Cottage Food Laws in Arkansas | 2021 Edition

Cottage Food Laws in Arkansas | 2021 Edition

In a previous post, I gave a general overview of Arkansas’ Cottage Food law, including all the amendments we had seen up to that time in 2020.

As a reminder, when we talk about “Cottage Foods,” what we’re talking about are food items produced in a person’s home”  Or, more accurately, food items produced in a person’s home for the purpose of selling.

I explained how Arkansas’ Cottage Food law backstory perhaps first begins with the state’s landmark “Food, Drug and Cosmetic Act” of 1953, where, for the first time, the Health Department was granted authority to license and inspect all food establishments.  That presumably included home-based food establishments.

It wasn’t until 2011 that Arkansas passed its initial Cottage Food law exempting home-based producers from permit requirements.  In was a major loosening of a lot of the red tape placed on an entrepreneur’s home kitchen, though not a total removal of the red tape.  Essentially, the law maintained strict guidelines on the list of allowed items, the labeling of those items, and the locations those items are allowed to be sold at.

Later in 2017, the law was eventually amended to add chocolate-covered fruit and berries to the list of allowed items, as well as online farmers markets to the list of allowed locations to sell at.  It was amended again in 2019 to add “pop-up shops” to that list of allowed locations.

Then in 2020, though we didn’t see any new amendments to the law, we did see an interesting development with the rise of COVID-19 during a time of state-mandated social distancing.  That was a more flexible tone and a universal expectation for businesses to get creative in how their products exchange hands so as to not perpetuate the declared public health crisis.

I promised I would put out an update if there were any more changes to the law, and, sure enough, during the 2021 legislative session, Act 306 was passed, perhaps as a more formal solution for Cottage Food sellers in the wake of COVID-19.  The act included an “emergency clause” allowing the amendment to go into immediate effect upon its passage “for the preservation of the public peace, health, and safety.”  I take that to be a response to the difficult position home producers have been put it when factoring both (1) the strict requirements they’re already subject to, plus (2) whatever public health expectations are added on top of that.

The 2021 amendment finally added “the internet” to the list of allowed locations cottage foods can be sold.  Whereas online sales were earlier opened to farmers markets back in 2017, home businesses operating on their own were still limited to a short list of direct, in-person locations.  Now, online sales are open to everyone.  The exact wording of the new amendment specifies a cottage food production operation may offer it’s products directly to the consumer now:

“Through the internet if the sale from the cottage food production operation is directly to an end consumer located in: (A)  This state; or (B)  Another state if the cottage food production operation complies with all federal regulations regarding food safety.”

If I can just say, that’s great news!  If you remember, it’s something I even had on my wish list in my 2020 post.  The way I see it, this amendment is long overdue, not just because the public health crisis of 2020, but because of the rise of the digital age, oh, several decades ago!  In many ways, cottage food sellers have been required to keep their businesses stuck in 20th century times, while everyone else has been given a 21-year head start to claim their stakes in 21st century e-commerce world.

Granted, I still think word-of-mouth marketing and in-person interaction with a customer is always the best business plan, but there’s no question the convenience factor of online ordering is something today’s customers want, including those loyal, first-name basis customers.

To try and break down the law as it’s written and as best as I understand it—(and to plug in a disclaimer, I’m not an expert.  If you want the official word, you’ll need to make your own phone calls to Arkansas’ Department of Health)—

The law states cottage foods may now be offered to customers “through the internet if the sale…is directly to an end consumer…”

The first thing I’d point out about that wording is just how wide the door is open now to cottage food sellers online.  There isn’t a crippling list of limits mentioned in connection with the phrase “internet.”  That must mean, all legitimate online platforms are open game.  Whether that’s your own website, or social media page, or some online marketplace site with a landing page dedicated to your business, etc.

The important qualifier that is mentioned is the fact your online sales must still be made “directly to an end consumer.”  Before this amendment, I would have interpreted a “direct” sale to mean an “in-person” transaction and exchange of products, especially since the list of allowed locations a individual cottage food seller could sell were all “in-person” locations.  However, because the nature of the internet isn’t in-person but digital, “direct” sales must simply mean no third-party brokers.

