buying a gun to resell question

[Praxidike]

If I see a firearm on sale online that normally sells for more locally, I purchase a couple, sell them both for a profit, and use that profit to purchase a more expensive firearm that I want, would that be legal to do under current federal law if its a one time thing?

 

[CoRoMo]

Here's how the arms trade business is defined where you are required to obtain the appropriate Federal Firearms License...

https://www.law.cornell.edu/uscode/text/18/921

(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;

 

[Frank Ettin]

If I see a firearm on sale online that normally sells for more locally, I purchase a couple, sell them both for a profit, and use that profit to purchase a more expensive firearm that I want, would that be legal to do under current federal law if its a one time thing?

It depends on a number of things, like how frequently you do that.

This has been the subject of an extensive discussion here. See this thread: What is "Dealing in Firearms Without a License?" . Note especially posts --

• 10:

  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.

  
  
• 13:

  ...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.

  
  
• 21:

  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/2011/05/052611-sf-salinas-man-sentenced-to-57-months-for-dealing-firearms-without-a-license.html
  
  Two years and at least 37 firearms:
  http://www.atf.gov/press/releases/2012/06/062012-no-jury-convicts-doyline-louisiana-man-of-dealing-firearms-without-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/2012/02/022312-sea-former-police-officer-sentenced-to-prison-for-illegal-gun-sales-and-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.

 

[Praxidike]

Here's how the arms trade business is defined where you are required to obtain the appropriate Federal Firearms License...

Thanks for the link, but I'm not a manufacturer though as was mentioned in the quoted text. In the link you provided as applied to dealers:

(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;

If this isn't a "repetitive"action, and if its to specifically fund the purchase of another firearm to add to my collection, I'm curious to know what other's thoughts are on whether I'm covered under the exemption or not.

 

[Praxidike]

Thanks Franks. Very helpful. I've read some older post on the matter, but none had to do with "occasionally" and sparatically buying to sell as a means to farther a collection.

 

[Frank Ettin]

....I've read some older post on the matter, but none had to do with "occasionally" and sparatically buying to sell as a means to farther a collection. ...

The difficulty is that there's no clear line between "occasional" or "sporadic", on one hand, and "regular" or "repetitive", on the other.

Once, or once a year, you're probably okay. Once a day, you better have a license or you'll probably going to jail. But where it stops being a reasonably safe bet and become high risk, no one really knows. As the Ninth Circuit said in Brier, to support a conviction for engaging in business without a license the prosecution must show:

...a greater degree of activity than the occasional sale of a hobbyist....

But exactly how much activity that is no one can say.

Everyone understandably wants to know for sure that he can sell X guns in Y months and be in the clear. But the reality is that there is no such clear "safe harbor."

As Voltaire said, "Once a philosopher, twice a pervert."

 

[Coyote3855]

I wonder how often and where this is enforced? Personally, I'd not take a chance or knowingly violate any other firearm law. But I see the same guys at gunshow after gunshow selling items from their "personal collection."

 

[Scooter22]

It's a grey area. If you were buying the same type gun in better shape and selling the old one thats bettering your collection. Your buying multiple guns with the intent of selling it. So you are dealing in firearms.. Those guns are in your name so I hope you are keeping track of who buys them. Back in the 90,s when all the surplus guns came in there was a surge in C&R licenses. Guys were buying the 2, 3, and 5 "fers deals that were being offered. They would keep the best and turn around and sell the rest. The BATF started cracking down on that practice and some guys got in big trouble.

 

[Frank Ettin]

I wonder how often and where this is enforced?...

Obviously it is enforced. In post 3 I cited four federal court of appeal cases, in four separate Circuits, in which convictions for dealing in firearms without a license were affirmed. A quick search of a legal data base to which I subscribe found 15 more.

Those represent only convictions which were appealed. They would not include conviction which were not appealed, charges disposed of by plea bargain, or appeals which might have been discovered using different search parameters.

 

[HankB]

Look at some of the cases - 9 guns in 6 months, 37 guns in 2 years, prompt sale of guns (plural) just days after purchasing them from a licensed dealer . . .

A paper trail showing a pattern of purchasing and promptly selling the guns may draw the attention of the BATmen, who may then decide (for whatever reason) to make an example of you . . . with the paper trail as documented evidence.

Repeatedly purchasing a couple of firearms and selling them at a profit in order to use the proceeds to build your own collection seems like the sort of thing that would be hard to defend against when you're being prosecuted and fed.gov can show hard documentation of what you've been doing. Even if/when you win, your legal fees will likely exceed your profits considerably.

