This post originally appeared at https://www.badgerinstitute.org/legislators-turn-up-heat-on-wisconsin-home-bakers/

Proposed cottage food sales cap would be among lowest in the country

Wisconsinites who bake food at home for sale in their communities could find their incomes dramatically curtailed under legislation recently introduced in the Wisconsin Legislature. Assembly Bill 897, introduced by Rep. Rob Summerfield (R-Bloomer) and Rep. Chanz Green (R-Grand View), would impose a $20,000 cap on the annual gross sales of Wisconsin cottage food producers.

A similar measure, Senate Bill 813, introduced by Sen. Andre Jacque (R-De Pere) and Sen. Duey Strobel (R-Saukville), would set the earnings cap at $25,000, still one of the lowest amounts in the nation for at-home producers who sell only shelf-stable food.

“Cottage food is, broadly speaking, homemade, home-grown, small batch food,” said Kriss Marion, who with her husband owns a bed and breakfast on their Circle M Market Farm in Blanchardville, Wis. “It’s what consumers want more than ever, post-COVID — to be close to the source of the products they buy. They want to know and trust their makers.”

Bill supporters argue that this cap is necessary to ensure fair competition.

“When it comes to home-baked goods, there was no sales limit, so it created an unfair market advantage that negatively affected licensed food producers,” said Green.

Jessica Hoover, executive director of the Wisconsin Bakers Association, agreed, saying that commercial bakeries have greater out-of-pocket expenses because they are required to be licensed by the state and to make their products in a commercial kitchen.

“Products produced in a home setting do not incur these costs and can be produced at a much lower price point,” she said. “It is inherently unfair for the state to require one sector of the industry to adhere to an extensive set of strict and costly rules while completely ignoring the existence of an unregulated competitor.”

Opponents point out that a majority of states don’t have cottage food sales caps, that such restrictions would limit their ability to earn a living wage, and that their markets options are limited relative to licensed producers.

“Expenses for home businesses are very high, (and a maximum of) $20,000 gross income is unreasonable,” said Dela Ends, who owns and runs a Scotch Hill Farm, a USDA-certified organic farm, with her husband and children in Green County. “Other states have much higher caps or no caps at all. Wisconsin was the next-to-last state in the country to (relax restrictions on) home baking, and that was only after our lawsuit. Do we want to continue to be among the last in the country?”

In 2017, Ends, Marion, and Lisa Kivirist, represented by the Washington, D.C.-based Institute for Justice, were plaintiffs in two lawsuits challenging a Wisconsin law that required cottage food producers to obtain a license and rent or build a commercial-grade kitchen before selling a single home-baked pie or jar of pickles. Kivirist, along with her husband, owns and runs a bed and breakfast on their small farm near Browntown.

Anyone who violated the law risked fines of up to $1,000 or six months in jail. Wisconsin was one of only two states to ban, in effect, the sale of home-baked goods.

The first lawsuit involved baked goods. IJ attorneys argued “that the ban on homemade, non-potentially hazardous baked goods was not rationally connected to any constitutionally legitimate purpose,” according to Justin Pearson, senior attorney for the institute. “Instead, it was passed at the request of special interest groups like the Wisconsin Bakers Association and the Wisconsin Restaurant Association to restrict competition.”

In 2017, the court ruled for the plaintiffs, stating that the ban was unconstitutional. The government chose not to appeal, and homemade, shelf-stable baked goods have been legal to sell in Wisconsin without a state license ever since. “Shelf-stable” describes foods that can be safely stored for a long period of time without having to be refrigerated or cooked to be eaten safely.

The second case addressed all homemade, non-potentially hazardous foods, such as canned goods, that were not covered by the first lawsuit.

“The government’s employees admitted that these foods were equally safe as the foods covered by the first lawsuit,” said Pearson.

In 2022, the court ruled that this ban was also unconstitutional. The government appealed, and the Wisconsin Court of Appeals stayed the ruling pending a decision. 

The rulings created a “legal mess” that needs clarification in law, said Hoover of the Bakers Association.  