Therefore, whatever online platform you choose, just remember your cottage food sales need to happen directly.  Even if you’re selling through someone else’s website, the funds and products being transferred need to happen straight from the customer to a business, and a business to the customer.  It can’t be exchanged through a third party.

The law goes on to specify where a customer can be located to order your cottage foods online.  That list first includes “[The state of Arkansas].”No qualifiers are placed on that.  Any online order placed in the state is allowed.

The list also includes “[Any other state] if in [compliance] with all federal regulations regarding food safety.”  That opens the door to out-of-state orders, though the obvious qualifier is if you’re in compliance with federal rules.

Ordinarily, every individual state governs it’s own cottage food laws.  However, once you cross the state line, your online orders enter federal jurisdiction and are subject to federal rules.

How do you know if you’re in compliance with federal rules?  For those answers you would need to check with the United States Food and Drug Administration (or “FDA”).  Specifically, you might check the FDA’s “Food Code,” most recently updated in 2017 at the time I’m recording this.  Just keep in mind, because cottage food requirements are generally left to individual states to determine, you’re not going to find explicit federal provisions addressing cottage foods, at least, not to my knowledge.

I did notice that the Food Code excludes private home kitchens from its list of “Food Establishments” subject to licenses, training, permits, and inspection.  However, when talking about private home kitchens, the Food Code only refers to them in relation to their use of in-person sales, such as at a church bake sale.  So, there’s no clear category for a cottage food operation that engages in internet sales, let alone internet sales across state lines, or what is referred to as “interstate commerce.”  You can do your own reading to see if you find anything different.

If you don’t find what you’re looking for in the FDA’s Food Code, you can try looking into “Title 21 on Food and Drugs” in the Code of Federal Regulations (or “CFR”).  I’ll just admit to you, when it comes to federal rules, I’m not going to be much good in helping you narrow down your research to find the most relevant factors to consider.  Perhaps someone reading this who has more experience than me can comment on what we need to know.

The only other thing I would mention when talking about internet sales, whether that’s within your state or across state lines, is the implication that (#1) payments are being transferred electronically, and (#2) goods are being transferred physically.

In terms of receiving payments, most e-commerce platforms are going to use some kind of online “payment gateway.”  That could be Paypal, Stripe, Square, Braintree, or some other Credit Card  payment solution.  Just remember, when processing cards online, there usually is a transaction fee to go along with it.  You’re paying for the service and the convenience of receiving payments online.  It’s all making things easier for your customers—and, in many ways, it can make things a lot easier for your small business too.

In terms of getting the goods into your customers hands, there are also different options to choose from.  If we’re talking about online sales made to customers within Arkansas, I think it’s understood your options would be three-fold—those being, “pickup,” “delivery,” or “shipping.”  Again, I’m making some assumptions here based on how internet sales are usually handled.

I imagine reasonable pickup locations would include that short-list of allowed locations already outlined in the law, namely (1) your home, (2) a farmer’s market, (3) a county fair, (4) a special event, or (5) a pop-up shop.  I talk about those in my other post.  It makes sense to me, if you’re already set up in those spots for in-persons sales why you can’t turn those spots into a pickup location if an order comes in online.

I believe delivery is another reasonable way to fulfill online orders, whether that’s “at-home delivery,” or delivery at established “points-of-distribution” such as a commuter lot or a church parking lot.  I don’t see why that wouldn’t be allowed under an internet sale approach.

Shipping is probably the most obvious way online orders are fulfilled, especially for out-of-town and out-of-state customers.  Since you’re shipping food, you’ll just need to check on what your mail services’ packaging requirements are for sending food through the mail.  I know the  United States Postal Service has a page on its website with a section all about food shipments.

I think the important rule-of-thumb to comply with in a shipping company’s rules, your state’s cottage food laws, or any federal rules (if you’re shipping across state lines) is the avoidance of your items being deemed hazardous.  That’s something you should think about before your cottage foods leave your door, but it’s also something you need to think about while your cottage foods are in transit.   Ask yourself the question, in whatever packaging or shipping methods you use, will your items remain safe for the customer?  That’s the important question.

To wrap this up, I think the 2021 amendment is a wonderful addition to the law.  Amy and I have already started making updates to our website to allow for online payments on our cottage food items.  If you want to see how we do it, you can visit us at www.thekinnardhomestead.com/products.

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