To Become an FFL, Or Not ...

[M100C]

All,
Sorry for such a long post, but the quality of the information I provide will affect the quality of your answers, so here goes:

I have recently had the opportunity to buy/sell some guns. I really enjoy breaking them down, cleaning them, reassembling, and taking them to the range to see how well they work (or, what I need to fix). In the end, I've made a few hundred bucks here and there, but I enjoy this hobby enough to warrant doing it more frequently. Most of the sellers and buyers have been relatives and friends, and with everyone I know armed … … I am looking at opportunities to sell online (e.g. GunBroker). To become an FFL or not to become; that is the question!

First, some background: I live in Michigan. This is strictly a hobby; the principal objective is not livelihood and profit – I have a full-time, professional career. And, I am only interested in buying and selling long guns (mostly rifles). Just assume I go wild in this endeavor, and end up buying and selling ten per weekend (enough that someone could question this activity). Can I do so as an “unlicensed person” or must I become a “licensed dealer”? Here's what I've found in the law (I've underlined sections that are particularly relevant to the questions that follow):

From: http://www.atf.gov/firearms/faq/unlicensed-persons.html#private-record-keeping
Q: What record-keeping procedures should be followed when two private individuals want to engage in a firearms transaction?

When a transaction takes place between private (unlicensed) persons who reside in the same State, the Gun Control Act (GCA) does not require any record keeping. A private person may sell a firearm to another private individual in his or her State of residence and, similarly, a private individual may buy a firearm from another private person who resides in the same State. It is not necessary under Federal law for a Federal firearms licensee (FFL) to assist in the sale or transfer when the buyer and seller are “same-State” residents. Of course, the transferor/seller may not knowingly transfer a firearm to someone who falls within any of the categories of prohibited persons contained in the GCA. See 18 U.S.C. §§ 922(g) and (n). However, as stated above, there are no GCA-required records to be completed by either party to the transfer.

There may be State or local laws or regulations that govern this type of transaction. Contact State Police units or the office of your State Attorney General for information on any such requirements.

Please note that if a private person wants to obtain a firearm from a private person who resides in another State, the firearm will have to be shipped to an FFL in the buyer’s State. The FFL will be responsible for record keeping.

Here's the relevant MI state law:
750.223 Selling firearms and ammunition; violations; penalties; “licensed dealer” defined.
(1) A person who knowingly sells a pistol without complying with section 2 of Act No. 372 of the Public Acts of 1927, as amended, being section 28.422 of the Michigan Compiled Laws, is guilty of a misdemeanor, punishable by imprisonment for not more than 90 days, or a fine of not more than $100.00, or both.

(2) A person who knowingly sells a firearm more than 30 inches in length to a person under 18 years of age is guilty of a misdemeanor, punishable by imprisonment for not more than 90 days, or a fine of not more than $500.00, or both. A second or subsequent violation of this subsection is a felony punishable by imprisonment for not more than 4 years, or a fine of not more than $2,000.00, or both. It is an affirmative defense to a prosecution under this subsection that the person who sold the firearm asked to see and was shown a driver’s license or identification card issued by a state that identified the purchaser as being 18 years of age or older.

(3) A seller shall not sell a firearm or ammunition to a person if the seller knows that either of the following circumstances exists:
(a) The person is under indictment for a felony. As used in this subdivision, “felony” means a violation of a law of this state, or of another state, or of the United States that is punishable by imprisonment for 4 years or more.
(b) The person is prohibited under section 224f from possessing, using, transporting, selling, purchasing, carrying, shipping, receiving, or distributing a firearm.

(4) A person who violates subsection (3) is guilty of a felony, punishable by imprisonment for not more than 10 years, or by a fine of not more than $5,000.00, or both.

(5) As used in this section, “licensed dealer” means a person licensed under section 923 of chapter 44 of title 18 of the United States Code who regularly buys and sells firearms as a commercial activity with the principal objective of livelihood and profit.

