Is an FFL required for buying complete rifle's and then parting them out?

[G29SF]

The firearm you are buying will have to go through an FFL (either your own or that of another dealer) with a background check, unless it's an antique.





What you do with the PARTS (everything except the receiver) does not require an FFL because, regardless of your selling them for profit ... the PARTS are NOT FIREARMS.





If you're going to just store the receivers and not sell them ... again, you are NOT dealing in firearms. If you do sell a receiver ... that might get you close to ugly because by your own admission, "you are buying and selling with the intent to make a profit".





Just my 2 cents worth.

^^This...



I don't know how else to say it... If the PART that is considered the FIREARM by the ATF is kept, you are not selling firearms.



This is not skirting the law. The ATF doesn't give a flip about the parts... only the "firearm". In the case of an AR, that is the STRIPPED LOWER RECEIVER. All other parts are just parts. All firearms have a part that is considered the firearm.



As long as you can produce the "firearms" or show you disposed of them (sell, etc.) in a legal fashion, you are good.

 

[mgmorden]

^^This...

I don't know how else to say it... If the PART that is considered the FIREARM by the ATF is kept, you are not selling firearms.

This is not skirting the law. The ATF doesn't give a flip about the parts... only the "firearm". In the case of an AR, that is the STRIPPED LOWER RECEIVER. All other parts are just parts. All firearms have a part that is considered the firearm.

As long as you can produce the "firearms" or show you disposed of them (sell, etc.) in a legal fashion, you are good.

Its not always that cut and dry. For example, as a C&R holder, I can't have a sporterized rifle shipped to my door. The "the receiver is the gun" rule doesn't apply in those cases - even though the receiver might be from a 1917 Enfield the rest of the parts have been swapped out and therefore ATF considers it a new gun and therefore not C&R eligible.

Same with buying JUST a receiver with a C&R. Without the rest of the parts they don't consider it eligible since it's not a complete rifle.

Now I realize that the OP wasn't asking a C&R question, but my point is that it isn't always as cut and dry as saying "the receiver is the gun and that's all that matters".

I'd still want to check with ATF before trying this - at a bare minimum a lawyer. Plus an FFL is only $300 per 3 years, and would provide a whole lot of peace of mind IMHO. If your revenue stream can't support $300 spread over 3 years then your business isn't going to make it anyways.

 

[Bubbles]

The rifles in question are Surplus.

Does surplus = DRMO?

 

[ugaarguy]

This is such a gray area that I'd write the ATF for clarification. Per the FAQs on the ATF web page:

http://www.atf.gov/content/Firearms/firearms-industry/FAQ-firearms

Manufacturers


May a person engage in gunsmithing under a dealer’s license (type 01), or do gunsmiths need to be licensed as "manufacturers" of firearms?



Generally, a person engaged in gunsmithing requires only a dealer’s license (type 01). There are circumstances in which a gunsmith might require a manufacturing license. Generally, a person should obtain a license as a manufacturer of firearms if the person is: 1. performing operations which create firearms or alter firearms (in the case of alterations, the work is not being performed at the request of customers, rather the person who is altering the firearms is purchasing them, making the changes, and then reselling them), 2. is performing the operations as a regular course of business or trade, and 3. is performing the operations for the purpose of sale or distribution of the firearms.

Below are examples of operations performed on firearms and guidance as to whether or not such operations would be considered manufacturing under the Gun Control Act (GCA). These examples do not address the question of whether the operations are considered manufacturing for purposes of determining excise tax. Any questions concerning the payment of excise tax should be directed to the Alcohol and Tobacco Tax and Trade Bureau, U.S. Department of the Treasury.

1.A company produces a quantity of firearm frames or receivers for sale to customers who will assemble firearms.

The company is engaged in the business of manufacturing firearms and should be licensed as a manufacturer of firearms.


2.A company produces frames or receivers for another company that assembles and sells the firearms.

Both companies are engaged in the business of manufacturing firearms and each should be licensed as a manufacturer of firearms.


