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advice on ammo manufacturing - custom reloading

Discussion in 'Handloading and Reloading' started by rvrbraun, Feb 27, 2004.

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  1. rvrbraun

    rvrbraun Member

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    i have the equipment, the experience, and will soon be retiring - considering starting a small custom reloading business. anyone been there, done that and willing to advise on regulations, pitfalls, lessons learned?
     
  2. bogie

    bogie Member

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    Insurance, so that when Bubba figures out a way to blow up his rifle with your perfectly good ammo, and then blames you for it, you still have a retirement...
     
  3. cordex

    cordex Member

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    "Custom reloading"
    What market will you be selling to? Rare ammo? Working up loads for competition shooters who don't reload?

    Or do you just intend to start up a little reloading business for common calibers?
     
  4. ocabj

    ocabj Member

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    I know you need a permit to sell ammunition (at least here in California), but won't you need some kind of Federal permit to manufacturer ammunition for commercial sale?
     
  5. Jeeper

    Jeeper Member

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    I think there was a topic like this about 3 or 4 months ago where someone was starting this. I would try a search and contact that person about it.
     
  6. rvrbraun

    rvrbraun Member

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    target (go ahead and groan) market is CAS and SASS, plus pistol/revolver "practice" loads for non-reloaders who shoot a lot. current equipment can produce 6-900 rounds per hour.

    liability plan is to incorporate, carry errors and ommissions insurance.

    ? is the permit process. did a general search of the web and got no useful info.
     
  7. ocabj

    ocabj Member

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    It looks like you need a permit. The ATF FAQ makes a reference to one (http://www.atf.gov/firearms/faq/faq2.htm#h1):

    I couldn't find a form to apply for a license to manufacturer ammunition on the ATF forms webpage (http://www.atf.gov/forms/5000.htm), though.
     
  8. kimbernut
    • Contributing Member

    kimbernut Member

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    Custom reloading

    About six years ago I was looking into getting a Gunsmithing FFL and in the process of reading over the info packet from the Tampa BATF office I noticed that an FFL was also required for ammunition manufacturing.
    Good Luck in your endeavor - I would think if you're on the CAS/SASS trail anyway (I thought I detected a twinkle in your eye through your keyboard when you mentioned CAS/SASS) you might as well have it help pay your expenses anyway.
     
  9. Quantrill

    Quantrill Member

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    "FITZ", the moderator has been there and done that. He is a wealth of information. Quantrill
     
  10. redneck2

    redneck2 Member

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    WeShoot2 custom reloads...might pm him
     
  11. BluesBear

    BluesBear member

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    You'll need a 06 license if you want to load ammo for anyone except yourself. Even if you want to give it away to your friends you'll need a license.

    It's $30 for 3 years.

    The Federal Excise tax on ammo is 11% of the price you sell it for. You don't have to pay tax on ammunition loaded in customer supplied casings.
     
  12. Quantrill

    Quantrill Member

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    When I tried to get an FFL about 30 years ago to manufacture ammo, the ATF took my application and kindly informed my insurance company that I had a ammunition factory in my basement. Needless to say, I canceled the the application and told the insurance company, it was a hobby. Quantrill
     
  13. cxm

    cxm Member

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    Commercial Reloading

    I operated a commercial reloading business in the 1970s.

    It is a LOT of work, not only to make the ammo, but to get shelf space in stores to sell it. The sales part is much harder than the technical part.

    My advice is find a retired salesman (good one) to sell on straight commission. An alternative is to set up a route salesman and sell to shops on consignment... it is much easier to get space on consignment...though there are risks there if the shop's has bad cash flow.

    As someone else noticed, insurance is a must. Also business license, tax certificate, a manufacturer's FFL to start out... if you have employess there is even more.

    The profit level is greater if you cast your own bullets for the lead loads, and you have to have good soruces of brass (always several sources for all supplies...never just one) and other supplies...and buy in BIG quantities... the profit margin is pretty small in this business.

    You will need a business location that is zoned so you can conduct such a manufacturing business.

    You will also want to find a supplier of new brass with your headstamp and jacketed bullets for your new business... not hard to do, but takes a good bit of cash up front.

    Let me know if I can answer any specific questions.

    V/r

    Chuck
     
  14. BluesBear

    BluesBear member

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    When I recieved my first 06 license in 1978, I was doing it in my basement and the ATF didn't tell anybody anything. I renewed that license 11 times.

    50,000 pieces, per headstamp, for the initial order plus die/setup fees. Reorders are 100,000 pieces.
    :what:
    Each caliber or variation is a separate headstamp. If you were doing .38 Special and .38 Special +P that would be two separate headstamps and two separate charges.
     
  15. Dannix

    Dannix Member

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    Hate to bump such an old thread, but I'm getting started in reloading and have a few friends that would like get some plinking reloads from me to save a few bucks. Very much a hobby, but how does the profit in "for the purposes of livelihood or profit" work? If I factor in the labor (and at least initially the cost of equipment) in no way would I be profiting.

    And at what point does money have to be declared on income taxes? I've googled but couldn't find it. I assume paying a neighborhood kid $30 to mow a law isn't illegal, but at what point does it become so? Gifting, iirc, is limited to $13k/year for off-the-record gifting, but this is a transaction not a gift.
     
  16. RandyP

    RandyP Member

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    Income is figured the minute it hits your wallet. Legitmate business expenses are just that, when you fill out the correct IRS business tax forms.

    If you charge anything for your reloads, even to your friends, that is:

    A. Income

    B. You operating an ammunition manufacturing facility which is now federally regulated, plus any zoning issues.

    C. YOU who now are massively liable in the unlikely (or likely) event of a mishap that causes injury to any of your customers/former friends. And you better believe that the instant injury, medical bills, disability etc get involved, friendship leaves town in a hurry.