So, here is my “business plan”:
1) I will limit my purchases from MI state residents; otherwise, I'll have my FFL do the transfer to me.
2) I will limit my sales to MI state residents; otherwise, I'll require the buyer to have an FFL to do the transfer.
3) For state residents, I'll check their state-issued ID, and have them attest to the questions on the ATF transfer form. Clearly, I will not knowingly sell a gun to a felon. I will not file any of this paperwork, but will keep it for my records.
4) Sales will be made face-to-face; I will not ship a gun, period, unless it is to an FFL.

Do you foresee any legal issues, or practical limitations to conducting my hobby in this way?

Thanks so much for your feedback in advance,
Chris

 

[rocky branch]

There used to be a great many people doing what you propose.
Look around-90% gave it up around 20 years ago.

Fees, restrictions, liabilities, etc etc took all the fun out of it.

Not raining on your parade, but I have several friends who were doing OK as a sideline and simply threw up their hands.

This was in response to a well planned attack by the govt. on the gun trade.

I'm sure others will have opinions.

Good luck, whatever you decide.

 

[brickeyee]

Does your zoning allow a business to be run from your home?

BATFE wil want to see a business license, sales tax certificate, etc.

All the things of a real business.

 

[dprice3844444]

plus if you have it at your house,they have the right to check all guns on the premises

 

[GRIZ22]

This is strictly a hobby; the principal objective is not livelihood and profit

You can't approach become a FFL with this attitude. If you are not looking for a profit worth your time it will wind up costing you money.

I guarantee if ATFE finds some discrepancy in your recordkeeping they will not accept the excuse "this is strictly a hobby".

 

[Bubbles]

plus if you have it at your house,they have the right to check all guns on the premises

Really? News to me, and I am a home-based FFL. The IOI's don't care about your personal guns as long as you store them separately from the business firearms, or as long as they are clearly tagged as personal guns and not for sale.

On the dealing side, just to give you an idea, the ATF recently popped a guy in WA state for dealing w/o an FFL - he bought and resold an average of three guns a month for several years. The guy is in Club Fed for a while.

The activity described by the OP definitely puts him into the business category as it sounds like he is taking in guns for repair and keeping them overnight, or he's buying them to repair and resell. So, he should be licensed if he wants to continue legally.

Also, there is a very fine (and expensive) line between gunsmithing and manufacturing wrt guns you purchase to repair and resell - see http://www.atf.gov/firearms/faq/manufacturers.html#dealer-gunsmithing for more info.

 

[AlexanderA]

A gun hobbyist who, like the OP, wants to buy and sell guns on a regular basis, but working from home and without the objective of livelihood and profit, is in a catch-22 situation. On the one hand, these sorts of regular transactions will eventually garner the attention of the ATF, which may charge the person with the crime of "dealing without a license." On the other hand, the lack of a profit motive and the lack of the accoutrements of a business, such as premises open to the public during regular business hours, compliance with local zoning, local business license, sales tax number, etc., will preclude the issuance of the FFL in the first place. As a practical matter, then, such activities are illegal or at least highly risky.

This situation is entirely by design. Up until the mid- to late-1980's, there were hundreds of thousands of such "kitchen table" FFL's. Then, ostensibly because there were too many such dealers for the ATF to supervise effectively, a weeding-out process was initiated, through the raising of fees and the strict enforcement of things like zoning and business hours. Hundreds of thousands of FFL's simply decided that the hassle wasn't worth it, and dropped out. The whole landscape of the gun business changed, to the detriment of both hobbyists and consumers. The relatively few FFL's that remained were put into a monopolistic position (having a captive clientele for transfer fees, etc.).

There should be a hobbyist FFL, something like a hybrid between a C&R and a regular FFL. I wouldn't hold my breath that this will happen; some of the biggest opponents would be the current holders of business FFL's. They're a "protected class," and they want to keep it that way. (Sort of like some current owners of registered machine guns.) What we have here is a very effective use of a "divide and conquer" strategy by the anti-gunners.