3.A company provides frames to a subcontractor company that performs machining operations on the frames and returns the frames to the original company which assembles and sells the completed firearms.

Both companies are engaged in the business of manufacturing firearms and should be licensed as manufacturers of firearms.


4.A company produces barrels for firearms and sells the barrels to another company that assembles and sells complete firearms.

Because barrels are not firearms, the company that manufactures the barrels is not a manufacturer of firearms. The company that assembles and sells the firearms should be licensed as a manufacturer of firearms.


5.A company receives firearm frames from individual customers, attaches stocks and barrels and returns the firearms to the customers for the customers' personal use.

The operations performed on the firearms were not for the purpose of sale or distribution. The company should be licensed as a dealer or gunsmith, not as a manufacturer of firearms.


6.A company acquires one receiver, assembles one firearm, and sells the firearm.

The company is not manufacturing firearms as a regular course of trade or business and is not engaged in the business of manufacturing firearms. This company does not need to be licensed as a manufacturer.


7.An individual acquires frames or receivers and assembles firearms for his personal use, not for sale or distribution.

The individual is not manufacturing firearms for sale or distribution and is not required to be a licensed manufacturer.


8.A gunsmith regularly buys military type firearms, Mausers etc., and “sporterizes†them for resale.

The gunsmith is in the business of manufacturing firearms and should be licensed as a manufacturer.


9.A gunsmith buys semiautomatic pistols or revolvers and modifies the slides to accept new Style f sights. The sights are not usually sold with these firearms and do not attach to the existing mounting openings.

The gunsmith offers these firearms for sale. This would be considered the manufacturing of firearms and the gunsmith should be licensed as a manufacturer.


10.A gunsmith buys government model pistols and installs “drop-in†precision trigger parts or other “drop-in parts†for the purpose of resale.

This would be considered the manufacturing of firearms, as the gunsmith is purchasing the firearms, modifying the firearms and selling them. The gunsmith should be licensed as a manufacturer.


11.A gunsmith buys surplus military rifles, bends the bolts to accept a scope, and then drills the receivers for a scope base. The gunsmith offers these firearms for sale.

This would be considered the manufacturing of firearms and the gunsmith should be licensed as a manufacturer.


12.A gunsmith buys surplus military rifles or pistols and removes the stocks, adds new stocks or pistol grips, cleans the firearms, then sends the firearms to a separate contractor for bluing. These firearms are then sold to the public.

This would be considered manufacturing of firearms and the gunsmith should be licensed as a manufacturer.


13.A company purchases surplus firearms, cleans the firearms then offers them for sale to the public.

The company does not need to be licensed as a manufacturer.

 

[G29SF]

No gray area. If you do not sell THE PART that is considered the firearm by the ATF, you are fine.



All you have to do is figure out which part is considered the firearm, on a gun by gun basis.



If you don't sell a firearm (i.e., the part that is classified as the firearm), you are not selling firearms. This is why you can buy firearm parts on the Internet without going through an FFL... because those parts are not a/the firearm.



Again, you will have to figure out which part is considered the firearm. For an AR, that is the stripped lower receiver. Other guns will have a different part that is classified as the firearm. You have to figure that out.



Since you would not be selling the part that is considered the firearm, you are not engaged in the business of selling firearms. You are engaged in the business of selling parts that are not firearms.



No gray area. No loophole. The ATF doesn't care.



C&R, gunsmithing, etc. all have no relevance to the discussion.

 

[dogtown tom]

G29SF .....No gray area. No loophole. The ATF doesn't care....

Wrong. Flat out, wholly and completely wrong.....so wrong I'll tell you that ATF DOES care.

In November 2010, I had a customer buy 100 AR lower receivers "as an investment". At my compliance inspection in September 2011 the IOI took notice of that transfer and requested a copy of the buyers 4473.

ATF then sent my buyer a cease and desist letter......to cease and desist from engaging in the business of dealing in firearms without a license. It didn't matter one bit that my buyer had not sold a single lower receiver yet. It would seem that ATF clearly views such purchases as intent to engage in dealing in firearms.

