Selling Firearms and Possible FFL loophole?

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Boba Fett

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So I've been reading up on selling firearms. Specifically, I've been wanting to buy the parts for AR-15s, assemble them, keep a few for myself, and sell the rest.

The way I understand it is, you need an FFL if you are going to sell firearms.

I would need a business, pay all the fees, charge the taxes, etc. etc.


Now, I'm not looking to sell thousands AR-15s. And I would primarily want to sell a few at a time at gun shows or on sites like gunbroker.com.


So I'm wondering if there is a way to get around needing an FFL.

Could I do the following:
1) Buy the AR-15 parts (go through an FFL for, as I understand it, the lower)
2) Assemble the AR-15
3) Fire one or a few rounds through it (basically to make sure it works like the factory does)
4) And because it has been shot, sell it as a "used" firearm.


Basically at that point, I would just be an average Joe who bought a firearm, shot it, and decided to sell it. Would that get me out of needing to be an FFL?


I get the feeling it wont, but I have to ask.
 
I don't think the BATFE cares about new versus used firearms. I think what will get you pegged as a dealer is your intent as you buy and sell.

If you sell four a year, and the time between buying a selling is a span of months, they probably will never hassle you.

But if they see you with a table full of EBRs and moving them like hotcakes at a bunch of gun shows, perhapes you should expect some attention.

I have sold a bunch of guns. But I have always owned them for a while before selling, and I have always purchased them for a reason other than making money by selling them later.
 
And the reason you can't just go ahead and get an FFL so you can do this legally is ...?
Click to expand...

Don't misunderstand, I'm not suggesting or implying that anyone should do anything illegal. I was simply trying to see if there were a legal way to assemble and sell AR-15s without an FFL. I figured there wasn't, but it never hurts to ask.


As to why I am hesitant to get the FLL: As I understand it, and maybe I don't, so please correct me if I have the wrong info, but:

1) Have to have a business that is open to the public (i.e. not my garage)
2) Have to have an FFL license
3) Have to charge or pay the 11% tax

And that all adds up to more money than I have on hand at the moment or cuts into the potential profit to the point that it isn't worth it.


*shrug* Like I said, not promoting doing anything illegal. Just wanted to see if there were a legal way that would get around all those costs.
 
As said my reading of ATF a few yrs back was a big NO. There are some "grey" areas.

I.E. my(understanding which may be wrong/law may have changed) is you could buy a dozen lowers/ lower parts kits/upper parts and put them together. Never fire them. Decide you want something else and sell/trade them off. And be legal.

BUT your case you are buying them with the INTENT to sell them. You must have a FFL to do this.
I would think you could get together with a FFL. They could (I assume) buy the lowers and have you build them and sell them as complete guns. (With it clearly shown) that they are NOT factory guns. The ffl would know. Odds are liability concerns would make that not work.
 
1) Yes you can work out of your garage. If you want to be a home based gun dealer (manufacturer in this case) you would have to check zoning laws. If you are fine, you can be a home based FFL. There is no federal law that it has to be a retail storefront. You have to be in business, so do transfers a few times a year.

2)If you are selling only at gunshows, no. However, what you describe is manufacturing, not dealing, so you would need to be an 07 FFL and register with the State Dept under ITAR even if you don't export. The law is clear on this, you must register. Yearly fee for this registration is $2250.

3) There is only FET on more than 50 guns per year. If you make less than 50, no FET is due.

Do not try to mess with the ATF.

4) I build ARs for 100% markup. I make $500-600 profit per rifle I sell. You can make decent money but there are other costs that you probably don't think you need or won't take into consideration.
 
Let's keep our vocabulary straight.

The Manufacturer made the receiver, which you purchased and recorded on a 4473. The receiver is considered a firearm. You didn't manufacture it.
 
Original post by ants:
Let's keep our vocabulary straight.

The Manufacturer made the receiver, which you purchased and recorded on a 4473. The receiver is considered a firearm. You didn't manufacture it.
Click to expand...

