What is "Dealing in Firearms Without a License?"

[xxjumbojimboxx]

Hoping someone can give me a good answer here...

Is it illegal to buy a gun and sell it for profit?

Is there some kind of difference if its unfired or not?

I see a lot of folks selling AKs , ARs, and other semi autos for jacked up prices.

For some reason I think i saw something at one point that you needed an ffl to do that.. I live in texas where trading and selling privately is completly legal, my question is in regards to buying with the intent to sell.

[N003k]

Depends, did you buy it JUST to resell it?

If yes, then odds are the ATF will view that as being in the business, therefore technically you'd need an FFL. Of course, doing it just one time, odds are it wont be an issue, it's just a technicality.

If you bought it for any other reason, and later chose to sell it, then it doesn't matter if you made a profit. Intents everything.

The difficulty is proving intent, which is why if you do it once, it's a non-issue really...do it continually...well, just get an FFL if you want to sell guns routinely for profit.

[Byrd666]

NOT trying to be a smart azz but, is that not what a dealer does? Isn't that what guys and gals at gun shows do all the time?

Normally a new and or unfired weapon would attain a higher price just for that reason. Although with the recent craze for firearms, I'm not sure it would make much difference for some people.

As a matter of fact, I have a rifle for sale right now that is a NIB, unfired item. And yes, I will be selling it for a profit. But I didn't initially buy it with that intention. Just found a better rifle for my needs.

[niner4tango]

You need a dealer's license if you are "engaged in the business"

Title 18, CH 44

§ 923 Licensing.
(a) No person shall engage in the business of importing, manufacturing, or dealing in firearms, or importing or manufacturing ammunition, until he has filed an application with and received a license to do so from the Attorney General....

Engaged in the business means
§ 921 Definitions

(21) The term "engaged in the business" means—.....
(C) as applied to a dealer in firearms, as defined in section 921(a)(11)(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;

[USAF_Vet]

Its perfectly legal to do as long as it is not your primary source of income. Say I visit a pawn shop and see a colt Python in the case for $350 because the guy doesn't know what he has. I'd drop $350 on it so fast it would make his head spin. I could then turn around and more than double my money by selling it for what it's worth. Perfectly legal.

If I made a habit of doing this, to the point where I could quit my job and flip guns as a primary source of income, I'd need an FFL. The occasional flip, nothing wrong with that.

[xxjumbojimboxx]

Originally Posted by niner4tango

You need a dealer's license if you are "engaged in the business"

Title 18, CH 44


Engaged in the business means
§ 921 Definitions

Hmmm

"purchases of firearms for the enhancement of a personal collection or for a hobby"

Well that would be all of us, right?

[AlexanderA]

Its perfectly legal to do as long as it is not your primary source of income.

That's not the test at all. You would be "engaged in the business," even if it was a sideline, if you were repeatedly doing transactions for the purpose of making money, as a regular course of trade. As a matter of fact, you wouldn't actually have to be making money, as long as it was your intention to do so. There are lots of part-time gun dealers. They still need to be licensed.

[xxjumbojimboxx]

Sounds like we still dont have a solid answer on this yet....

Anyone who can follow up their name is esquire able to answer this question?

[JohnKSa]

Sounds like we still dont have a solid answer on this yet...

The law was quoted by niner4tango, and it's pretty clear.

If you're in the business of buying and selling firearms then you need a license.

Buying a firearm because you know you can sell it later for more than you paid is not being in the business of buying and selling firearms unless you do it frequently as a regular course of trade or business with the goal of supporting yourself fully or partially via the profits.

Is it illegal to buy a gun and sell it for profit?

No. Not unless you do it as a business as defined by federal law.

Is there some kind of difference if its unfired or not?

No. If you're not in the business of buying and selling firearms you can buy either used or new/unfired firearms with the intent to resell them at a profit. If you are in the business of buying and selling firearms then you must have an FFL regardless of whether the firearms involved are new or used.

For some reason I think i saw something at one point that you needed an ffl to do that.

You may have, but it was incorrect if it implied that the act of buying a firearm with the intent to resell at a profit is a crime for non-FFLs.

[Frank Ettin]

Originally Posted by xxjumbojimboxx

Is it illegal to buy a gun and sell it for profit?

....

For some reason I think i saw something at one point that you needed an ffl to do that.

Yes, at some point you need an FFL. But it's not necessarily all that clear where that point is.

Under federal law, one needs an FFL to engage in the business of a dealer in firearms. "Engaged in the business" is defined at 18 USC 921(a)(21)(C), emphasis added:

(21) The term “engaged in the business” means—

(A)...

(B) ...

