MoCRA Small Business Exemption: What Handmade Cosmetics Makers Actually Need to Know
The MoCRA small business exemption, established under the Modernization of Cosmetics Regulation Act of 2022, is a statutory provision that waives FDA facility registration and product listing requirements for cosmetics makers with average gross sales of $1 million or less over the prior three-year period. For small-batch makers, the most important question is straightforward: does the small business exemption apply to me, and if so, what does it actually cover?
The answer is more specific than most guides let on. Qualifying as a small business waives certain MoCRA obligations, but several requirements apply to every cosmetics seller regardless of size or revenue. Assuming full exemption without understanding the details is where makers get into trouble.
This post breaks down the exact thresholds, maps out what is waived versus what still applies, and explains how to document your status if you ever need to demonstrate it. MoCRA itself introduced the first major overhaul of US cosmetics law in over 80 years, which is part of why its new requirements caught so many small makers off guard.
What MoCRA Actually Requires (The Full Picture)
Before looking at exemptions, it helps to understand what MoCRA requires in the first place. The law introduced several new obligations for cosmetics facilities and the companies that own or operate them:
Facility registration with the FDA, renewed every two years
Product listing for each cosmetic product manufactured or processed at a registered facility
Adverse event reporting for serious health events linked to a product
Safety substantiation — maintaining records that demonstrate your products are safe
Labeling compliance, including ingredient declaration and contact information
Records maintenance for manufacturing processes and safety data
The small business exemption directly affects facility registration and product listing. It does not eliminate all obligations across the board.
The Exact Thresholds That Define a Small Business Under MoCRA
MoCRA defines a small business as a company with average gross annual sales of $1 million or less in the previous three-year period, calculated across all cosmetics products sold in the United States.
That is the primary threshold. There is no employee count cutoff in the statutory definition for this exemption. Revenue is the qualifying factor.
A few details worth knowing:
The $1 million figure applies to gross sales, not profit. If you grossed $1.1 million but your costs were high, you do not qualify.
The three-year average smooths out unusual years. A maker who had one strong year may still qualify if the average stays at or below the threshold.
The threshold applies to cosmetics sales specifically, not total business revenue if you sell non-cosmetic products as well.
Most handmade soap, skincare, and body care makers fall well under this threshold. But confirming your own numbers before assuming you qualify is worth the ten minutes it takes.
If your business has fewer than three years of cosmetics sales history, the statute does not specify how to calculate the qualifying average, and the FDA has not issued explicit guidance on this point as of the date of publication. Consult a regulatory attorney or contact the FDA directly before deciding whether to register.
A conservative interim approach used by many new makers is to annualize available data — for example, if you have 18 months of cosmetics sales, divide total revenue by 18 and multiply by 12 — and register if that annualized figure exceeds $1 million. This is not an FDA-endorsed method, but it is a defensible posture while formal guidance is pending. Document your reasoning in writing. This approach should be confirmed with a regulatory attorney before you rely on it.
Not sure whether your sales revenue actually puts you under the MoCRA threshold?
The $1 million cutoff is calculated on gross sales across three years, and the details matter. Answer a few quick questions to find out exactly where you stand on FDA registration, product listing, and other requirements.
Check your compliance →When the Revenue Threshold Is Not Enough: Product-Based Carve-Outs to the Exemption
The small business exemption is revenue-based, but revenue alone does not guarantee you qualify. The statute includes carve-outs based on product type that remove the exemption entirely for certain categories, regardless of how much or how little a business earns.
According to the FDA's MoCRA small business exemption guidance, the exemption does not apply to any business that manufactures or processes cosmetics that:
Regularly come into contact with the mucous membrane of the eye under conditions of use that are customary or usual
Are injected
Are intended for internal use
Are intended to alter appearance for more than 24 hours under conditions of use that are customary or usual and are not removable by the consumer through normal washing or use of an ordinary cosmetic remover
These carve-outs reflect the FDA's determination that products in these categories carry elevated safety risk that justifies full registration and listing requirements regardless of business size.
In practical terms, makers of lash tints, brow tints, semi-permanent makeup, certain hair dyes, and similar long-wear or color-altering products should not assume the exemption applies simply because they fall under the $1 million revenue threshold. The fourth carve-out in particular is broad enough to capture products that alter appearance for more than 24 hours and cannot be removed with water or a standard cosmetic remover. Whether a specific product falls within that definition depends on its formulation, its marketed use, and how customers actually use it.
If you make any of the product types described above, confirm with a regulatory attorney whether these carve-outs apply to your specific situation before deciding not to register. The statutory language is the controlling standard, and the FDA's published guidance is the best starting point for understanding how the agency interprets it. Verify the exact statutory language at the source before publishing any compliance decisions.
What the MoCRA Small Business Exemption Waives and What It Does Not
This is the section most guides skip over. The small business exemption is not a blanket pass on MoCRA compliance. It waives specific obligations while leaving others fully intact.
Waived for Small Businesses | Still Required for All Sellers |
|---|---|
Facility registration | Adverse event reporting |
Product listing | Safety substantiation |
Labeling requirements (INCI, net quantity, contact info) | |
Prohibited and restricted ingredient compliance | |
Records access during FDA inspection |
Qualifying small businesses are exempt from the following obligations:
Facility registration — You are not required to register your production space with the FDA as a cosmetics facility.
