurance to cover the hospital bills? If you are delivering a cake and get into a wreck, do you have commercial insurance on your car? We always think about the upside of our business, but forget about the potential risks.
What if a neighbor gets tired of seeing cars pull up to your house to get cakes…maybe you just have a cranky neighbor. They can turn you in for running a business in a residential zone. That opens up all kinds of other issues with the government.
I think the one thing I keep coming back to is that running an underground bakery means that you keep it on the down low. If you are advertising all over the place and aggressively marketing your business, chances are you are going to eventually draw unwanted attention. My advice would be to think before you take each step and to ask yourself if it is worth it. I think about James Bond. What kind of secret agent would he have been if he had a Facebook page called 007, if he had a listing in Craig’s list proclaiming that he was a secret agent for hire and if he set up a booth at security conferences bragging that he was the best spy ever? If you step out of the shadows, you need to be cognizant of both the good and the bad that could come from your decision.
Eyes wide open, people. You’re either an undercover Caker or you are publicly running an illegal shop. Be smart and cautious about the decisions you make.