Texas Cottage Food Law (2026): Limits, Permits, Labels & Taxes

Texas has one of the most generous cottage food laws in the country, and it got a lot bigger in 2025. "Texas cottage food law" is the most-searched state cottage food question in the US, with about 3,600 Google searches a month (October 2026).

This guide covers what changed, what you can sell, how to label it, and the part most Texas cottage food guides skip: the taxes. It's based on the Texas Health and Safety Code, the Texas Department of State Health Services (DSHS), and the Texas Comptroller as of October 14, 2026.

What changed in Texas cottage food law in 2025?

Senate Bill 541 took effect on September 1, 2025, and it was the biggest update to Texas cottage food rules since the law was created in 2011.

SB 541 also made three smaller changes (Tex. Health & Safety Code ch. 437):

• Nonprofits can now run a cottage food operation. A 501(c)(3) organization, like a church or school group, can sell cottage food made in the home of one of its directors or officers.

• You can give out free samples anywhere in Texas, like at a market booth or community event.

• You can donate food to events, like a church or charity bake sale, as long as it doesn't need refrigeration.

What can you sell under the Texas cottage food law?

You can sell almost any food you make at home, as long as it isn't one of these six excluded categories (Health & Safety Code §437.001):

• Meat, meat products, poultry, and poultry products

• Seafood, fish, and shellfish

• Ice and ice products, including shaved ice, ice cream, frozen custard, popsicles, and gelato

• Low-acid canned goods

• Products containing CBD or THC

• Raw milk and raw milk products

That means cookies, breads, cakes, pies, candy, jams, granola, dried herbs, and similar foods are all allowed.

Foods that need refrigeration are now allowed too, with extra steps. Texas calls these "time and temperature control for safety" (TCS) foods. The law gives cream or custard pies and cakes as examples. To sell them, you must register with DSHS, keep them at 41°F or below (or 135°F or above for hot food), and add extra label information (DSHS). Cheesecake isn't named in the law, but because it needs refrigeration, it follows these same rules.

Pickled, fermented, and acidified foods are allowed if you use an approved recipe or test the pH, put a batch number on each label, and keep records for 12 months.

Do you need a license or permit for a Texas cottage food business?

No. Texas doesn't require a state permit or license to run a cottage food business, and the law specifically says a city, county, or local health department can't require "any type of license or permit" or charge a fee to produce or sell directly to customers (§437.0192).

You do need two things:

1. A food handler card. You must complete an accredited food handler course. Anyone else who handles your food must also have one, be directly supervised by someone who does, or live in your household (§437.0195). DSHS also accepts a food manager certification.

2. DSHS registration, but only in some cases. You register through the DSHS online licensing system if you sell foods that need refrigeration, or if you want to put a state ID number on your labels instead of your home address (DSHS).

The cottage food law doesn't address homeowners association rules, so check your HOA covenants if you have them.

Where and how can you sell cottage food in Texas?

You can sell directly to customers and deliver at the point of sale or anywhere the customer chooses. That covers home pickup, farmers markets, pop-ups, and personal delivery.

Online sales are allowed only if the customer buys online and you, an employee, or a household member personally delivers the food. Before you take payment, your website has to show the same information your label would (§437.0194). SB 541 removed mail order from the law, so shipping cottage food isn't allowed.

Selling through stores, restaurants, and markets is new. A registered "cottage food vendor" can sell your food at a farmers market, farm stand, restaurant, or retail store if it has a contract with you, posts a disclosure sign, and dates the food. This only works for foods that don't need refrigeration.

Samples are allowed anywhere in Texas, and you can donate food that doesn't need refrigeration for events like bake sales.

Texas cottage food label requirements

Every food you sell needs a label with (§437.0193):

• Your name and address, or the unique ID number DSHS gives you when you register

• This exact statement: "THIS PRODUCT WAS PRODUCED IN A PRIVATE RESIDENCE THAT IS NOT SUBJECT TO GOVERNMENTAL LICENSING OR INSPECTION."