Product listing — You are not required to submit product listings to the FDA's Voluntary Cosmetic Registration Program or the new MoCRA listing database.
These are significant obligations in terms of administrative effort and ongoing renewal requirements. Being exempt from both is meaningful relief for makers operating at small scale.
The following requirements still apply regardless of size:
Adverse event reporting — If a consumer experiences a serious adverse health event linked to your product, you are required to report it to the FDA within 15 business days (21 U.S.C. § 364i). This obligation has no small business carve-out. Note: verify the current codified section against the FD&C Act as amended by MoCRA before relying on this citation, as section numbering may differ in the official codification.
Safety Substantiation Records — Your products must be safe for their intended use. You are expected to maintain documentation supporting that claim. The FDA can request this during an inspection or investigation.
Labeling requirements — All cosmetics must carry proper labeling: ingredient list in INCI format, net quantity, directions for safe use where relevant, and a way to contact the responsible person. Size does not affect this.
Prohibited and restricted ingredients — MoCRA gave the FDA new authority to prohibit or restrict cosmetic ingredients. These restrictions apply universally.
Records access — If the FDA initiates an inspection or safety investigation, you may be required to provide records. Maintaining organized documentation is relevant even for exempt businesses. See the FDA's MoCRA statutory overview for the inspection authority provisions; the original House bill text at congress.gov/bill/117th-congress/house-bill/4445/text should be cross-referenced against the currently codified FD&C Act sections to confirm current citation accuracy.
The MoCRA Exemption Misconception That Creates Real Risk
The most common mistake makers make with the small business exemption is treating it as a general pass rather than a specific, limited waiver.
The logic usually goes: I am small, so MoCRA probably does not apply to me. This leads to makers skipping safety documentation, ignoring labeling requirements, or assuming they have no reporting obligations. None of that is accurate.
Consider a hypothetical example: a soap maker who crossed $800,000 in annual gross sales assumes she is exempt from everything, skips building a safety file, and does not report a customer's allergic reaction requiring an ER visit. She was exempt from registration — but not from adverse event reporting or safety substantiation. Both gaps are now enforcement risks.
The risks are real. The FDA has broad enforcement authority under MoCRA, including mandatory recall authority for cosmetics it determines pose a safety risk. A business does not need to be large for that authority to apply.
Adverse event reporting is the most overlooked universal obligation. If a customer contacts you about a serious health reaction, such as an allergic response requiring medical attention, you have a 15-business-day reporting window. Assuming you are exempt from this because you are small is incorrect and potentially costly.
The practical takeaway: know exactly which obligations the exemption covers and maintain compliance on everything else as normal.
How to Document Your Small Business Status
The FDA does not require you to file anything to claim the small business exemption. You simply do not register or list products if you qualify. But if you are ever audited, inspected, or questioned, you want to be able to demonstrate your qualification quickly.
Reasonable documentation includes:
Annual revenue records for each of the past three years broken out by cosmetics sales. Your accounting software, Etsy payment reports, or Shopify sales summaries work for this.
A simple written summary of your three-year average calculation, dated and kept with your business records.
Channel-level sales data if you sell across multiple platforms, consolidated into a single total for each year.
This does not need to be elaborate. A one-page document showing your annual cosmetics sales for the past three years, a calculated average, and the conclusion that the average falls at or below $1 million is sufficient for most purposes.
If your sales are close to the threshold, recalculate annually. A maker who qualifies today may not qualify in two years, and facility registration has a defined timeline once a business crosses the threshold.
For a broader look at what MoCRA requires across your entire operation, the MoCRA compliance checklist for handmade skincare sellers covers the full scope in one place.
The FDA's official MoCRA resources include the full statutory text and ongoing guidance updates as the agency issues them. It is worth bookmarking, since implementation guidance continues to be released.
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Key Takeaways
The MoCRA small business exemption applies to makers with average gross cosmetics sales of $1 million or less over the prior three-year period.
The exemption does not apply regardless of revenue to businesses that make products regularly contacting the eye's mucous membrane, injected products, products intended for internal use, or products that alter appearance for more than 24 hours and are not removable by the consumer with water or an ordinary cosmetic remover.
The MoCRA small business exemption waives facility registration and product listing only — it does not waive adverse event reporting, labeling requirements, safety substantiation, or prohibited ingredient rules.
Adverse event reporting applies to every cosmetics seller regardless of size. A serious health event linked to your product must be reported to the FDA within 15 business days.
You do not file paperwork to claim the exemption, but you should keep three years of revenue records to support your status if needed.
Assuming you are fully exempt without checking your numbers, understanding the product-type carve-outs, or confirming which obligations remain is the most common and avoidable mistake makers make with this law.
MoCRA changed the regulatory landscape for cosmetics sellers at every scale. The small business exemption offers meaningful relief on the most administratively heavy requirements. Understanding exactly where it applies, and where it does not, is what keeps your business on solid ground.
If you are working to keep your ingredient and product records organized as part of your compliance effort, recipe and formula management software built for handmade cosmetics can make that documentation significantly easier to maintain.