IANAL, but if done with one or two guns a year, I'd be astonished if prosecution resulted . . . but I don't see this practice ending well for anyone that does it with some frequency.

 

[243winxb]

You will go unnoticed till the gun is used in a crime or it was sold to a felon.

 

[SC Shooter]

I have purchased several guns, and not liking them for what ever reason, I turned around and sold them. After finding a buyer, I have gone through a FFL, and had the transaction recorded. My FFL charges $15.00 for the transfer, but if something ever comes back on the gun, you are covered.

 

[Coyote3855]

Obviously it is enforced. In post 3 I cited four federal court of appeal cases, in four separate Circuits, in which convictions for dealing in firearms without a license were affirmed. A quick search of a legal data base to which I subscribe found 15 more.

Those represent only convictions which were appealed. They would not include conviction which were not appealed, charges disposed of by plea bargain, or appeals which might have been discovered using different search parameters.

So more often than I would have thought. I always appreciate your accurate and insightful posts.

 

[Sam1911]

After finding a buyer, I have gone through a FFL, and had the transaction recorded. My FFL charges $15.00 for the transfer, but if something ever comes back on the gun, you are covered.

Actually, there is a perception that you can "launder" guns you're buying and selling through dealers and that takes the burden off of you. This is a mistaken belief, though common.

(Of course, it does at least cover you from charges of having sold a gun knowingly to a felon, or knowingly to someone from another state.)

Buying or selling through an FFL is really a totally separate matter from whether or not you are considered to be dealing without a license. If you go and buy 100 guns through a dealer, and you sell them for a profit, through a dealer, you could still be considered to be in the business of...heck gun dealers themselves do that all the time: transfer their guns to buyers through some other dealer.

Consider this: If you are buying guns at gun shows regularly and selling them on GunBroker to people all over the country, those sales all go through dealers simply because the buyers are in other states. But no one would say you've somehow immunized yourself against being considered an unlicensed dealer simply because you transferred them to the buyers through FFLs.

So buying and selling from and to residents of your own state, with or without a dealer (where legal) would be no different. All that really matters is that you are "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."

 

[dogtown tom]

Ask Bruce Abramski about flipping guns

While not "engaging in the business", buying a firearm from a licensed dealer also involves completing a Form 4473. Question 11a asks "Are you the actual transferee/buyer of the firearm(s) listed on this form...". If you answer "No" the dealer cannot lawfully transfer the firearm to you.

Remember Mr Abramski? He purchased a single handgun, then sold it to his uncle using a licensed dealer in his uncles state to transfer. He is in a Federal prison for ONE GUN.

While he was charged with lying on the 4473, it was for ONE GUN.
Here is a great synopsis of the Abramski case from http://www.dailykos.com/story/2014/01/07/1261522/-What-Straw-Purchase-a-Gun-Abramski-v-US#

Of note is this:

The Fourth Circuit Court of Appeals upheld Abramski's convictions on the counts as charged. It held that because the sole reason for Abramski's purchase was to sell the Glock to his uncle, he lied on the ATF form about being the “actual buyer” and thereby violated 18 US Code Sec. 922(a)(6) (Count I). It held that the “identity of the purchaser of a firearm is a constant that is always material to the lawfulness of the purchase of a firearm." Count II dealt with the records of Federally licensed dealers. The Appeals Court decided that whether a firearms acquisition is lawful or not, a false statement about it is a criminal offense on the dealer record, so Abramski also violated 18 US Code Sec. 924(a)(1)(A).

 

[Praxidike]

While not "engaging in the business", buying a firearm from a licensed dealer also involves completing a Form 4473. Question 11a asks "Are you the actual transferee/buyer of the firearm(s) listed on this form...". If you answer "No" the dealer cannot lawfully transfer the firearm to you.

Remember Mr Abramski? He purchased a single handgun, then sold it to his uncle using a licensed dealer in his uncles state to transfer. He is in a Federal prison for ONE GUN.

While he was charged with lying on the 4473, it was for ONE GUN.
Here is a great synopsis of the Abramski case from http://www.dailykos.com/story/2014/01/07/1261522/-What-Straw-Purchase-a-Gun-Abramski-v-US#

Of note is this:

I'm aware of that case, but I believe, I maybe wrong, that it differs from my case being that I'm not specifically buying a gun on the behalf of a specific person aka a strawman sale. Is buying a firearm with the intention of selling it at a later unknown date to a, unknown at the time of purchase, separate party also considered a strawman purchase?