    D. at this point do you even care if there is a D? LOL
     
  17. Dannix

    Dannix Member

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    "If you charge anything for your reloads"
    Gross profit = Net sales – Cost of goods sold.
    Net income = Gross profit – Total operating expenses.
    So yeah, apparently labor is irrelevant. Charging COGS (cost of materials in this case) appears to be OK.

    Good point on liability. Plinking loads is what's on the menu, but there's always the, however remote, possibility of overcharging despite precautions.
     
    Last edited: Dec 27, 2009
  18. RandyP

    RandyP Member

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    And I (thankfully) am neither a lawyer nor an accountant -lol - but were I thinking about starting up a business, even a tiny cottage industry, I would be talking to both professions just to cover my aging keester.

    Always remember the mantra of those who help out their friends....."No good deed goes unpunished."
     
  19. Dannix

    Dannix Member

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    Yeah, putting this on the back burner until if/when I've got every duck possible in a row.

    It would be nice if we had the economic freedom of yesteryears. :(
     
  20. evan price

    evan price Member

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    You need an FFL '06 which is $30 for three years to the ATF.

    Then you need to register with ITAR via the US State Department, even though you do not ever intend to export anything, you are now a producer of war materials. Cost is $2250.00 per year to start and goes up from there.

    Plus you need insurance. Plus excise taxes. etc.
     
  21. freakshow10mm

    freakshow10mm member

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    You will need
    • to comply with local zoning for a firearms and manufacturing business
    • Type 06 FFL $30 for 3 years
    • ITAR registration* for $2250 per year

    *ITAR is the International Trade in Arms Regulations and is the US State Department's jurisdiction (ie the ATF can't and doesn't enforce it directly). Basically in a nutshell everything firearms related including ammunition and components is a "defensive article" and the manufacturers must be register and pay that stupid fee. I have found an exception and will share it, but will not hold anyone's hand during the process or offer any additional advice beyond what's posted here.

    If you are a manufacturer of "whatever" and intend on solely selling it to
    • Domestic civilains
    • Domestic dealers or distributors or wholesalers
    • Domestic civilian law enforcement agencies (ie cops)
    you can submit a Commodity Jurisdiction Request to the US State Department requesting determination of whether your products are "defensive articles" having a military application. This must be a letter from scratch (no form letter is provided or "out there") detailing what you make, whom you sell to, and whom the end user is. You will need to submit drawings, blueprints, techinical documents, etc. If they determine you are not manufacturing for any military or paramilitary force, they will not make you pay ITAR.

    That's it for the licensing BS.

    Now the business aspect.

    Marketing is fun and a PITA all at the same time. Buy the book "Guerrilla Marketing" and read it cover to cover. Not the gospel but gives a different perspective than "buy a magazine ad and wait for the phone to ring" mentality of marketing. The book explains it all but here's my perspective:

    Marketing isn't about getting a sale. It's about setting up a client relationship. The last thing you want is a customer. A customer comes in, buys some ****, and leaves. That's not good. You want a client. You want long term, loyal, repeat business. Marketing is showing them your product/service, informing them of the value, and showing how you will be there to support them after the sale.

    OK, now insurance. If you think you can form a fancy corporation and be protected you are dead wrong and I just saved you millions of dollars. GET LIABILITY INSURANCE!!! It's a couple thousand dollars a year (as in less than $200 per month) for a basic $1 million policy. If $2,000 a year is too much, STOP. You are not cut out for this business. Operating without liability insurance is simply retarded for any business. That's settled. Get insured or go flip burgers.

    Equipment. Have to go blue here. Dillon is your brand. Learn it, love it, live it. For the type of loading you are doing, you will need volume but not primer pocket swaging. Get at least one Dillon 650 press with case feeder for each press. Get one set up for small primer and large primer. Then change out the other stuff for caliber changes. This will give you 800-1000 rounds per hour production. That's a good start. If you can't load at least 500,000 rounds annually, it will be a hard living, even as a part time retirement income source.

    Then there's the FET or Federal Excise Tax (I don't care if it helps wildlife crap, it's retarded and a burden to my business and you end up paying the tax anyway because me and every other manufacturer rolls it into the cost of the ammunition). Tax is 11% on the sale price of ammunition you load. Exceptions are
    • Local (non-federal) law enforcement agencies
    • Department of Defense including the Coast Guard
    • Reloading customer brass
    Hit up www.ttb.gov for more info. Basically if you buy brass, load it, and sell it as ammo, FET is due. If you sell to law enforcement other than federal or DOD, no tax due. If you reload customer brass and you ship it as ammo (no substituting your brass for their brass or replacing worn brass with your brass to make even count), no tax due. Tax on ammunition is 11%.

    That's about it. The rest is on your own just like I learned the hard way. Give 'em hell!
     
    Last edited: Dec 29, 2009
  22. Dannix

    Dannix Member

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    ^wow, thanks! :)

    I'm hoping to have a MBA under my belt a few years, and will reassess the idea then. Between now and then though I'm going to be pushing my state legislator to pass some sort of state sovereignty bill where ammo made and sold within the state is outside fed jurisdiction...not holding my breath on it though.
     
  23. MNPyro

    MNPyro Member

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    Kind of an answer to your question as far as taxes and income goes, if this wouldn't be your primary source of income, you can declare it as hobby income, and there are seperate forms and such for that. But if you figure in the cost of equipment, materials and the works, surely if you were reloading for friends and not charging big bucks, you would be at a loss, therefore no "real" income. And you can't, if I recall, charge a loss to your taxes in excess of gains for hobby income/loss (similar to gambling losses).

    Long way around it, if you got the permits, licenses etc in the end, you probably wouldn't have any income to disclose since more than likely you would be at a loss.
     
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