What is involved in getting the appropriate FFL license to build machine guns?

Status
Not open for further replies.
M

Mark-Smith

Member
Joined
Oct 1, 2010
Messages
285
Location
Texas!
I know you need a FFL class 3 or class 2 license to build / use machine guns, but I don't know much other than that.

I like to tinker and build things, and have been contemplating doing specialized / niche gunsmithing as a part-time job.

Does it have to be a full time job to get the appropriate FFL license?

Are there any yearly net income requirements - ie, you have to make X amount working with / fixing / selling firearms?


As far as expense, hassle and time consumed go, I don't mind any of those too much. :D

If there is some requirement to have a certain amount of income from FFL-related work though, I do worry as the things that are most profitable for gun smiths and the things that I'm interested in may not coincide enough (I don't want to make mass production stamped firearms :barf:, but rather heirloom quality items that can be passed down for generations).
 
As member Bubbles (who does this sort of thing...) has said:

If you wish to do it legally, get your Type 07 Federal Firearms License (FFL), pay the $500/year Special Occupational Taxpayer (SOT) fee, and $2250/year ITAR registration fee. Then you may build new fully-automatic firearms.

Since you'll be in the biz, you'll also form some sort of corporate entity, file tax returns regularly, get business liability insurance, etc.
Click to expand...
 
As far as the business thing goes, are you required to show a certain amount of profit per year, or just meet the check boxes for being a legal entity called a 'business'?

Mostly because as a part-time job, it'd be something I'd enjoy, but if I made a full-time job out of it, I don't know if I'd enjoy it as much.
 
Making firearms and making automatic firearms are two very different things. Realize that any automatic weapons you make will be "post-samples" that cannot be transferred to civilians (non-gov/PD)...ever. And you cannot keep them when you give up your license.

Having said that, FFLs have not traditionally had to show a profit to keep their licenses. The ATF doesn't require you to show them your balance sheet. The IRS, however, has been known to have issues with "businesses" that don't show a profit but claim deductions/exemptions. The fees for keeping your license would normally fall into this category, but if you don't care...

You don't need the SOT to build Title I guns. So you could still build really nice "heriloom quality" bolt guns or pistols (as an example) without any problem.

And with the SOT, you can still build suppressors, AOWs, SBSs, SBRs, etc. for sale to non-prohibited persons. But any machinegun you built would be a nice toy only until your license expires; then it has to become someone else's toy.
 
MasterSergeantA said:
Making firearms and making automatic firearms are two very different things. Realize that any automatic weapons you make will be "post-samples" that cannot be transferred to civilians (non-gov/PD)...ever
Click to expand...

Yeah, I have no plans in letting a non-eligible person / entity getting their hands on any full-auto post-samples.

I'm not sure if there's any money to be made in selling those to government / PD from a 1 man gun smith type shop... Then again, I don't know either way honestly.
 
While you are not required to show a profit (most businesses don't the first few years they're in business) you do have to show that you are operating as a business with the reasonable expectation of making a profit. This means keeping appropriate financial records, not co-mingling business funds with personal funds, setting up a business entity (e.g. an LLC). Otherwise the IRS (not ATF) will claim that your activity is classified as a hobby.
http://www.irs.gov/newsroom/article/0,,id=169490,00.html

ATF doesn't care if you're profitable or not, only that your records are correct.

I have a home-based FFL. I wrote this up based on my experience getting it a couple of years ago.

Steps to getting a home-based Federal Firearms License (FFL):

1) Check your local zoning ordinances and HOA CCR's, if any. If either document prohibits you from obtaining a business license at your residence, go no further until you've worked these out. The ATF will not issue you an FFL until you get a waiver from your county and/or HOA.

2) Check with your homeowner's insurance to see how much it will go up if you run a firearm business out of your home. Hopefully you have a local agent who you've personally known and worked with for many years, as the flunkie on the toll-free call center phone will probably freak at your questions. You may find the increase in premium alone makes getting an FFL unviable.

3) Another question for yourself - are you comfortable filing federal and state tax returns every quarter, and monthly sales tax returns? If not, add CPA services to your list of expenses.

4) If you've gotten to this point, find an attorney to help you form a S Corp, C Corp, or LLC (most folks go with an LLC). This is not the time to go with a DIY document off the internet, especially if you plan on dealing in NFA toys. Besides, being in the firearms biz, you're going to need an attorney sooner or later anyway; might as well get to know one now.

5) Once your corp/LLC is formed, get your EIN and obtain any necessary state and local business licenses to run a business. If you don't have these, the ATF will not issue an FFL. See #1 (and yes, they go to your county or city courthouse and check).

6) Call the ATF Distribution Center (703-455-7801) and ask for an application packet. It will include several copies of the application (no carbons unfortunately), fingerprint cards, and instructions.

Note that all manufacturers (Type 06, 07, and 10 FFL's) must register with the Department of State and pay ITAR annually. This registration fee is $2250.00.

A Type 01 (Dealer) FFL is $150 for the first 3 years, and $90 every three years afterward to renew the license afterward.

Some states, such as CA, MD, NY, and NC, have additional licensing requirements & fees for gun dealers.

Also, avoid the "we will help you get your FFL" companies that want to charge a fee to get you your license. Everything you need is available free from the ATF.
 
Yeah, I LOVE the ITAR thing. Really an great fixture in American law. Joe Blow mom and pop get to pay international arms trade registration fees? This is ridiculous. I can see needing this if you are HK or FN, but for say for Red Jacket? Say what you will about them, I'm not a fan, but it is highly unlikely you'll find a brigade of fighters in Africa armed with Red Jacket weapons, and that makes it ridiculous. Especially since it costs more than all the other licenses combined. Only DD is more?

Don't forget your local licenses and fees. You'll need to be in the proper zone and your state may have special laws and fees for this too.

It is enough that I can't afford to get going and I just want to do semi's. Really is a drag, I'd like to do something about the economy but I'm hamstrung. Starting a business today is so expensive and risky it'll be our downfall. Only corporations and big business can survive like that, and only for so long before it will require communism or facism to keep the boat afloat.
 
Thanks Bubbles! That's incredibly informative stuff!

I don't have to deal with any HOA's (thank god), but I'll have to check into zoning as well as if home owner's insurance premiums will be too painful or not.

I can do CPA stuff without a problem, I'll definitely talk to my lawyer about forming a company though. Good to know you need a EIN before you can apply for your FFL.

What's the difference between the type 06, 07, and 10 FFL's?
 
Mark-Smith said:
Thanks Bubbles! That's incredibly informative stuff!

I don't have to deal with any HOA's (thank god), but I'll have to check into zoning as well as if home owner's insurance premiums will be too painful or not.

I can do CPA stuff without a problem, I'll definitely talk to my lawyer about forming a company though. Good to know you need a EIN before you can apply for your FFL.

What's the difference between the type 06, 07, and 10 FFL's?
Click to expand...
The differences are in what you manufacture. 10's are manufacturers of DD's. 07's are manufacturers of everything but.
 
As usual, Bubbles nailed it.

I gave up my FFL back during the reign of the Clintonistas with the changes that they caused. I was running a one-man gunsmithing operation and went to renew the license only to find out that I NOW had to have the county come in and verify that my "premises" were adequately alarmed, my "vault" was up to their expectations, etc. I threw in the towel. ATF had been given a mission of cutting down the "kitchen table" dealers by a substantial margin. I think it worked.

At the time, you could only own a handgun in Washington D.C. if you had a district-issued permit...and those were few and far between. BUT...there were like 15,000 FFL holders in the district. Interesting way around the rights violation.
 
Last edited:
Status
Not open for further replies.
Back
Top