 

[jerkface11]

You're buying a gun with the intent to sell it and turn a profit. How is that not business?

 

[Praxidike]

You're buying a gun with the intent to sell it and turn a profit. How is that not business?

Only to play devil's advocate, because the one time purchase and sale would not be "repetitive", so it doesn't meat the ATF's definition of being a "business" is how I understood it.

 

[BSA1]

Buying, selling and trading guns is as American as Apple Pie. Well in many parts of the country anyway. Many of us try to make more money than we have invested when we do so. Some of us have brought gun(s) that we don't want/use simply because we know it is priced so low we know we can resell it at a tidy profit.

There are folks that are taking advantage of the glut on the AR market and buying AR Lowers at $50.00 +/- with the intent to resell them if demand for AR's spike again. So at what point do they become a dealer if at all? Until they resell them they are indeed the actual buyer.

 

[Frank Ettin]

I'm aware of that case, but I believe, I maybe wrong, that it differs from my case being that I'm not specifically buying a gun on the behalf of a specific person aka a strawman sale....

Agreed.

The significant facts in Abramski were that Bruce Abramski and his uncle, Angel Alvarez, arranged between themselves that Alvarez would give the necessary money to Abramski, Abramski would buy a Glock 19 with the money, and then Abramski would transfer the Glock to Alvarez.

On those facts, Abramski was not the actual purchaser/transferee of the gun and therefore lied when he claimed to be on the 4473. He was not the actual purchaser/transferee because he was buying the gun on behalf of Alvarez.

The conclusion that Alvarez, not Ambraski, was the actual pruchaser/transferee follows naturally from the well understood principles of the law of agency (which have been around for hundreds of years)

Agency: An Overview

Agency law is concerned with any "principal"-"agent" relationship; a relationship in which one person has legal authority to act for another. Such relationships arise from explicit appointment, or by implication. The relationships generally associated with agency law include guardian-ward, executor or administrator-decedent, and employer-employee.

The law of agency is based on the Latin maxim "Qui facit per alium, facit per se," which means "he who acts through another is deemed in law to do it himself." Agency, in its legal sense, nearly always relates to commercial or contractual dealings.:

So if you and I enter into an arrangement whereby you will buy a gun for the sole purpose and with the expectation of subsequently transferring the gun to me, and with the understanding that I am supplying the money, I am a principal; and you are buying the gun as my agent. And thus under the well established principles of agency law, I am the actual buyer. My agent is merely acting on my behalf.

You're buying a gun with the intent to sell it and turn a profit. How is that not business?

Whether or not you would characterize it as business is irrelevant. What matters is how the activity, i. e., being engaged in the business of a dealer in firearms, for which a license is required is defined in applicable law. "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;...

So doing it once, wouldn't be being engaged in the business of a dealer in firearm.

 

[jerkface11]

Yeah but it doesn't say how long you have to wait before you can do it again either.

 

[Frank Ettin]

There are folks that are taking advantage of the glut on the AR market and buying AR Lowers at $50.00 +/- with the intent to resell them if demand for AR's spike again. So at what point do they become a dealer if at all?...

No one knows. If they're prosecuted, it will be up to the jury.

...Until they resell them they are indeed the actual buyer.

They were the actual buyer from the beginning and remain the actual buyer. See post 3 and my post above.

Don't mix "straw purchase" with "dealing without a license." They are entirely different things.

 

[Frank Ettin]

Yeah but it doesn't say how long you have to wait before you can do it again either.

As usual, you're not paying attention, and making irrelevant and non contributory comments. See post 3.

I suggest that you read more and post less.

 

[BSA1]

I think State and Local Laws might (do?) play a important role. States with restrictive laws that require registration of buyers and firearms and all transactions to go through a FFL make the tracking of firearm transactions much easier as it creates a data base.

Compare that to States like Kansas that is very gun owner friendly that only require background check on purchases made through a FFL. I don't even need that done as my Conceal Carry License eliminates the need for FBI Instant Check so I don't even enter into their data base.

 

[giggitygiggity]

I think it's one of those things that is purposely up to interpretation and not largely enforced. If you are a good person and you're not ripping people off or committing crimes, people will likely not question you buying and selling guns whether it's one, two, or fifty, even if it is for profit and you do it regularly. However, if you get busted for something that is without question a crime, you're gun buying/selling might result in an additional charge since you've already been caught doing something illegal and it would not be too difficult to convince a judge or jury that you should also be convicted of another crime. This is not legal advice and I am not a lawyer, but I'd imagine that being charged with that if you were arrested and charged with that, it would be an "add on" charge.