“Back-to-back court decisions since 2017 have exposed a gap in (the Wisconsin Department of Agriculture, Trade and Consumer Protection’s) authority to require even modest food safety protocols from home-producers of non-potentially hazardous foods, i.e. wedding cakes, breads, cookies, etc.,” she said. “As a result, the bakery industry has been flooded by unregulated producers and your main street bakery is quickly becoming a thing of the past.”

But commercial bakers also have distinct market advantages over their unlicensed competitors. Cottage food producers must make their products at home, limiting the scale of their production. They’re also required to sell their food directly to consumers, while licensed food producers can sell through third parties, at grocery stores and at restaurants.

Meagan Forbes, director of legislation and senior legislative counsel for the Institute for Justice, said the bills would be “a huge step backwards for Wisconsin.”

“Many states are lifting gross sales caps and expanding the venues and food that cottage food producers can sell,” said Forbes. “Even Minnesota raised its $18,000 gross sales cap to $78,000 a couple of years ago. Our research shows that cottage food is incredibly safe, even in states that allow the broadest variety of food to be sold.”  

Twenty-nine states and the District of Columbia do not cap cottage food sales, according to Forbes. States that do have caps set them significantly higher than this bill would establish. Florida has a gross sales cap of $250,000, Oklahoma’s cap is $75,000 and Texas’ cap is $50,000.  

Forbes pointed out that selling cottage foods is often a steppingstone for cottage food producers to become licensed and expand their businesses, “something that we’ve seen cottage food producers do in other states.” 

In one area, the legislation lifts an existing cottage food sales cap. The Assembly bill increases a cap on canned goods from $5,000 to $20,000; the Senate bill would raise the cap to $25,000. 

“It may seem like a small amount, but $20,000 is what we agreed to, and it was a significant improvement from $5,000,” said Green. 

But Ends argues that even with the increase, the cap is still “much too low.” 

“Canning is very labor intensive and really not very profitable on a small scale,” she said. 

While the cap would go up for canned goods, moreover, opponents are focused on the new limits and regulations for baked goods.  

The bills will also require cottage food producers to inform DATCP of what and where they plan to sell. Hoover calls this “an asset in the event of a food-born illness outbreak.” 

But cottage foods — particularly baked goods — don’t pose a safety threat, according to research conducted by the Institute for Justice. 

“The government calls them ‘not potentially hazardous’ because they remain safe to eat even if they aren’t refrigerated,” said the institute’s Pearson. “They may become stale over time, but even then, they won’t hurt you. It is undisputed that there is literally no safer item to eat being sold in Wisconsin today.” 

IJ researchers requested data from seven states with the broadest homemade food laws regarding the number of complaints and foodborne illnesses that could be traced to cottage food products.

“We found no incidents of foodborne illness, even in these states that allow the widest variety of food to be sold,” said Forbes. 

Both Green and Summerfield acknowledge that their legislation won’t do much to benefit Wisconsin food buyers. 

“This bill won’t have a large impact on consumers,” said Summerfield. 

But cottage food producers argue that it will restrict options for consumers, especially those seeking specialty items such as gluten-free, halal or kosher foods.  

Marion said a ban would be “catastrophic” for cottage food producers like herself. She believes legislators should encourage entrepreneurial food enterprises, especially in rural and urban areas. 

“To me, the lawsuit was a matter of economic justice for small towns, small business and small farms — the things that make vibrant rural living wonderful and rare,” she said. “Many rural places are not vibrant, but cottage food has the ability to revitalize both hollowed-out rural communities and hollowed-out urban neighborhoods.” 

Forbes agreed that legislators should be looking to expand, not restrict, the cottage food industry. 

“The state should not impose severe restrictions on cottage food sales simply to protect licensed food producers from competition,” she said. “There are many benefits to having a thriving cottage food industry.  

“Aspiring food entrepreneurs benefit by being able to test the market and grow their businesses,” she added. “Small farms also benefit from being able to make value-added products and from having an additional source of revenue. Overall, expansive cottage food laws create jobs and stimulate economic growth in their communities.” 

AB 897 is scheduled for a hearing this Thursday at 10 a.m. in the Committee on Consumer Protection.

Michael Jahr is former vice president at the Badger Institute and current CEO of Jahr Productions.

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