(C) as applied to a dealer in firearms, as defined in section 921 (a)(11)(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;...

The operative concepts are (1) devoting time, attention and labor; (2) doing so regularly as a trade or business; (3) the repetitive purchase and resale of guns; and (4) intending to make money.

"Livelihood" simply means:

1: means of support or subsistence

Nothing in the statutory definition of "engaged in the business" requires that it be one's only business or means of support. It could be a side business, a secondary business or one of several ways you have of bringing money into the household. What matters is that you're doing it regularly to make money. You don't even necessarily need to make a profit to be "engaged in business." People go into business all the time and wind up not making money. It's not that they're not engaged in business; it's just that they're not very good at it.

But an occasional sale is not being "engaged in the business." Where is the the line between an occasional sale and the repetitive purchase and resale? That's not clear from the statutes, and I don't know if there's been any clarification judicially. I did a quick search for case law, and didn't immediately find anything. So I'll knock it off for tonight and try again tomorrow.

[Elessar]

To be safe, I call the line the point at which you are buying something soley to re-sale it at a mark up. Most of the stripped lowers for sale right now on Gunbroker, if they not FFls, are probably guilty of this. Fipping recievers and mags right now it big business. Buying as many recievers as you can get and then quickly listing them on Gunbroker at a mark up clearly violates the law and people are taking their chances based on a presumed low risk of prosecution.

[JohnKSa]

To be safe, I call the line the point at which you are buying something soley to re-sale it at a mark up.

That is certainly safe, but it is like never starting your car to prevent getting speeding tickets. You can be safe without drawing the line so far from the location that the law actually places it.

...buying as many recievers as you can get and then quickly listing them on Gunbroker at a mark up clearly violates the law...

It only violates the law if this is being done as a business. The federal law specifically states that it must be done "as a regular course of trade" and that it involves the "repetitive purchase and resale of firearms". Buying a whole bunch of receivers at once and selling them at a profit is neither a regular course of trade, nor is it the repetitive purchase and resale of firearms.

If a person were to KEEP doing it, then at some point, the law will be broken, but doing it once (even buying a lot of receivers at once and selling them all) is not a clear violation.

It is not against the law for a non-FFL to buy firearms with the intent to resell at a profit. It's not against the law for a non-FFL to buy a large batch of firearms with the intent to resell at a profit as long as it is done occasionally and for the purpose of enhancement of a personal collection or as a hobby.

So if I were to buy a huge batch of receivers and sell them at a huge profit and then turned around and used the money to purchase guns and ammo for my own personal use, that would clearly be for the enhancement of my personal collection and would be done as a hobby and would therefore be perfectly legal.

A very good rule is that money you make on guns should be used to purchase guns and gun-related purchases. I don't buy and sell guns to pay my bills with the profits, but I sometimes buy and sell guns to make money to be spent on more guns and ammo.

[Frank Ettin]

Originally Posted by JohnKSa

...It only violates the law if this is being done as a business. The federal law specifically states that it must be done "as a regular course of trade" and that it involves the "repetitive purchase and resale of firearms". ...

But the question is how the courts apply that. In that connection, I found the following:

• The Third Circuit, in upholding a conviction of dealing in firearms without a license noted (U.S. v. Tyson, 653 F.3d 192 (3rd Cir., 2011), at 200-201, emphasis added):

  ...By the statute's terms, then, a defendant engages in the business of dealing in firearms when his principal motivation is economic (i.e., “obtaining livelihood” and “profit”) and he pursues this objective through the repetitive purchase and resale of firearms. Palmieri, 21 F.3d at 1268 (stating that “economic interests” are the “principal purpose,” and “repetitiveness” is “the modus operandi ”). Although the quantity and frequency of sales are obviously a central concern, so also are (1) the location of the sales, (2) the conditions under which the sales occurred, (3) the defendant's behavior before, during, and after the sales, (4) the price charged for the weapons and the characteristics of the firearms sold, and (5) the intent of the seller at the time of the sales. Id. (explaining that “the finder of fact must examine the intent of the actor and all circumstances surrounding the acts alleged to constitute engaging in business”). As is often the case in such analyses, the importance of any one of these considerations is subject to the idiosyncratic nature of the fact pattern presented...

• And the Fifth Circuit noted (United States v. Brenner (5th. Cir., 2012, No. 11-50432, slip opinion), at 5-6, emphasis added):

  ...the jury must examine all circumstances surrounding the transaction, without the aid of a "bright-line rule". United States v. Palmieri, 21 F.3d 1265, 1269 (3d Cir.), vacated on other grounds, 513 U.S. 957 (1994). Relevant circumstances include: "the quantity and frequency of sales"; the "location of the sales"; "conditions under which the sales occurred"; "defendant's behavior before, during, and after the sales"; "the price charged"; "the characteristics of the firearms sold"; and, "the intent of the seller at the time of the sales". Tyson, 653 F.3d at 201.