Now, the OP may get lucky and ATF may not notice his multiple purchases when they inspect his dealers bound book. BUT IF THEY DO.........the OP better have his ducks in a row and an attorney on retainer.

 

[wildbilll]

There is no law that limits your number of gun purchases. If BATFE sends a letter, I want to see it. Because there is no statute to prevent it.
If I want 1,000 firearms it is my money and my business what I want them for.
Having an FFL means you are subject to rules that do not apply to individuals.
1983 comes to my mind if they tried to act outside the law.

 

[G29SF]

There is no law that limits your number of gun purchases. If BATFE sends a letter, I want to see it. Because there is no statute to prevent it.


If I want 1,000 firearms it is my money and my business what I want them for.


Having an FFL means you are subject to rules that do not apply to individuals.


1983 comes to my mind if they tried to act outside the law.

Yes.



And if the ATF knocks on the OP's door, he will have the firearms. So no laws broken and everyone is happy.

 

[newfalguy101]

Why not just get an 01 FFL and be done with it??

The savings in transfers alone will likely pay for the FFL, and unless there are State or Local rules saying otherwise, you can run the business out of your home.

Having an FFL will also allow you to sell the stripped receivers instead of sitting on them.

Your intent is to run a business, just get the FFL and be done with it............sit of the receivers forever or sell them, it will be your decision either way.

Oh, and by the way, an 01 FFL is only $200 for the first 3 years with a $90 renewal...... and you can absolutely do what you have outlined with an 01 FFL.

 

[BSA1]

I am still having trouble wrapping my arms around the idea that the O.P. Is going to buy multiple firearms, strip and resale the parts while keeping the reciever/frame which in itself is worth money when resold.

So the O.P. acquires multiple receivers/frames how does he legally dispose of them? If he sells even one reciever/frame (or even gives it away) does that change his status as he is now selling the "firearm."

Way too much risk for me.

And honestly thinks in today's post 2001 world the BATF won't notice?

Get a FFL.

 

[G29SF]

I kept to the facts of the original question. I didn't try to rationalize why or it it would be practical. The legality was the question.

 

[kitsapshooter]

If the firearm is a C&R gun get a C&R FFL 35 dollars for 3 years. Save a ton on X-fer costs for C&R firearms. As the receiver is the firearm, stripping them for parts is not a problem.

I don't think it will be a profitable business given the volume you would need to show profit.

 

[BSA1]

I don't think his activity is legal with a C&R. C&R is for collecting not buying guns and reselling the parts.

 

[G29SF]

I don't think his activity is legal with a C&R. C&R is for collecting not buying guns and reselling the parts.

His proposed activity would be legal because he would not be selling firearms.



Not sure why that is hard to understand.

 

[ugaarguy]

There is no law that limits your number of gun purchases. If BATFE sends a letter, I want to see it. Because there is no statute to prevent it.
If I want 1,000 firearms it is my money and my business what I want them for.
Having an FFL means you are subject to rules that do not apply to individuals.
1983 comes to my mind if they tried to act outside the law.

The ATF has been given very broad latitude to interpret the law and enforce it as they see fit.

And if the ATF knocks on the OP's door, he will have the firearms. So no laws broken and everyone is happy.

It's not so black and white. The ATF gets to interpret the law, and they will arrest you if you're breaking their interpretation of the law. You may win in court, but that will be after you've spent some time in jail and posted bond if you can afford it. And you'll be paying out the nose for a lawyer to defend you.

His proposed activity would be legal because he would not be selling firearms.

Not sure why that is hard to understand.

The ATF has decreed that if you perform certain modifications to firearms that another company manufactured you are still required to hold a manufacturer's license rather than the dealer's license that many gunsmiths legally operate under. It is therefor equally plausible to be concerned that one who buys complete firearms to part them out for profit (even if he retains the receivers) would be determined by the ATF to be a dealer in firearms. The ATF has also determined that some brokers in firearms, even though such broker never sends or receives a single firearm, are required to hold a dealers license. Their example was a broker who has all firearms drop shipped from the manufacturer to the dealers. Their interpretation is that the broker is still engaged in the sale of firearms for profit, and therefor must hold a FFL.

