Michigan Cottage Food Sales Tax: What Home Sellers Owe (2026)
Do you charge sales tax on Michigan cottage food? Learn the prepared-food tests, the bakery exemption, when utensils make a sale taxable, and income tax basics.
By the Ajinto teamUpdated Facts checked against MCL 289.4102 and MDARD on 8 min read
The short answer
- Michigan exempts food from sales tax unless it is "prepared food."
- Bakery items like cookies, breads, cakes and pies sold without eating utensils are excluded from prepared food, so they are generally not taxable.
- Providing plates, forks, napkins or other utensils with a cake can make it taxable prepared food.
- Whether you need a sales tax license depends on whether you make taxable sales; confirm with the Michigan Department of Treasury or a CPA.
- Cottage food profit is taxable income: report it on Schedule C, with self-employment tax once net earnings reach $400, whether or not you get a 1099-K.
Most Michigan cottage food sales are not subject to sales tax. Michigan exempts food from sales tax unless it counts as "prepared food," and bakery items sold without eating utensils are specifically excluded from that definition. So a boxed cake or a bag of cookies is generally not taxable. Hand over plates and forks with it, and the answer can change.
The exemption from licensing that cottage food operations get under Michigan law has nothing to do with taxes. You still owe income tax on your profit, and some sales can still be taxable. This guide walks through both, based on the Michigan Department of Treasury's notice on prepared food and IRS rules.
Do cottage food sellers charge sales tax in Michigan?
Usually not, for the products most cottage food sellers make. Here's why.
Michigan's constitution bars sales tax on food for human consumption, with one exception: "prepared food." If what you sell isn't prepared food, it's exempt. If it is, it's taxable like any other retail sale.
MDARD's own answer to "Do I need to collect sales tax?" is "Possibly," followed by a referral to Treasury and this general rule: sales tax is generally not charged on prepackaged foods that are not for immediate consumption. That lines up with how most cottage food is sold, prepackaged and labeled before sale, to be eaten later.
What counts as "prepared food" in Michigan?
Treasury's notice (January 25, 2024) says food is "prepared food" if it meets any one of three tests:
| Test | What it means | Cottage food example |
|---|---|---|
| 1. Sold heated | You sell it hot, or you heat it for the buyer | Rare for cottage food, since products must be packaged and shelf-stable |
| 2. Mixed or combined by you | Two or more ingredients mixed or combined by the seller and sold as a single item | Almost everything you bake, which is why the exclusions below matter |
| 3. Sold with utensils you provide | You supply eating utensils: knives, forks, spoons, glasses, cups, napkins, straws or plates | A cake delivered with a stack of plates and forks |
Containers and packaging used to transport the food (a cake box, a cookie bag, a jar) are not utensils under the notice.
Read test 2 on its own and nearly every cottage food product looks taxable. That's where the statutory exclusions come in.
Which foods are excluded from "prepared food"?
The law carves certain food out of the prepared-food definition even when it would otherwise meet a test. Per Treasury's notice, the exclusions include:
- Bakery items sold without eating utensils. The list covers bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies and tortillas.
- Food sold unheated by weight or volume as a single item.
- Food that the seller only cuts, repackages or pasteurizes.
The "by weight or volume" exclusion can also matter for non-bakery items sold unheated as a single item. Whether a specific product qualifies is a question to take to Treasury.
When can utensils make a cottage food sale taxable?
The bakery exclusion only holds when you sell without eating utensils. Treasury's list of utensils includes plates, napkins and cups, not just forks and knives.
Picture a Lansing baker who makes a birthday cake. Scenario one: the customer picks up the cake in a box and serves it at home with their own dishes. That's a bakery item sold without utensils, so it's generally exempt. Scenario two: the baker delivers the same cake to a party with a package of plates, forks and napkins "to make it easy." Now the seller has provided eating utensils, and the cake may be prepared food.
If you want to offer party supplies, don't bundle them casually. Ask Treasury or a CPA how to handle it before you start, and keep it separate from your usual orders until you have an answer.
Practical ways to stay on the clear side:
- Sell in a box, bag, jar or clamshell. Packaging for transport is not a utensil.
- Don't include napkins, forks or plates by default, including at a farmers market table.
- Don't offer to cut and plate servings at an event.
- Write down your policy so you apply it the same way every time.
What about items that aren't bakery goods?
Not everything a cottage food operation makes is on the bakery list. Candy, granola, snack mixes, popcorn, dry mixes, jams and flavored vinegars are all allowed products (see what you can sell under Michigan cottage food law), but they aren't named in the bakery exclusion.