• The Sixth Circuit noted (United States v. Gray (6th Cir., 2012, No. 11-1305, slip opinion), at 8):

  ...However, "a defendant need not deal in firearms as his primary business for conviction." United States v. Manthey, 92 F. App'x 291, 297 (6th Cir. 2004)....

• And in upholding Gray's conviction the Sixth Circuit also noted (Gray, at 8-9):

  ...We have previously held that evidence was sufficient to support a conviction under § 922(a)(1)(A) where it showed (1) that the defendant frequented flea markets and gun shows where he displayed and sold guns; (2) that the defendant offered to sell guns to confidential informants on multiple occasions and actually sold them three different guns on two different occasions; (3) and...that the defendant bought and sold guns for profit. See United States v. Orum, 106 F. App'x 972, 974 (6th Cir. 2004)...

• In affirming a conviction of dealing in firearms without a license, the Ninth Circuit stated (U.S. v. Breier, 813 F.2d 212 (C.A.9 (Cal.), 1987), at 213-214, emphasis added):

  ...Courts have fashioned their own definitions of the term. For example, we have previously stated "that where transactions of sale, purchase or exchange of firearms are regularly entered into in expectation of profit, the conduct amounts to engaging in business." United States v. Van Buren, 593 F.2d 125, 126 (9th Cir.1979) (per curiam). In United States v. Wilmoth, 636 F.2d 123 (5th Cir. Unit A 1981), the Fifth Circuit stated that to prove the status of the accused as one engaged in the business of dealing in firearms, "the Government must show a greater degree of activity than the occasional sale of a hobbyist." Id. at 125. "It is enough to prove that the accused has guns on hand or is ready and able to procure them for the purpose of selling them from time to time to such persons as might be accepted as customers." Id.; accord United States v. Carter, 801 F.2d 78, 82 (2d Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 657, 93 L.Ed.2d 712 (1986); United States v. Burgos, 720 F.2d 1520, 1527 n. 8 (11th Cir.1983)....

Also, it's worthwhile to note that profits are taxable as short term or long term capital gains. But if one isn't engaged in a business some deductions ordinarily allowable as business expenses would not be allowable.

[xxjumbojimboxx]

To summarize,

There's no clear cut line drawn in the sand as to where one would be considered "engaged in business". The factors involved in such sales would be looked at by a group of 12, and detirmined buy them. In the case shown the man was set up at flea markets, I would assume this would qualify as being engaged in business, because that goes above and boyond what the average collector would do. I mean, I meet poeple in parking lots of gun ranges, and academy sports stores... Most times I break even on guns or just outright trade. By evaluating your answers I think I can conservativly say that I'm not breaking any laws... Thats good

Thanks guys.

[JohnKSa]

Frank,

Do you disagree with my "bright-line rule"--i.e. if any profit realized can be traced to future purchases of guns & ammunition, as opposed to bill paying, etc., that it clearly falls under the heading of enhancement of a personal collection or buying or selling as a hobby?

There's no clear cut line drawn in the sand as to where one would be considered "engaged in business".

I think that's overstating the situation.

Although Frank's provided cites do muddy the water somewhat, there are still clear themes running through them that warn of danger.

"quantity and frequency"
""the quantity and frequency of sales"; "

(buying and selling a lot and doing it repetitively)

"economic interests as the primary purpose"

(not for fun or hobby, but to improve economic standing)

"that the defendant frequented flea markets and gun shows where he displayed and sold guns"

Again, repetitive behavior.

"transactions of sale, purchase or exchange of firearms are regularly entered into in expectation of profit"

(regularly/repetitively engaged in buying/selling/trading)

I know this is simplistic, but the bottom line is that if you are making a business of it, you're breaking the law, if you're not, then you're not. Making a profit on a sale or on several sales is not the same thing as being in business, but if you keep it up long enough you're going to cross the line.

Buying a large lot and reselling the items at a profit is not the same thing as being in business, but it would be wise to be able to demonstrate that you aren't paying your house payment or buying groceries with the profit--that you're using the profit to enhance your personal collection or to otherwise enjoy your hobby.

[Frank Ettin]

Originally Posted by JohnKSa

Frank,

Do you disagree with my "bright-line rule"--i.e. if any profit realized can be traced to future purchases of guns & ammunition, as opposed to bill paying, etc., that it clearly falls under the heading of enhancement of a personal collection or buying or selling as a hobby?...

