(a) “Cottage food operation” means an enterprise that has no more than the amount in gross annual sales that is specified in this subdivision, is operated by a cottage food operator, and has no more than one full-time equivalent cottage food employee, not including a family member or household member of the cottage food operator, within the registered or permitted area of a private home where the cottage food operator resides and where cottage food products are prepared or packaged for direct, indirect, or direct and indirect sale to consumers pursuant to this part. A “Class A” cottage food operation shall not have more than seventy-five thousand dollars ($75,000) in verifiable gross annual sales. A “Class B” cottage food operation shall not have more than one hundred fifty thousand dollars ($150,000) in verifiable gross annual sales. The gross annual sales for a “Class A” or “Class B” cottage food operation shall be annually adjusted for inflation based on the California Consumer Price Index. A cottage food operation includes both of the following:

1. (1) A “Class A” cottage food operation, which is a cottage food operation that may engage only in direct sales of cottage food products from the cottage food operation or other direct sales venues described in paragraph (4) of subdivision (b).
2. (2) A “Class B” cottage food operation, which is a cottage food operation that may engage in both direct sales and indirect sales of cottage food products from the cottage food operation, from direct sales venues described in paragraph (4) of subdivision (b), from offsite events, or from a third-party retail food facility described in paragraph (5) of subdivision (b).

(b) For purposes of this section, the following definitions shall apply:

1. (1) “Cottage food employee” means an individual, paid or volunteer, who is involved in the preparation, packaging, handling, and storage of a cottage food product, or otherwise works for the cottage food operation. An employee does not include an immediate family member or household member of the cottage food operator, nor an individual who delivers a cottage food product.
2. (2) “Cottage food operator” means an individual who operates a cottage food operation in their private home and is the owner of the cottage food operation.
3. (3) “Cottage food products” means nonpotentially hazardous foods, including foods that are described in Section 114365.5 and that are prepared for sale in the kitchen of a cottage food operation.
4. (4) “Direct sale” means a transaction within the state between a cottage food operation and a consumer, in which the consumer purchases the cottage food product directly from the cottage food operation. Direct sales include, but are not limited to, transactions at holiday bazaars or other temporary events, such as bake sales or food swaps, transactions at farm stands, certified farmers’ markets, or through community-supported agriculture subscriptions, transactions occurring in person in the cottage food operation, and transactions made via the phone, internet, or any other digital method. A direct sale may be fulfilled in person, via mail delivery, or using any other third-party delivery service.
5. (5) “Indirect sale” means a transaction within the state between a cottage food operation, a third-party retailer, and a consumer, in which the consumer purchases cottage food products made by the cottage food operation from a third-party retailer that holds a valid permit issued pursuant to Section 114381. Indirect sales include, but are not limited to, sales made to retail shops or to retail food facilities where food may be immediately consumed on the premises. An indirect sale may be fulfilled in person, via mail delivery, or using any other third-party delivery service.
6. (6) “Private home” means a dwelling, including an apartment or other leased space, where individuals reside.
7. (7) “Registered or permitted area” means the portion of a private home that contains the private home’s kitchen used for the preparation, packaging, storage, or handling of cottage food products and related ingredients or equipment, or both, and attached rooms within the home that are used exclusively for storage.