So assembling the upper and lower for an AR-15 isn't considered manufacturing?

So which FFL would I need and what if any state registrations etc., etc. would I need and how much would it cost?

Again, I just want to assemble the parts for uppers and lowers and sell whole AR-15 rifles. Primarily on Gunbroker/other auction sites and at gunshows.
 
When you buy the stripped receiver from an FFL dealer that is the FFL sale. Done deal. No more to it. The federal government requires no other registration whatsoever. Ever. You check on your local laws, because I don't know where you live or what your local laws require.

Go to AR15.com or to one of the distributor's web sites. They generally have a whole volume on the do's and don'ts. Building a few AR's and selling them is not unlawful.
 
Reread my post. That's for the ITAR registration payable to the US State Department.

FFL: $150 3 years
ITAR: $2250 1 year

If you don't register, it's a $1 million fine AND 10 years in federal prison.
 
I've decided to ask the NRA since I will probably get a better answer. No offense to everyone who has replied back to me, but if anything it has shown that there are conflicting opinions and facts and I need to sort facts from opinions. I do appreciate the responses though.

I'll let you know what the NRA says.
 
Good plan, Boba.

Additional vocabulary:
  • You will be assembling an AR15, not manufacturing or 'making' it. In federal terms, 'making' is fabricating from bare steel. You will be assembling parts that are already manufactured.
  • If they ask about an NFA firearm, that refers to firearms like machine guns, sawed-off shotguns, short-barreled rifles, etc. Your AR-15 carbine or rifle is none of these.
Oh, wait. What the heck am I doing. I'm encouraging more people to buy parts, just at a time when parts are scarce and there is a 3 to 6 month wait. Why do I want more people to suck up the meager parts out there?
OK, Boba. I changed my mind. You should not assemble AR-15 rifles. Never. It's bad juju. Nightmares. Fear. Paranoia. Extensive fees to therapists. Don't do it.
I gotta go.
 
Sorry, ants - you're trying to apply logic and reason instead of reading the BATFE's own documentation.

The F Troop believes that anyone assembling a firearm for resale should be considered a manufacturer and should be prosecuted if they did not possess the Type 7 license. I know of more than a few gunsmiths who used to 'assemble' precision rifles based on AR15 and Rem700 receivers and who are now no longer doing so because they do not wish to get a Type7 license.

Here is what the F Troop has to say on the subject:

http://www.atf.gov/firearms/faq/faq2.htm#h6

H6) May a person engage in gunsmithing under a dealer’s license (type 01), or do gunsmiths need to be licensed as “manufacturers” of firearms? [Back]

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. (see attached).
Click to expand...

Here are the scenarios from the 'see attached' PDF:

Manufacturing of 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. 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.

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.
Click to expand...

It's crazy but there it is, straight from the F Troop. Specific to what Boba Fett wants to do, the second scenario seems to pretty well spell out that in order to assemble ARs for resale requires a Type07 FFL.
 
Let's keep our vocabulary straight.

The Manufacturer made the receiver, which you purchased and recorded on a 4473. The receiver is considered a firearm. You didn't manufacture it.
Click to expand...
Stunningly bad advice indicating why taking advice off an internet forum will get you in trouble.
In fact, if you establish a pattern of buying and selling for profit you are a manufacturer. Sure you could get by with one gun, maybe two. But any more than that and you are in deep doo-doo.
I wish people would stop trying to game the system. It makes life harder for the rest of us who are honest.
 
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.
Click to expand...

This seems to indicate that I do not need a license.
 
Assembling is manufacturing because assembly is considered a manufacturing process.

I'm interested in if the NRA helps you out at all. They are a joke to FFLs in general.
 
I wish people would stop trying to game the system. It makes life harder for the rest of us who are honest.
Click to expand...

I would like to again reiterate that I am not suggesting in any way that someone do something illegal.

My purpose was to find out if there were a legal way to assemble and sell ARs without the need for a license.