John, I'm sorry, but I do disagree.

Money is fungible. The money spent on guns and shooting is interchangeable with the money spent to pay bills and buy groceries. I can set up different operating accounts to track my money, but it's all my money. When my finances are considered in the aggregate, the sources of the money don't change the character of the money, nor does what I spend it on change the character of the money. It's just my money. (The times tracking is important are for keeping proper track of marital property, e. g., distinguishing between separate property and marital/community property; or when amounts of money from certain sources, or amounts paid, might be subject to different tax treatment, e. g., capital gains or municipal bond income or medical expenses.)

The only way to really keep finances truly separate is by creating different legal entities, like corporations, for different activities. Of course if you have a corporation for your gun buying and selling, that looks even more like a business.

So the bottom line is that if a federal prosecutor, looking at the totality of the circumstances and all the factors discussed in the various cases, decides that he can first convince a grand jury that there's probable cause to believe you're buying and selling guns as a trade or business, and then convince a trial jury beyond a reasonable doubt that you're buying and selling guns as a trade or business, he very well might prosecute you.

Originally Posted by JohnKSa

...the bottom line is that if you are making a business of it, you're breaking the law, if you're not, then you're not...

And if you're really unlucky, that will be decided by a jury looking at the totality of the circumstance.

There really doesn't appear to be a safe harbor, i. e., a set of specific, clearly defined conditions which, if satisfied, definitely get you off the hook.

[JohnKSa]

Are we really working our way around to the conclusion that if a person ever buys a gun and sells it for a profit that person is in danger of prosecution?

Is there really no way that one could come up with a foolproof method for occasionally buying a gun and selling it for more than the purchase price without running the risk of having the authorities look "at the totality of the circumstances and all the factors discussed in the various cases" and deciding it's being done as a business?

And if that's really the answer, then what's the point of this part of the law?

"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;... "

If it doesn't mean anything, what's the point of wasting the ink?

[Frank Ettin]

Originally Posted by JohnKSa

Are we really working our way around to the conclusion that if a person ever buys a gun and sells it for a profit that person is in danger of prosecution?...

I don't think so. But certainly there can be risks, depending on what one does.

So if I shoot regularly, perhaps compete or attend classes as a matter of course, or if I hunt from time to time, but on occasion sell one of the guns I regularly use for such activity, I'm most likely in the clear even if I make a profit on the sales.

I'm also probably okay if I like to hang around guns show or visit gun stores, buy a gun every so often for my recreational shooting, but sometimes find a gun at a good price that I think someone I know might be interested in, buy it and sell it. One factor that might matter is whether I buy more guns for my own shooting than I occasionally buy thinking I could sell it.

Things start to get murkier when I'm spending a lot of time roaming gun shows and gun shops looking for interesting and under priced guns, buying them and selling them, more than I'm buying guns to keep or to shoot.

Originally Posted by JohnKSa

...Is there really no way that one could come up with a foolproof method for occasionally buying a gun and selling it for more than the purchase price without running the risk of having the authorities look "at the totality of the circumstances and all the factors discussed in the various cases" and deciding it's being done as a business?...

Well there's no bright line test or safe harbor, but I don't think it's really all that random.

I think most people will know what they're doing unless they are fooling themselves or are disingenuous. The danger signs probably revolve around when one is buying and selling more than he is shooting and keeping. Is he really just rationalizing at that point about being a "collector"? Is he being honest with himself when he avoids accepting that his real interest is the dealing -- buying and selling rather than owning and shooting? Because at that point he's really at risk.

As a hobby, there's nothing wrong with deriving one's satisfaction and fun from the "action" of dealing. With any sort of collectable there are folks whose real pleasure isn't owning that painting or watch or antique table or baseball card; it's the buying and selling of such things. The difference is that one doesn't need a license to deal in baseball cards. But he does need a license to deal in guns.

And one needs a license to deal in guns because, I think the ATF would contend, gun transfers by a dealer need to comport with certain formalities, e. g., background checks, forms that are retained, validation of a transferee's identity and place of residence, etc. So limiting transactions by unlicensed persons limits transfers "off the books." We might not like that, but that is government's rationale, and ATF is going to serve that interest until a court tells it that it can't or until Congress changes the law (both extreme long shots).

[xxjumbojimboxx]

"As a hobby, there's nothing wrong with deriving one's satisfaction and fun from the "action" of dealing. With any sort of collectable there are folks whose real pleasure isn't owning that painting or watch or antique table or baseball card; it's the buying and selling of such things. The difference is that one doesn't need a license to deal in baseball cards. But he does need a license to deal in guns."