So, what part of the above examples is difficult to understand? The OP's business intent is a gray area in regard to how the ATF interprets the law. Write the ATF (or better yet spend a little now to have an attorney write them on your behalf) and ask.

 

[BSA1]

"I don't think his activity is legal with a C&R. C&R is for collecting not buying guns and reselling the parts."

His proposed activity would be legal because he would not be selling firearms.

Not sure why that is hard to understand.

It isn't if you would have read the BATF Regulations before posting your comment;

Q: Does a license as a collector of curio or relic firearms authorize the collector to engage in the business of dealing in curios or relics?

No. A collector’s license only enables the collector to transport, ship, receive, and acquire curios and relics in interstate or foreign commerce, and to make disposition of curios and relics in interstate or foreign commerce, to any other licensee, for the period stated on the license. A collector’s license does not authorize the collector to engage in a business required to be licensed under the Act. Therefore, if the acquisitions and dispositions of curios and relics by a collector brings the collector within the definition of a manufacturer, importer, or dealer, he shall qualify as such. A dealer’s license must be obtained to engage in the business of dealing in any firearms, including curios or relics.

http://www.atf.gov/firearms/faq/curios-relics.html#modifications

 

[Bubbles]

The ATF has decreed that if you perform certain modifications to firearms that another company manufactured you are still required to hold a manufacturer's license rather than the dealer's license that many gunsmiths legally operate under.

If it is done for the purpose of upgrading the firearm before it is resold. OP has stated that he is not selling the firearm.

It is therefor equally plausible to be concerned that one who buys complete firearms to part them out for profit (even if he retains the receivers) would be determined by the ATF to be a dealer in firearms.

I can guarantee that when the transfer FFL gets a compliance audit, the OP's buying activity would be noted, especially if the firearms are all of the same type. How far ATF chooses to go if the OP can produce the receivers or evidence of their destruction, e.g. video of them being torch-cut, is anyone's guess; mine is that they'll drop it.

The ATF has also determined that some brokers in firearms, even though such broker never sends or receives a single firearm, are required to hold a dealers license. Their example was a broker who has all firearms drop shipped from the manufacturer to the dealers. Their interpretation is that the broker is still engaged in the sale of firearms for profit, and therefor must hold a FFL.

A drop-shipper is a reseller, not a broker. While neither the drop-shipper nor the broker takes posession of the firearm, ATF based its ruling on the difference in how the money flows between the buyer, middleman, and licensee.

If a customer pays the reseller/drop-shipper, and the drop-shipper pays the distributor/manufacturer, then yes the drop-shipper needs an FFL.
If the broker finds the buyer, the buyer pays the licensee, and the licensee pays a commission to the broker, then no FFL is required for the broker. Typically whole collections, estates, high-end transferrable machine guns, etc. go through a broker. Another common example would be an auction house - ATF has held that in very specific circumstances no FFL is required.

OP has also not answered my question on the source of the surplus, as there are practical issues to consider as well as legal ones. Some sources will require buyers/bidders to have an FFL even though legally it may not be required if he directs the seller to ship to a transfer dealer.

 

[mgmorden]

If it is done for the purpose of upgrading the firearm before it is resold. OP has stated that he is not selling the firearm.

But he is buying the firearm and with the intent to resell parts of it.

If he was buying JUST parts - not a whole gun, and then reselling them, then I agree there's no problem whatsoever. However, if you're buying the whole gun with the INTENT to resell parts of it, then you're in a gray area. "The receiver is the gun" is a decent rule of thumb - it is not the be all and end all law of all things firearm related and certain situations get interpreted in varying ways.

No matter you confident you may try to sound in your disagreement its still a gray area and almost no one on these forums is qualified to give a DEFINITIVE answer.