• The common name of the product

• Any major food allergens, like wheat, milk, eggs, tree nuts, or peanuts (DSHS)

Foods that need refrigeration also need the date the food was made, plus this statement in at least 12-point font: "SAFE HANDLING INSTRUCTIONS: To prevent illness from bacteria, keep this food refrigerated or frozen until the food is prepared for consumption."

If a food doesn't have to be packaged, you can put the label information on an invoice or receipt instead.

How much can you earn under the Texas cottage food law?

You can earn up to $150,000 in gross income a year from cottage food sales. The law says DSHS will adjust that number for inflation each year, but as of October 2026, DSHS still lists $150,000 (DSHS).

That cap is a licensing rule, not a tax rule. Going over it means you no longer qualify as a cottage food operation and would need to follow regular food establishment rules. It doesn't change how your income is taxed, and staying under it doesn't make your income tax-free.

Do you pay taxes on cottage food sales in Texas?

Yes, but less than in most states. Texas has no state income tax (Texas Comptroller), so your taxes come down to federal income tax, self-employment tax, and possibly sales tax.

Federal income tax and self-employment tax

Your cottage food income goes on Schedule C with your federal return. You pay tax on your profit: your sales minus business expenses like ingredients, packaging, and market fees. A cottage food license doesn't change any of this.

Here's an example. Rosa sells custom cakes and cookies in San Antonio and also has a W-2 job that puts her in the 12% bracket. In 2026, she sells $30,000 and spends $11,000 on ingredients, packaging, fees, and mileage, for a profit of $19,000.

That's about 23% of her profit. These numbers are simplified for illustration, and your bracket and other income will change the result. Use Keeper's 1099 tax calculator to estimate yours.

If you expect to owe $1,000 or more, you'll generally need to make quarterly estimated payments (IRS).

Texas sales tax on cottage food

Most baked goods are exempt. Texas exempts "bakery items sold at a retail location other than a bakery without plates or other eating utensils" (Tex. Tax Code §151.314). Bakery items include bread, rolls, biscuits, pastries, doughnuts, cakes, pies, tarts, muffins, bars, cookies, tortillas, and similar items.

Texas defines a bakery as a retail location that primarily sells bakery items, mostly to go. If most of what you sell is baked goods, your bakery items stay exempt even when they're warm or served with a plate. Ask a tax pro if that applies to you.

Where sales tax does apply, the rate is 6.25% plus up to 2% in local tax, for a maximum of 8.25% (Texas Comptroller).

Do you need a sales tax permit? If you sell anything taxable, like candy or drinks, yes. The permit is free, though the Comptroller may require a security bond (Comptroller FAQ). If you sell only exempt baked goods, the Comptroller's guidance doesn't clearly say whether you need one, so check with the Comptroller directly.

What Texas cottage food sellers can write off

You can deduct the business costs of your cottage food operation, including:

• 🧈 Ingredients and packaging (only the business share of mixed grocery runs)

• 🎓 Your food handler course and any DSHS registration costs

• 🏷️ Labels, boxes, and display supplies

• ⛺ Farmers market and event booth fees

• 🚗 Mileage for deliveries and supply runs, now that Texas requires in-person delivery for online orders. That's 72.5¢ a mile for January–June 2026 and 76¢ for July–December 2026 (IRS)

• 💳 Payment app fees and online ordering tools

If you deliver orders yourself, you probably drive a lot. You can deduct that driving using either the standard mileage rate or your actual car expenses, like gas, insurance, and repairs. See mileage vs. actual expenses to pick the one that saves you more, and keep a mileage log either way.

Our cottage food tax guide covers write-offs, grocery receipts, and the home office question in more detail.

Keeper scans your bank and card transactions for write-offs like ingredients, packaging, and booth fees, and files your taxes with every deduction included.

Do you need an LLC for a Texas cottage food business?

No. Most cottage food sellers run as sole proprietors and report their income on Schedule C.

If you do form an LLC, know that Texas treats LLCs differently from sole proprietors for franchise tax. A sole proprietorship isn't subject to the franchise tax, but an LLC is, even if it has one owner (Texas Comptroller). In practice, an LLC with revenue under $2.65 million owes no franchise tax for 2026 and 2027 reports, but it still has to file an annual Public Information Report or Ownership Information Report (Texas Comptroller).