It appears there may be according to the BATF info posted by rbernie.

People should always follow the law in these instances so they don't muck up the works for the rest of us.
 
If you assemble and sell more than one firearm you are a manufacturer.

I cannot say it enough. If you want to make ARs and sell them, get the FFL, register with ITAR. If not, then don't.

If you can't afford to pay those fees, go through the licensing and registration process, you are not someone who should be building ARs or other firearms for sale to the general public and certainly not someone I'd buy from, especially without insurance.

If you build one and the guy's gun blows up at the range, guess who gets sued? You do. Think that sweet talking guy at the gun show will give a **** about you when half his upper receiver is blown off to the side?

Since you are only a parts assembler, you will try to pass the buck to the actual parts manufacturer to save your ass. What if they ask you, in court, to prove that it was their bolt that was at fault? Was their marking on the bolt? What besides a receipt from some Internet mail order company confirms it was X Mfg's bolt in that particular gun? Since X Mfg doesn't mark any of their parts, do you think they can get stuck with liability if all you have to go on is "my receipt says I bought a X Mfg bolt group" and that's what I put in the rifle?

Welcome to the real world. Being an FFL manufacturer isn't all money and glory. It's paperwork, bills, no mercy.
 
http://drl.wi.gov/boards/auc/code/title18.pdf

Section 921(a)21)(C)
The term "engaged in the business" means - C) as applied to a dealer in firearms, as defined in section 921(a)(ll)(A), a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms;
Click to expand...

Since I am not planning to make a living selling firearms (I have a job and run my own side business), and part of my interest in building and selling a few rifles is so I can afford to add to my collection, and I enjoy assembling firearms, this seems to indicate that I may not need a license.

I am not planning on selling dozens a month. I'm not looking to run a firearms business. I'd just like to assemble a few from time to time for the fun of it and sell them at a slight profit so I can buy some more firearms.


Thoughts?


BTW, I greatly appreciate your comments freakshow10mm. Please keep shining the cautionary and reasoned legal light on things. Like I said, I want to be legal in whatever I do which is why I contacted the NRA-ILA just to be double sure before I do anything. If I have to have the various licenses and pay various fees and can't afford to, then I'll have to wait until I can.



*EDIT*

Also found this which seems to indicate that it is alright so long as it is only one per 30 days. I can't tell if the bill passed or not.

http://www.thomas.gov/cgi-bin/query/z?c110:S.3634.IS:
 
Strictly speaking out of my third point of contact:

-You want to sell guns for profit, but don't want to pay fees, taxes, etc.

-You want to sell guns at gun shows and at online auctions.

I understand your desire to make a few bucks at something you enjoy doing, but the rules and regs seem to be against you IMO. It's one thing to build a few for friends, but if you're building them for re-sale, at a profit, and evading taxes, you are in business and likely to get whacked.

The whole intent of the 1993/94 (?) FFL crackdown was to ensure that the guys with licenses were meeting the requirements, to include taxes, local laws & zoning...you want to do what they got in hot water for?...and you don't have a license?

When dealing with a possible violation, it's best to be conservative, we often interpret things in a manner that benefits us. This interpretation may not be shared by the prosecutor and spending $5k to convince a federal magistrate otherwise isn't worth it.

Just my opinion based input...
 
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Original post by beatcop:
I understand your desire to make a few bucks at something you enjoy doing, but the rules and regs seem to be against you IMO. It's one thing to build a few for friends, but if you're building them for re-sale, at a profit, and evading taxes, you are in business and likely to get whacked.
Click to expand...

Yes, I agree that this is most likely the case which is why I am asking all these questions and using words like "may" or "seems to indicate" when I ask them.

And just to clarify, I don't want to sell multiple firearms at a time. It would be a single gun at the show or a single gun online. I would never have more than one for sale at any time. No tables of guns at gunshows or multiple listings online.

But as you said, license, zoning, etc., etc. are against me and will most likely mean I need the licenses and so forth.
 
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