Trading vs Selling

[user 12568]

OK... I've been at odds with the local by-law office since I began considering selling my soaps. Where I live (in Canada), the local by-laws forbid the operation of any manufacturing business within a residential area. As soap making is considered manufacturing, I'm basically stopped as I cannot afford to lease another location for production.

I am by no means producing a vast quantity of soap, but typically have a few hundred on hand -- for friends, family, co-workers, etc. Some do choose to purchase from me, others prefer to trade items (e.g., raw organic honey) for my soaps, and others I just give away as thanks.

This has got me thinking that there may be other legitimate avenues which I could navigate in order to benefit from my soaps. Namely trading...

Has anyone here ever looked into the nuances of trading vs selling? Do by-laws and vending permits still hold sway over this? If not, I may just try to harken back to older times and attempt to trade / barter my soaps for various riches. (1 castile = 2 goats and a chicken. )

Cheers!

 

[Lindy]

The by-laws are going to be in effect whether you are trading or selling, you are still producing it in your home. Can I ask where you live? I too am in Canada and have not run across that by-law before. Perhaps you could explain that it is simply a hobby that you sell to gain back some of the costs involved in this hobby?

 

[user 12568]

Hi Lindy; thanks for your reply. I'm in Kitchener, Ontario. Apparently, different municipalities have different by-laws which govern them, and I just happen to live in one that's very restrictive. However, I'm hoping the by-laws pertaining to manufacturing in a residential area only effect registered businesses, and not simple home hobbyists. I'm just looking for a legit way to off-load some excess soaps without getting into legal issues.

I did touch base with several other soapers who live and sell in my city, and none of them have licenses or follow proper labelling requirements. Apparently, they too have found the local laws difficult to work within.

As far as I know, anyone in Canada selling products from a hobby is considered to be running an unregistered business and can face heavy fines. That's why I'm investigating trading instead of selling. For example, if I give you 2 soaps for 1 jar of raw honey from your farm, is this a business transaction with taxable income and permits required, or is it a simple arrangement between two people????

If simple trading is considered legit, then I'd think that other requirements such as business licenses, vending permits, sales tax, registering the soaps with Health Canada, and proper labelling are also no longer required (although I do believe in proper labelling). This would leave me with only the "no manufacturing in a residential area" and insurance to deal with.

I know this all sounds very dubious. However, I can assure you that I'm not trying to find a way to work outside the laws, but rather a way to work within them.

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I am reminded of a news story several years back, where a gentleman traded a red paper clip for another item of greater value. He kept trading item after item, and eventually (after several years) was able to successfully trade his most recent item for a house. It cost the man nothing but time, and good trades. Lucky fellow!!!

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Cheers!

 

[DeeAnna]

Some municipal codes ban manufacturing or other businesses from being located in residential areas. It's not just Canada -- there are US towns and cities that do likewise. My local town is having to consider a zoning variance to allow a church in a residential area of town. It adds congestion and traffic that is not necessarily appropriate in a residential neighborhood.

 

[pamielynn]

Most of these bylaws are in place because residents don't want raw meat processing and such in their neighborhoods. But, we also get caught in it. And the storage of lye and essential oils CAN pose a fire hazard.

We have "code enforcement officers" here - do you have something like this? If you do, trying to stay under the wire can result in a hefty fine to you

 

[The Efficacious Gentleman]

I see your point - basically, there is no difference between cooking a meal for a family at home and cooking food to sell, other than the fact that you're selling it. But what you need to do to be able to cook food to sell in your home would be mad, just like the soaping - while making soap for your own use is technically the same, it is not likely to be included in the code.

The trouble comes with how you then arrange the transaction, the swap of soap for honey. You might consider starting a place where local producers who want to make things but also can't sell them can come together to trade.

For example, you post up your soaps and some things that you are interested in, like honey and beef jerky, how much soap someone gets for x ounces of honey or y ounces of beef jerky. People can also offer you other things, like x number of knitted animals in exchange for soap. The trade is between two private people. Fro context, if you come and help me chop down a tree in my back garden and I give you some beer, I don't need a license for that.

 

[user 12568]

Thanks for the replies everyone. I guess what I'm saying is that I don't want to be considered a business at all, but rather a hobbyist that other people can trade with.

