The food industry is heavily regulated in Texas given the primary concern for food safety. To prevent food-borne illnesses and ensure the well-being of its citizens, businesses manufacturing and selling food has to follow strict rules and regulations governing food businesses.
One big difference in Texas is their laws for home-based food businesses. In 2011, Texas passed SB 81 allowing for the manufacturing of certain food products from homes. The law opened huge opportunities for home-based businesses in the state, commonly referred to as cottage food operators.
Here are the steps you need to consider when starting a food business in Texas.
Get a Food License
Except for cottage food operators, contact the Food and Drug Licensing Group and apply for a license:
RLU, Food and Drug Licensing Group MC 2835
Texas Department of State Health Services
P. O. Box 149347
Austin, Texas 78714-9347
For Foods, Retail Food Establishments,
Certificate of Freesale and/or Certificate of Origin, Seafood Safety, and Inspection Applications:
Telephone: (512) 834-6626
Fax: (512) 834-6618
Email: foodslicensinggroup at dshs.state.tx.us
Download the food license application at http://www.dshs.state.tx.us/fdlicense/apps.shtm#food
The license fee is based on the gross annual sales for all food manufactured at the place of business. If gross annual sales is $0.00 – $9,999.99 (which a new food manufacturer will fall under), license fee is $104. License fee for businesses earning $10 million or more is $1,731 for each place of business.
Home-Based Food Business
From the FAQ section of the Food and Drug Licensing Group page http://www.dshs.state.tx.us/fdlicense/faqs.shtm, home-based manufacturing of food is allowed if and only if:
As long as manufacturing or holding of items for distribution are not conducted in any room used as living or sleeping quarters. All manufacturing and storage must be separated from any living or sleeping quarters by complete partitioning and must meet the minimum standards for licensure.”
However, it is important to check with your county their guidelines for home-based food business. For example, Austin-Travis County prohibits home preparation of food :
Except for those businesses that meet the requirements of a Cottage Food Industry, home preparation of food for public consumption is prohibited. All food that is to be consumed by the public, whether free or for sale, must be prepared at a permitted establishment that is inspected by a federal, state, or local Health Authority.
Cottage Food Production
You may be able to manufacture food products from your home and start a home-based food business if you meet the stringent requirements of a Cottage Food Production Operation, which Texas law defines as:
A Cottage Food Production Operation is an individual, who operates out of the individual’s home, who produces a baked good, a canned jam or jelly, or a dried herb or herb mix for sale at the person’s home that has an annual gross income of $50,000 or less from the sale of the food described above; and sells foods produced (baked good, canned jam or jelly, or a dried herb or herb mix) only directly to consumers from the cottage food production location.
It is important to understand that the cottage food law has some serious limitations. You are allowed to sell only non-perishable food items, which do not require refrigeration. Among the food items your business as a cottage food production operation can produce are as follows:
- Breads, rolls, biscuits
- Sweet breads, muffins
- Cakes (birthday, wedding, anniversary, etc.
- Fruit pies
- Jams and jellies
- Dry herbs and dried herb mixtures
You cannot make candies, popcorn, bakery goods such as pies that require any type of refrigeration, barbecue sauces, among other food items.
Where you sell your products is strictly restricted by law. You have to sell your food products at your home. You are only allowed to sell your food products in a farmer’s market or craft fair if the event is sponsored by the municipality or county. You are not allowed to sell at privately sponsored public events such as flea markets (check with the event organizer if they are municipally-sponsored). You are also not allowed to sell on the Internet.
You are also not allowed to sell your food to a retailer (e.g. your local bakery or coffee shop). The law requires that you sell your food products directly to customers, which means you cannot be a wholesaler and sell to a licensed reseller like bakeries, groceries and other food establishments.
It is also important to check the labeling requirements for food items prepared in a home-based food business. The law states that labels on food products produced in a home kitchen must include the name and address of the food producer, and state that the products were made in uninspected and unlicensed home kitchen.
