California does not have a cottage food law. Currently, if you bake a cake at home and sell it to the public--let's say at a bake sale--you are breaking the law. If you make a few pints of jam from the fruit in your backyard and sell them from a shop, you're breaking the law. There's no way to get "right" with the law, either: food made for sale in California must be made in a commercial kitchen.
According to Food Safety News, that could change if AB1616, proposed by Assemblyman Mike Gatto (D-Los Angeles), becomes law. California would become one of an increasing number of states permitting small-scale food sales from private kitchens.
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Lest you freak out about the idea of rancid butter being sold across the counter of your favorite store, fear not. Cottage foods, by definition in the law, cannot be potentially hazardous food (PHF); aspiring cheesemakers and butchers are not covered by AB1616. It's meant to include foods that are safely held and eaten at room temperature.
Cottage food makers would still be subject to some amount of regulation, especially regarding labeling; most states require an easily-visible notification that the food was cooked in a non-commercial kitchen. They'd be required to register, and kitchens could be inspected if consumer complaints warrant it, but inspection could not be a prerequisite for registration.
The bill is set to be heard in committee on March 10; if you agree with its premise--and, as faithful Forkers, you very well should--contact your legislators in Sacramento.