Do I Charge Sales Tax on Cottage Food or Catering in Texas?

Cottage food in Texas: usually no. Bakery items, which is what most Texas cottage food operators sell, are exempt from sales tax when sold without plates or eating utensils. Cottage foods that are not bakery items, like candy and snack items, are generally taxable. Catering in Texas: yes. A caterer is a seller of prepared food and must collect sales tax on all charges billed in connection with the taxable meal, and because Texas sources local tax at the seller's place of business, the rate usually starts from your own location, not the venue's.

This article explains the rules and links the authorities that set them. It is not tax advice, your state's Department of Revenue and your accountant are the final word for your situation.

Cottage food: the bakery-item exemption does the work

Texas defines bakery items broadly: "bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, Danish pastries, cakes, tortes, pies, tarts, muffins, bars, cookies, tortillas, and similar items" (Texas Administrative Code, Rule 3.293). Those items are exempt from sales tax in any size or portion, with two triggers that flip them taxable: selling them heated, or selling them "with plates or other eating utensils that the seller hands to the customer." The Comptroller's grocery publication says the same thing from the store's side: bakery items become taxable "when sold with eating utensils (plates, knives, forks, spoons) or when heated" (Comptroller Pub 96-280).

For a cottage baker at a farmers market or handing off a custom cake, the sale is normally exempt. A napkin is fine; a plate and fork is the line. If everything you sell is an exempt bakery item, the Texas Cottage Food Law community's explainer reads the Comptroller's guidance to mean no sales tax permit is required. Treat the Comptroller as the authority: candy, snack items, and anything served heated or with utensils are taxable, and taxable sales need a permit first.

Catering: taxable, and broader than just the food

Rule 3.293 is blunt about catering: "A caterer is a seller of prepared food and beverages and must collect sales tax on all charges billed in connection with the sale of taxable meals" (Rule 3.293). "All charges billed in connection with" is the phrase to sit with. Delivery, setup labor, staffing, and even a separately stated room charge passed to the client ride along with the taxable meal. The Comptroller's restaurant publication covers the purchase side, which equipment is taxable to you and which non-reusable items you can buy tax free for resale with the meal (Comptroller Pub 94-117).

The Texas wrinkle: origin-based, with a delivery layer

Texas is an origin state for local tax. Local jurisdictions can stack up to 2 percent on top of the 6.25 percent state rate, for a maximum combined 8.25 percent (Comptroller local tax FAQ). When an order is placed in person at your place of business, "the sale is consummated at that place of business of the seller, regardless of the location where the order is fulfilled" (Comptroller Pub 94-105). Your own city's combined rate is the starting point, not the venue's.

The layer people miss: if you ship or deliver into a jurisdiction with a higher combined local rate than yours, you collect the additional local use tax due for that destination (Pub 94-105). Origin-based is the beginning of the Texas answer, not the end of it. Rates and rules here are current as of July 2026.

FAQ

"Do I need to charge sales tax on cottage food in Texas?" Not on bakery items sold without plates or utensils, which covers most cottage food sales. Candy, snack items, and anything sold heated or with utensils is taxable, and taxable sales require a sales tax permit.

"Aren't home bakers supposed to charge tax?" In Texas, not on the baked goods themselves. The exemption applies to home bakers the same as storefronts. Bakers in other states face different rules, which is where this recurring argument usually starts.

"Do I use my city's sales tax rate for the cake?" In Texas, generally yes for an in-person sale: local tax is sourced to your place of business. If you deliver into a city with a higher combined rate, you collect the additional difference for the destination. The Comptroller's rate lookup resolves any address.

Where Savi Tools fits

Savi Tools looks up the sales tax rate by address on the invoice, which is exactly the check a Texas caterer needs when the delivery city's rate might beat their own. On the Growth plan, when your client has a full address, every invoice gets the jurisdiction-accurate rate applied automatically, and every taxed invoice records the state and ZIP it was taxed for. Your dashboard keeps a running view of what you've collected, split paid vs invoiced and address-accurate vs estimated, and at filing time you (or your accountant, through their free seat) export a clean CSV: state, ZIP, taxable amount, tax collected. Savi Tools tracks and reports; it does not file or remit tax, and it does not tell you where you owe, that stays with you and your accountant. Growth is $19/month. Start free →

Savi Tools tracks and reports collected sales tax by state and ZIP. It does not file or remit tax and does not provide nexus or tax advice. Consult your accountant. Never get surprised at tax time.