Want to make and sell cartoon character pinatas for a party supply store, is this legal?

Usually the rights to selling cartoon characters are reserved by companies like Disney and Warner Brothers.  You need to be very careful as to what you are doing here.  i suggest that you contact a lawyer that is involved in intellectual property and discuss your business idea and what it is you want to do.  you may be restricted from creating what appear to be cartoon characters that are owned (i.e. the rights to market) by these companies mentioned above.  if you begin selling the cartoon pinatas you may be subject to a lawsuit and have to turn over all the profits that you made.  most lawyers will meet with you the first time for free and i suggest you do that before spending money on labor costs, etc.