Some of these may fit a different exclusion, such as food sold unheated by weight or volume as a single item. Others, like a snack mix you combine yourself, raise a real question under test 2. The published notice doesn't answer every product, and we won't guess. If a meaningful share of your sales are non-bakery items, get a written answer from Treasury or talk to a CPA.
| Product type | Starting point | Confirm? |
|---|---|---|
| Cookies, breads, cakes, pies, muffins, bars (no utensils) | Named bakery items, generally excluded from prepared food | Only if you add utensils |
| Same items sold with plates, forks or napkins you provide | Utensil test may make them prepared food | Yes |
| Candy, snack mixes, granola, popcorn | Not on the bakery list | Yes, ask Treasury or a CPA |
| Jams, jellies, dry mixes, vinegars | Not on the bakery list | Yes, ask Treasury or a CPA |
Do you need a Michigan sales tax license?
It depends on whether you make taxable sales. If everything you sell is exempt food, the question looks different than if some of your sales are taxable, for example because you routinely provide utensils or sell non-food items like gift baskets or cake stands.
We're not going to give you a yes-or-no rule here, because it turns on your exact product mix. The right move:
- List what you sell and how (packaged, with or without utensils, any non-food items).
- Take that list to the Michigan Department of Treasury or a CPA and ask whether you need to register for sales tax.
- Keep their answer with your records.
Note that MDARD doesn't handle this. Cottage food operations don't need a license or permit from MDARD, but that exemption is about food safety licensing, not taxes. For the full picture of what MDARD does and doesn't require, see do you need a cottage food license in Michigan.
Do you owe income tax on cottage food sales?
Yes. Sales tax and income tax are separate. Even if none of your sales are taxable for sales tax, the profit is income, and the IRS expects you to report it.
Schedule C and self-employment tax
A home bakery run as a sole proprietorship generally reports its income and expenses on Schedule C with your federal return. Once your net self-employment earnings reach $400 or more for the year, self-employment tax (Social Security and Medicare) applies too.
Expenses you can document, such as ingredients, packaging, labels and platform fees, reduce your net profit. That's one more reason to keep receipts.
Form 1099-K
Payment apps and online marketplaces must send Form 1099-K when your payments through them exceed $20,000 across more than 200 transactions in a year, a threshold restored by the One Big Beautiful Bill Act of 2025. Many small sellers won't hit it, though the IRS notes you may still receive one below the threshold.
That doesn't change what you owe. Income is taxable whether or not you receive a 1099-K, including cash, pay-in-person and payment-app sales.
Michigan income tax
Michigan has its own income tax on top of federal. Rates and estimated-payment rules change, so check the current figures with Treasury or your tax preparer rather than relying on a blog post.
What records should you keep?
Good records answer three different people: the IRS, Treasury, and MDARD.
- Every sale: date, product, amount, and how it was paid. MDARD can ask for written documentation of your gross sales to confirm you're under the annual cap of $50,000 (or $75,000 if you sell products priced at $250 or more per unit). See the Michigan cottage food sales limit.
- Every expense: receipts for ingredients, packaging, labels, equipment and fees.
- How you sold it: whether utensils were included, if you ever include them.
- Any written answer you get from Treasury or a CPA.
Ajinto records every online and pay-in-person order in one place and tracks your running total against the cap, which covers the sales side. Keep your expense receipts alongside it.
Frequently asked questions
Is homemade food taxable in Michigan?
Food for human consumption is exempt from Michigan sales tax unless it is "prepared food." Bakery items sold without eating utensils are excluded from prepared food, so most packaged home-baked goods are generally not taxable.
Do I charge sales tax on cakes in Michigan?
Generally not, if you sell the cake without eating utensils. Cakes are on the statutory list of bakery items. Providing plates, forks or napkins with the cake can make it prepared food, so confirm with Treasury before you do that.
Do I need a sales tax license to sell cookies from home in Michigan?
It depends on whether you make any taxable sales. Cookies sold without utensils are generally exempt, but your full product mix matters. Ask the Michigan Department of Treasury or a CPA.
Does the cottage food law exempt me from taxes?
No. The cottage food law exempts qualifying home kitchens from food licensing and inspection. It says nothing that removes sales tax or income tax obligations.
Do I have to report cottage food income if I don't get a 1099-K?
Yes. Income is taxable whether or not a payment platform sends you a 1099-K. Business income generally goes on Schedule C, and self-employment tax applies once net earnings reach $400.
Is a cake box or cookie bag an "eating utensil"?
No. Treasury's notice excludes containers and packaging used to transport food. The utensils that matter are items like plates, forks, knives, spoons, napkins, cups and straws.
For the full set of rules beyond taxes, read the Michigan cottage food law guide.
This is general information, not legal advice.
Sources
General information, not legal or tax advice. Rules can change; confirm anything you're unsure about with the Michigan Department of Agriculture and Rural Development (MDARD-CottageFood@michigan.gov). Ajinto is not affiliated with MDARD or MSU. Spotted something out of date? Tell us at hello@ajinto.com.