# What Happens When You Hit Your Cottage Food Revenue Cap
If you sell homemade food under a cottage food law, your state almost certainly limits how much you can earn per year. That limit is your cottage food revenue cap — and hitting it is actually a good problem to have. It means your food business is growing.
But it also means you need a plan. Once you reach your state's annual sales limit, you have to stop selling for the rest of the year, transition to a commercial license, or find another path forward. The good news is that you have more options than you might think.
The short version: Every state with a cottage food law sets an annual revenue cap — typically between $25,000 and $75,000 in gross sales, though some states go much higher or have no cap at all. When you hit that cap, you must stop cottage food sales for the remainder of the calendar year. Your main options are to pause and restart in January, apply for a commercial food license, rent time in a licensed commercial kitchen, or move to a state with a higher cap or no cap. Most vendors who hit the cap treat it as a signal to level up their business, not shut it down.
A cottage food revenue cap is the maximum amount of money you can earn from cottage food sales in a single calendar year. Every state that has a cottage food law also sets this limit — it is part of the legal framework that lets you sell homemade food without a commercial license.
The cap is almost always based on gross sales, not profit. That means it counts your total revenue before subtracting the cost of ingredients, packaging, booth fees, or any other expenses. If you sell $50,000 worth of cookies but spent $30,000 on supplies, your state counts it as $50,000 against your cap.
Most states reset the cap on January 1 of each year. A few states use a rolling 12-month period instead, but the calendar year reset is far more common. For more details, see our guide on .
The purpose of the cap is to keep cottage food operations small and home-based. Legislators view cottage food exemptions as a way for people to earn supplemental income — not run full-scale food manufacturing from their kitchen. The revenue cap is the mechanism that draws that line.
Revenue caps range dramatically from state to state — from as low as $5,000 to over $250,000, and several states have eliminated caps entirely.
Here is a general breakdown of where most states fall:
Several states — including Texas, California, and Oregon — have started indexing their caps to inflation, meaning the dollar amount goes up automatically each year. This is a newer trend that prevents caps from becoming more restrictive over time.
To find your specific state's cap, check your state's cottage food law. Laws change frequently, and the trend over the past five years has been consistently toward higher caps.
When your gross sales reach your state's cottage food revenue cap, you must stop selling cottage food products for the rest of that calendar year. That is the straightforward legal consequence.
Here is what that looks like in practice:
Most states do not actively audit cottage food vendors for cap compliance. The responsibility falls on you to track your own sales and know when you are approaching the limit. However, if a complaint is filed or an inspector asks, you need records showing you stayed within the cap. Some states require you to keep sales records available for review.
The penalties for exceeding your cap vary by state. In most cases, the consequence is that you are operating as an unlicensed food business — which can result in a cease-and-desist order, fines, or being required to obtain a commercial food license retroactively.
Tracking your revenue against the cap is your responsibility, and it does not need to be complicated.
If you sell at farmers markets, keep a running tally after each market day. If you take orders online through a platform like Homegrown, your sales data is already tracked for you.
The most common mistake vendors make is not tracking until it is too late. If you are doing well at the farmers market and selling out every weekend, you can reach a $50,000 cap faster than you expect — especially during peak season months when sales spike.
Hitting your cottage food revenue cap is not the end of your food business. It is a turning point. Here are the paths forward, from simplest to most involved.
The simplest option. You stop selling when you hit the cap and wait for the new calendar year to reset. This works if:
Some vendors plan for this by front-loading their selling season or raising prices so they earn more before hitting the cap.
If your business has outgrown the cottage food exemption, the next step is a commercial food license. This removes the revenue cap entirely and lets you sell without a dollar limit.
A commercial license typically requires:
The cost and complexity vary widely by state and county. Some areas make it relatively straightforward. Others require significant investment in kitchen upgrades or commercial kitchen rental.
If you are not ready to build out your own commercial kitchen, see Option 3 below.
Renting time in a licensed commercial kitchen lets you operate under a commercial food license without the cost of building or converting your own kitchen space.
Shared commercial kitchens — sometimes called commissary kitchens or community kitchens — rent by the hour, day, or month. Rates typically range from $15 to $35 per hour, depending on your area and the kitchen's equipment.