As stated numerous times - if you want to be safe, write the ATF for confirmation.

 

[Carl N. Brown]

Seling gun parts as a business is a form of gunsmithing which is a regulated business. You must also consider state law.

There is no law that limits your number of gun purchases.

If you buy quanities of firearms beyond personal use, you can be flagged on the NICS database as a possible straw purchaser for others or as buying for resale: engaged in the business without a license. Your subsequent purchases could be monitored by ATF which could include anything from delays in the NICS to agents following you from the store to see if you drop your guns off at the address on the 4473, or even a stop-and-talk to query you about your purchases and disposition especially if the guns are handed off to a third party. And super especially in CA, AZ, NM and TX along the border with Mexico.*

Then there's state gun laws. Upper East Tennessee and Southwest Virginia had problems with cross-border gun trafficking; and dealers were told to report suspicios purchases. Pawnshops are required to send gun ser. num.s to police every working day for an NCIC check. In the mid 1990s I bought my wife a pistol and a shotgun on one 4473 which was OK, but if I had bought two pistols, the dealer told me the sale would be flagged. When my son got a decent job, he started checking guns off his wish list every payday; a second dealer warned him that more than three purchases a month, and he would find the next state BG check (TICS) delayed on suspicion of traffcking.

If I want 1,000 firearms it is my money and my business what I want them for.

If I advised people "If I want 1,000 packs of Sudafed at Walgren's it is my money and my business what I want them for" most folks would see me as stuck on stupid. Assume that purchase patterns that look like purchase for resale and not for personal use will raise suspicion and CYA accordingly.

-------------------------------------------------
*Under Project Gunrunner, federal licensed firearms dealers FFLs are instructed to identify suspected straw purchasers/unlicensed dealers. ATF is instructed to investigate and interdict. The widely publicized Operations Wide Receiver and Fast and Furious were exceptions to the general policy, but the Office of Inspector General review of OWR and OF&F gives clues on how FFLs and ATF are instructed to operate:

ATF agents to the DOJ OIG on OWR (2006-2007):

"One 20-year veteran of ATF’s Tucson office told us that before Operation Wide Receiver, all of ATF’s trafficking cases were very similar in their simplicity: ATF would get a tip from an FFL about a buyer who wanted a large number of firearms and information about when the transaction was scheduled to take place, and would set up surveillance and arrest the buyer when he headed southbound or at the border. Sometimes the initial buyer would cooperate with ATF, and agents would arrest the actual buyer when he showed up to take possession of the guns. If the guns went to a stash house, agents would speak with subjects at the stash house or conduct a search of the stash house. This agent told us that ATF interdicted guns as a matter of course and had been “content to make the little cases,” but that Wide Receiver represented a “different direction” from ATF’s typical practice."

Wide Receiver was an abberation from Project Gunrunner policy and affected only Tucson for a limited time, ending Oct 2007.

Phoenix gun dealers (FFLs) to DOJ OIG on OF&F (2009-2011):

"The owner of FFL2 said his concerns grew as months passed and the same individuals continued purchasing the same weapons. He told us that he knew these individuals were straw purchasers and could not understand why they were not being arrested. Like the owner of FFL1, the owner of FFL2 told us his previous experience with ATF was that after the store provided agents with the name of a suspicious purchaser, the individual was not seen again. The owner of FFL2 said he did not know what ATF did after it received the name, but that he would often get subpoenaed months later to testify at the trial of that suspicious purchaser."

OF&F was an abberation from Project Gunrunner policy and affected only Phoenix for a limited time, Nov 2009-Jan 2011.

 

[Frank Ettin]

Well this one is circling the drain fast -- a lot of legal advice bases on anecdotes and supposition.

First, the OP needs good, solid legal information because making a mistake could have highly undesirable and expensive consequences for him. So he needs his own, real lawyer -- not a bunch of anonymous folks in cyberspace.

Second, the OP needs a formal, written advisory opinion from ATF. A lawyer will know how to handle that.

But the OP doesn't need any more bickering here.