 

[Trebor]

Just assume I go wild in this endeavor, and end up buying and selling ten per weekend (enough that someone could question this activity). Can I do so as an “unlicensed person” or must I become a “licensed dealer”? Here's what I've found in the law (I've underlined sections that are particularly relevant to the questions that follow):

From what you describe you'd be "in the business" of buying and selling firearms and would need a FFL to do it legally.

While there is no "hard and fast" rule by the ATF about how many firearms you can acquire or dispose of as a private person, they look at the totality of circumstances and whether you could be considered to be "in the business." At the level you describe I'm pretty sure they'd consider you to be "in the business" and could bust you for dealing without a FFL.

You can get a FFL to operate from your home address. You just have to make sure you are in compliance with all local zoning requirements, have the correct business and sales tax license, etc. If the zoning is OK, from what I understand it's not that difficult to do.

Don't use the words "hobby" if you apply either on your application or during your interview. You would be in the business to make money, you'd just be working it as a part-time thing. If it's a hobby, they won't grant the license.

 

[USAF_Vet]

I'm looking to get my C&R FFL this year, for the sole purpose of buying and collecting (with the possibility of some selling) Milsurp rifles and revolvers. I buy at least one milsurp a year, and the $30 annual fee is an even trade for one FFL transfer.

I'm still familiarizing myself with the C&R regulations, will set up a bound book, etc.

You might consider this route rather than the full blown FFL as a dealer might have for a business.

 

[dogtown tom]

USAF_Vet I'm looking to get my C&R FFL this year, for the sole purpose of buying and collecting (with the possibility of some selling) Milsurp rifles and revolvers. I buy at least one milsurp a year, and the $30 annual fee is an even trade for one FFL transfer.

I'm still familiarizing myself with the C&R regulations, will set up a bound book, etc.

You might consider this route rather than the full blown FFL as a dealer might have for a business.

The two licenses are for two distinctly different purposes. The 03FFL is for collecting purposes only.........absolutely NOT to be used for buying with the intent to sell.

While the C&R will get you "dealer discounts", you cannot use it to engage in the business of dealing in firearms in any manner. It is not an "FFL lite".

 

[crracer_712]

Quote:
plus if you have it at your house,they have the right to check all guns on the premises

Really? News to me, and I am a home-based FFL. The IOI's don't care about your personal guns as long as you store them separately from the business firearms, or as long as they are clearly tagged as personal guns and not for sale.

I think the more important message was they can come in to your home anytime they want.

 

[RhinoDefense]

There should be a hobbyist FFL, something like a hybrid between a C&R and a regular FFL. I wouldn't hold my breath that this will happen; some of the biggest opponents would be the current holders of business FFL's. They're a "protected class," and they want to keep it that way. (Sort of like some current owners of registered machine guns.) What we have here is a very effective use of a "divide and conquer" strategy by the anti-gunners.

It's pretty simple really and the current law covers things nicely. The FFL is a business license, not a hobby license. Not everyone is cut out for business and especially not an FFL business. I don't care who gets an FFL. Competition is healthy for businesses and consumers alike. Why should requirements be dumbed down to suit the weak?

 

[dogtown tom]

crracer_712: ...I think the more important message was they can come in to your home anytime they want.

No, they can't. You retain the same constitutional rights to illegal search that you had prior to acquiring your FFL.
1. ATF is limited by Federal law to ONE compliance inspection on a licensee per year. It is physically impossible for ATF IOI's (Industry Operations Investigators) to inspect every licensee each year. Many FFL's report five or more years between inspections.
2. The compliance inspection is limited to the business hours you listed on your application. They don't get to demand entry for an inspection at 3am unless you let them in.
3. The compliance inspection is limited to your records and firearms inventory. This means bound book, 4473's and multiple sale of handgun forms. They don't get to search your sock drawer and bedroom closets.
4. IOI's may appear at any time when activily tracing a firearm. Again, it is not a 3am door kick in. But allowing him access to your records. Odds are 99-1 he would simply call you.
5. In the event that an ATF enforcement agent demands entry at 3am, he would be required to have a search warrant.......because you are under criminal investigation. This of course is far different from anything an IOI would do and should never concern a licensee unless he is up to some shady stuff.