This option makes sense if:
To find shared kitchens in your area, search for "shared commercial kitchen" or "commissary kitchen" plus your city or county name. Many are run by nonprofit organizations, churches, or local economic development agencies.
Some states offer a middle ground between cottage food and full commercial licensing called a Micro-Enterprise Home Kitchen Operation (MEHKO) or similar program. These allow you to sell a broader range of foods from your home kitchen — including some that require refrigeration — with a higher or no revenue cap.
California, Utah, and a few other states have MEHKO programs. The requirements are more involved than cottage food (typically requiring a home kitchen inspection and food safety certification) but less expensive than a full commercial kitchen setup.
Check whether your state offers a MEHKO or similar program through your state's cottage food law page.
If you live near a state border, you may have the option to sell in a neighboring state with a higher cap — though you would need to comply with that state's cottage food law, and not all states allow out-of-state cottage food sales. For more details, see our guide on simple bookkeeping routine.
Some vendors also explore shipping cottage food to customers in food freedom states, though the legal landscape for interstate cottage food shipping is still developing.
The best time to plan for your revenue cap is before you hit it — not after. Here are practical steps to stay ahead.
State legislatures have been raising cottage food caps consistently over the past several years. Multiple states raised or eliminated their caps between 2023 and 2025, and the trend shows no signs of slowing down.
If you are approaching your cap, it is worth checking whether your state has recently raised it or has legislation pending to do so. A cap increase could buy you another year or more of selling under cottage food rules before you need to make a bigger transition.
You can track legislative changes through your state's agriculture department website or through organizations that advocate for cottage food producers.
The broader trend is moving toward more flexibility, not less. Food freedom laws — which eliminate caps entirely — have spread from a handful of states to nearly a dozen, and more states introduce food freedom bills each legislative session.
Hitting your cottage food revenue cap is one of the strongest signals that your food business is viable. Most cottage food vendors never come close to their state's cap. If you are hitting it, you have a product people want to buy and a market that is willing to pay for it.
The cap is not a ceiling on your food business — it is the boundary of one specific legal category. Beyond that boundary, there are other categories (commercial licensing, MEHKO, food freedom) that let you keep growing.
Many successful food businesses started as cottage food operations, hit the cap, transitioned to a commercial kitchen, and continued growing from there. The cottage food phase was the low-risk testing ground. Hitting the cap means you passed the test.
If you are just starting your cottage food business, do not let the revenue cap discourage you. Think of it as a milestone to aim for, not a wall to fear.
In almost every state, the revenue cap applies to gross sales — your total revenue before subtracting any expenses. If you sell $50,000 worth of jam but spent $25,000 on ingredients and supplies, your state counts $50,000 against the cap. A few states word their laws differently, so check your state's specific cottage food law to confirm.
If you exceed your cap, you are technically operating as an unlicensed food business. Most states will require you to stop selling immediately. Consequences range from a verbal warning to fines, depending on how much you exceeded the cap and your state's enforcement approach. In practice, most states do not actively audit cottage food sales — but if a complaint is filed, you need records showing your compliance.
Most states do not require you to report cottage food sales to a government agency, but many require you to keep records available for inspection if requested. A few states require annual reporting. Regardless of your state's requirements, keeping detailed sales records protects you and helps you track your progress against the cap. You also need these records for tax purposes.
No. The cottage food revenue cap applies to your total cottage food sales across all venues combined — farmers markets, online orders, roadside stands, special orders, and any other channel. You cannot spread sales across different locations to stay under the cap.
Food freedom states — including Wyoming, North Dakota, Utah, and Maine — have eliminated revenue caps for qualifying home food producers. In these states, you can sell unlimited amounts of certain homemade foods directly to consumers without hitting a dollar limit. However, food freedom laws still have other requirements, like direct-to-consumer sales only and informed consent from buyers.
It depends on your situation. If you are consistently hitting the cap and have year-round demand, a commercial license is usually worth the investment — it removes the revenue limit entirely and opens up wholesale and shipping opportunities. If you are only hitting the cap late in the year and your sales are seasonal, it might make more sense to plan your selling season around the cap and avoid the added cost and complexity of commercial licensing.
Selling homemade food should be simple — and with Homegrown, it is. Whether you are tracking sales against your cottage food cap or ready to grow beyond it, having the right tools makes the transition smoother. Create your free Homegrown storefront and keep your focus on what you do best — making food people love.