DeeAnna: I understand why by-laws like this exist, but I would certainly not be a nuisance or cause roadway congestion.

pamielynn: Can people in a residential neighbourhood still process raw meats (e.g., making sausages, smoked meats, and/or dry cured meats, etc) for their own use? Is this still considered manufacturing, or just simple cooking / preserving. I don't think the city can stop me from producing soaps in my own home, for my own use, as a hobby. I only purchase as much lye as comes in a large container from the plumbing section of the local hardware store, and store it quite safely in my cellar.

Effy: Yes, that's exactly my thoughts as well. I am considering whether it would be legal for me to post an ad on kijiji offering my soaps for trade and then see what interest there is. (Mmmmm... beef jerky sounds sooooooo good right now!) My neighbour also makes jams, and I thought a trade with her might be a good idea!

I dunno... maybe it's not feasible in the long run, but I want to keep making soaps while being able to offload any excess that may be produced along the way. This is just another avenue I wanted to explore to see if it might work... maybe it won't!

Being legal sucks!

 

[green soap]

I think trades should be a private deal between individuals, and with no government interference - but apparently the IRS thinks differently. Trying to quantify or regulate trades and keep track of all - If one traded soap for carrots, then goat milk, then homebrew, then compost....what a nightmare to keep track of! it takes some of the joy out of it for sure.

I realize you are in Canada, but perhaps your taxation office is also interested in how many soaps you traded for honey and jerky. So if you want to do this, just keep it quiet. Much better strategy to introduce yourself (and samples of your soaps) to the person with excess fruit-honey-jerky-compost- fill in the blank, than putting an ad in the newspaper.

As far as how to figure out what is worth what, you will need to put a dollar value to your soaps. Just pretend your local bureaucracy was not interfering and you were to sell them at a market or craft fair. Then the person with the goat milk (as an example) sets a theoretical price for the jug of milk, what would he sell it for at a farmer's market? This is how you figure 1 soap for 3 bunches of fresh garlic, 2 soaps for a quart of yogurt, or honey. All examples. Trading soap is really wonderful, I wish you luck.

 

[pamielynn]

Here in the US - once you make more than $600 - in cash or trade - you have to report it as income. Do that more than once and they'll send a tax man to your house to see what you're up to. You can decide not to report it, but the Internal Revenue Service just LOVES to go after the little guy and it is NOT worth taking the risk. Under-reporting income is a big no-no.

As for my example, sure I can process raw meat in my house for myself - even for a big holiday event. Start having people show up at your door for some or have the smell of raw meat escaping the boundry of your property and your neighbors will call the county on you.

 

[user 12568]

Hmmmmm... I wonder how this would differ from casual eBay or kijiji sales, or even swap meets. I'm pretty certain nobody claims that income at tax time, and any trade benefits from my soaps would likely be even less significant than those three combined.

green soap: I think I'll take your advice and not post anything in local papers or websites and, instead, just continue to make casual trades on the side. :shh: It might be a slower start, but I suppose advertising myself would make me seem more "business" like; a perception which I am trying hard to distance myself from.

Seems like nothing is easy these days... Argh!!!!!!

 

[Lindy]

Goteeguy - in Canada if you are offering soap to the public whether as trade, sale or samples you must register with health Canada in that you must register your recipes through the Cosmetic Notifications Portal (http://www.hc-sc.gc.ca/cps-spc/cosmet-person/notification-declaration/index-eng.php) as well as you must following the regulations for labeling which includes bi-lingual and INCI for ingredients.

Health Canada doesn't care what municipality you live in and are not in the business of knowing the regulations for each town, they leave that to you, so no fear of them reporting you.

 

[user 12568]

Thanks, Lindy! That's good to know. I had intended on bi-lingual labelling with INCI anyway, so that's no problem. And it's easy enough to register my recipes (all 3 of my standard ones). So I may have a hope yet...

As I mentioned, I'm just testing the waters right now and may decide not to move forward in this regard after all. We'll see...

 

[scottief]

HI all,

Im new to soap making and just finished my 2nd batch. I am as well in Canada, Ontario to be exact. I have been researching soaping as a business and there seems to be a lot to know. I was wondering if anyone doing it as a business can clarify some things for me.

1. Once I have filled in the CNF form and send it in, am I able to sell the product right away or do they have approve it?