Sec.A437.0193. LABELING REQUIREMENTS FOR COTTAGE FOOD PRODUCTION OPERATIONS. The executive commissioner shall adopt rules requiring a cottage food production operation to label all of the foods described in Section 437.001(2-b)(A) that the operation sells to consumers. The label must include the name and address of the cottage food production operation and a statement that the food is not inspected by the department or a local health department.
However, subsequent implementation of the law has required home-based food businesses to list the ingredients on the label for the product they sell, which has caused consternation among the cottage food producers.
As a cottage food producer, you are also required to successfully complete a food handler’s course. You do not need a license from the Health Department, and you don’t have to register with the local Health Department. However, customers can complain about your business with the Health Department, which then gathers these complaints as part of your business records. Note that the Health Department can shut down your business if they find it to be sufficient risk to the consumers.
Consult with your lawyer as to the best business structure for your business.
If you will operate your food business as Sole Proprietorship, you only need to file an Assumed Name Certificate or DBA (doing business as) with the county clerk. There is no need to register with the Secretary of State. In Texas, assumed name filing is valid for 10 years.
If you will operate as limited partnerships, registered limited liability partnerships, limited liability companies, corporations, your food business must be registered with the Secretary of State http://www.sos.state.tx.us/. If your business will be identified by a name other than the name on file with the Secretary of State, you will be required to file an Assumed Name Certificate with the Secretary of State and the county where the business’ principal office is located.
Check with your county for specific zoning requirements.
Whether you are operating your food business from your home as a cottage food operator or in a separate structure of your house allowing you to operate with a food license, you will be subject to zoning regulations. It is important to understand that your neighbor has the right to take action against your food business and complain to the county, which may then impose zoning restrictions on your business.
Contact the Texas State Comptroller for all questions about tax requirements for your food business http://www.window.state.tx.us/contact.html
You can also get tax information from this agency:
Internal Revenue Service
825 East Rundberg Lane, Suite H-4
Austin, Texas 78753
800-829-1040 or 800-829-4059 (TDD)
Business Tax Kit and other publications: 800-829-3676 or 800-829-4059 (TDD)
According to the Texas State Comptroller
Ready-to-eat food is typically taxable even when it is sold “to go.” Tax is not due, however, on bakery items (regardless of size, whether whole pies, for example, or individual portions) when sold without plates or eating utensils.
You can read the tax rules on food items here:
Bakery items are taxable only when sold on a plate or with other eating utensils such as forks, knives and spoons. Napkins are not considered eating utensils. A bakery item is considered to be served with eating utensils if the seller actually hands the utensils to the customer or places the utensils on a tray or plate. It does not include situations when a seller provides a central station where customers can help themselves to items such as forks, knives, spoons, straws and napkins.
Some Texas counties collect rendition tax http://www.window.state.tx.us/taxinfo/taxforms/50-144.pdf based on the value of business personal property. If this is a tax your county charges, you will be required to submit a list of business assets and equipment.
Other resources that you can check include:
- Small Business Development Center Network (SBDC Texas) http://www.sbdctexas.org/
- Small Business Administration (SBA) has 6 district offices in Texas http://www.sba.gov/tools/local-assistance/districtoffices
Resources on Starting a Food Business
For additional reading on how to start a food business, check out the following articles:
- How to Start a Food Business
- How to Grow a Food Business
- How to Market and Sell Food Products to Grocery Stores
- Starting a Mobile Food Truck Business
- Social Media and the Mobile Food Truck Business
- How to Start a Mobile Food Truck Business
- How to Start a Home-Based Baked Goods Business
- U.S. Food and Drug Administration’s Small Business Guide to Food Starting a Bakery: Success in the Niche Food Business (PDF)
Recommended Books on Starting a Food Business
- Good Food, Great Business: How to Take Your Artisan Food Idea from Concept to Marketplace
- Cooking Up a Business: Lessons from Food Lovers Who Turned Their Passion into a Career — and How You C an, Too
- Starting a Part-time Food Business: Everything You Need to Know to Turn Your Love for Food Into a Successful Business Without Necessarily Quitting Your Day Job
- Homemade for Sale: How to Set Up and Market a Food Business from Your Home Kitchen
- Start & Run a Home-Based Food Business: Turn your kitchen into a business. (Start and Run A)