Interesting. How do we define what's "hobby" and whats "engagin in business", the reason I ask is because some poeple GO BIG with their hobby's. I know of a gentleman whom I buy firearms from who churns guns like butter. I think he buys and sells one or two a week. And thats all he's alluded to in my direction. Then again, lets say he maintains a collection of about 30 firearms, and never really goes above 32 and below 28... wouldn't that show that he is just advancing his collection?... I really wish there were a line drawn in the sand to clear this up. Then again, they may be pressing on the the freedoms of what are otherwise law obiding citizens...

[Frank Ettin]

Originally Posted by xxjumbojimboxx

...How do we define what's "hobby" and whats "engagin in business", the reason I ask is because some poeple GO BIG with their hobby's. I know of a gentleman whom I buy firearms from who churns guns like butter...

When one "GOES BIG" with his hobby, needing a license to deal in the item makes a big difference in the risks one is running.

Originally Posted by xxjumbojimboxx

...lets say he maintains a collection of about 30 firearms, and never really goes above 32 and below 28... wouldn't that show that he is just advancing his collection?...

Beats me. If he's unlucky that question could wind up being answered by a jury, and I'm not going to make any predictions about how a jury would be likely to answer it. But I do think that someone who "churns guns like butter" should be looking over his shoulder a lot.

That's just the way it is.

[Bubbles]

ATF is not going to be pinned down with a hard number as for whether or not buying/selling activity constitutes "dealing". However, we can look at prosecutions to find out where lines are drawn, though bear in mind that the charges filed are usually in addition to other charges (e.g. drug dealing, selling to prohibited persons, gang activity, etc).

Nine guns in six months:
http://www.atf.gov/press/releases/20...a-license.html

Two years and at least 37 firearms:
http://www.atf.gov/press/releases/20...a-license.html

This one definitely crossed the line, the guy had many warnings both from ATF and local LE.
http://www.atf.gov/press/releases/20...tax-crime.html
What I found most telling about the press release was this statement:

Some of the guns had been purchased by ALLOWAY from licensed sellers just days earlier – so they could not be considered part of a personal collection.

[Jim K]

BATFE is not going to set a "bright line" by saying that (for example) selling ten guns a year is OK but selling 11 is illegal. They want the flexibility to prosecute someone who is supplying a criminal gang even if only two guns were involved and not prosecute a collector selling collector guns to other collectors even if dozens of guns were involved. In other words, that vagueness lets BATFE and a US attorney look at other factors, not just the number of guns or what percentage of income was derived from gun sales.

Jim

[PGT]

Originally Posted by Bubbles

This one definitely crossed the line, the guy had many warnings both from ATF and local LE.

Yeah....I think we can all agree that's arrogance. 600+ guns and warnings from LE and ATF and still didn't stop? Makes me feel a little less guilty about flipping the 22LR pistol I got because I found the color I wanted a day after winning it on GB.

[Elkins45]

In the case of the first one it seems logical that WHAT he sold (full auto and silencer) influenced the prosecution as much as the NUMBER.

If Grandpa sets up a table at a gun show or flea market and sells off part of his collection over the weekend the it might be tough to prosecute for intent to deal without a liscence. If Grandpa sets up a table every weekend and is constantly moving new and different guns then he's dealing.

There are a number of familiar faces I see at the local gun shows every single time I go. They even have their own folding gun racks and glass display cases. That hardware makes me think they probably couldn't survive a prosecution. Quite frankly I'm surprised that ATF hasn't prosecuted some of them already. I heard one of them boasting that he was ignoring an agent's suggestion that perhaps he might want to consider acquiring an FFL. That seems like the very height of hubris to me.

I recently inherited some guns from my Father, so I have been selling others to make room for them. Have I been 'engaging in the business'? I have not. My intent has not been to profit or otherwise make a livelihood from these sales. Once I have narrowed my collection sufficiently I will stop. Might I buy others along the way? Sure, but only if they are models I really want.

[Donut Destroyer]

The key factors are buying AND selling and frequency. If I have a collection of 300 guns that I want to get rid of, I can sell them all without a license as long it is a one way occurrence, i.e. I am disposing and not just buying more guns to turn around and sell. What you end up purchasing with the proceeds is irrelevant. It's the issue of selling to buy more and then sell. If you buy 3 identical guns and settle on the best shooter, you can sell the other two, at a profit. No problem. If you buy 3 guns, keep one and trade the other two for something better, no problem. If you buy 5 guns, sell them and buy 6 more, sell them and buy 9 more.....that's where the problem comes in. Frequency of transaction and two way activity.