2. Do we need a complete separate area, other than our kitchen to make soap to sell it? Or can we make it in our kitchen? I know I read somewhere it has to be clean.

3. Do we need a health inspector to come and deem us safe and clean to Sell as a business?

4. What other things will I need if we do this as a business? Such as insurance,business number, tax info?

5. What all needs to be on the Label? I know your business and ingredients. Anything else?

If any of this has been answered before I would love to be pointed in the right direction. I have been reading a lot for the last week. I am currently going though the health Canada site to see how to label and that sort of stuff.

I am already addicted to making soap with only our 2nd batch. Before I go crazy and make to much, I need to figure out all the rules as I have one small store I know I can put it in. Thanks for any help.

 

[The Efficacious Gentleman]

Here is a good one on being ready to sell or not - http://www.soapmakingforum.com/showthread.php?t=16002

Here is a link to some interesting looking workshops on the subject - http://www.soapmakingforum.com/showthread.php?t=34139&highlight=canada+selling+laws

Finally, here is a thread on selling in Cananananananada in general - http://www.soapmakingforum.com/showthread.php?t=8299&highlight=canada+selling+laws

 

[Lindy]

1. Once I have filled in the CNF form and send it in, am I able to sell the product right away or do they have approve it? You are able to sell it right away. You now do your CNF's on-line through a portal.

2. Do we need a complete separate area, other than our kitchen to make soap to sell it? Or can we make it in our kitchen? I know I read somewhere it has to be clean. You can use your kitchen you just have to make sure the work area is clean and sanitized.

3. Do we need a health inspector to come and deem us safe and clean to Sell as a business? No that is only for food production.

4. What other things will I need if we do this as a business? Such as insurance,business number, tax info? I recommend that you register your business as a sole proprietorship and get insurance. You also need to check your town/city/municipality for business licensing, most require it.

5. What all needs to be on the Label? I know your business and ingredients. Anything else? You need to use INCI for your ingredients and you are required to put your address on your labels. I got a PO Box for that exact purpose.

 

[Lin]

I personally disagree with the government being involved in something like a personal trade, or selling personal possessions on eBay. I say personal to distinguish between those using it as a business. For example, a few years ago I was downsizing and selling a bunch of stuff on eBay. I moved from my own (very small) house to just renting rooms and was out of work due to health. I was trying to get money back from my possessions, and cover things like gas to Dr's appointments and co-pays. I was also on Medicaid and food stamps. So they required me to keep incredibly detailed records of everything sold and considered it income. I'm selling items I purchased long ago and for less than the original purchase price. I paid taxes on my income from my job before I was able to purchase these items in the first place, and now you consider it income?! That's double taxation imo. Same thing with when they consider school loans (loans, not grants) as income. This money is not income, it has to be paid back with interest so I do not understand how the government can consider it income. But they do when you're on Medicaid. I won't go into it, but it's another hurdle that actually prevents people with disabilities from becoming self sufficient again.

 

[Lindy]

Lin it doesn't cost us anything to register our formulas with the Government. The US is the only country that I am aware of that doesn't require this. It's not a big deal really and is a legal requirement here.

 

[Lin]

Sorry, my post had nothing to do with registering formulas, I was responding to the first page of discussion on if trading is considered income and is/should be regulated by the government. I didn't realize it was unclear or I'd said anything that sounded like it was referring to registering recipes. That's something I know nothing about.

 

[scottief]

Thanks Lindy,

Thanks for responding. I already have another business, so getting a business license is pretty easy. Do you need a permit to make soap or just the business licence. Im going to try and find out in my own town what the rules are on tuesday.

My wife and I just made our 3rd loaf today. How long would you recommend we test our product before we actually go about selling it? I know one small store that I could sell it in right away, but I want to make sure that our product is good and will last.

One question about the CNF. If we happen to fill it out wrong, will they send it back and make you redo it?

Once again, thank you so much for responding. I have been reading and researching non stop for the last 2 weeks.

 

[Lindy]

Lin I'm sorry I thought you were referring to our regs.

Scottie I recommend that you wait at least 12 months to see what your soap will do in that time. Also you need to make a lot of batches of soap to truly perfect this craft. My soaps even from when I did start selling to today are so far different you wouldn't know it was the same person. My first bars of soap are an embarrassment.

You don't usually need a special permit to make soap in Canada but your municipality may have other requirements due to the use of lye.