AR Sponsor
Posted: 8/8/2006 3:12:02 PM EDT
|
With an FFL and Manf. License, can one build kits and sell them over then net or at shows. I'm sure the answer is yes. But whats the differnce between a "Manufacturer" and a "Builder" in terms of the ATF taxation. Are you hit with EXCISE TAX of $XX.XX per gun or do you pay something only if its an NFA item? Any help is greatly appreciated |
Yes
If a complete gun is built from parts with the intention of selling it, as you stated, you must have a manufacturer license and pay the excise tax (11% for Rifle, 12% for Handgun) to the ATF. A "Builder" pays no excise tax to ATF if it is for personal use. If he builds one for personal use and eventually sells it, although it is 'probably' due based on the tax codes, there is no mechanism in place for non-manufacturers to make excise tax payments to the ATF. If you build and sell too many guns (too many has never been defined) and ATF finds out, they'll hit you up with manufacturing without a license and probably tax evasion as well. |
|
One minor point (maybe a bit picky).... The FET is a IRS issue and is paid to the IRS. Making lower receivers is an ATF issue. The ATF and IRS have different definitions of a "manufacturer", therefore the FFL and FET issues may be different in specific scenerios. I wish I could accurately remember all the descriptions and differences, but I don't want to hand out imperfect info on a topic like this. |
|
more food for thought. who are the receivers registered to? 80% receivers aren't registered. while you can get away with this for personal use, i think there are laws against selling unregistered firearms. logic dictates: machine 80% to 100% for sale will require serial # and registration - manufacturer. Buy a bunch of registered receivers, build/sell rifles - ffl. customers buy their own receivers - local business license as gunsmith. |
I was thinking much smaller time than an official business. Something that would only be done once in a while. The kind of "volume" I'm thinking of would be so low that if it were anything besides a gun, say a computer or a piece of furniture, I wouldn't give it a second thought. |
|
Conman, I think your right for sure. Its clear one should have an FFL and Manf. License. I guess my question is still understanding the FET being paid to ATF and or IRS? I had thought someone mentioned that under the cover of "Builder" you would only pay the 10-12% FET, but if you were a "Manufacturer" you paid $200.00 per gun. ITs still not clear to me, perhaps some of you builders and manufacture guys can explain it all. Thanks |
Not picky at all. At one time, ATF collected the manufacturing tax. It may have changed with the move of ATF from Treasury to Homeland Security (or were ever they are now), and I'm not 100% sure of the changes that this move caused. I haven't researched this aspect lately as it is of no direct concern to me and I made the assumption that since ATF still issues the manufacturing license, that they were still collecting the FET taxes and giving the to IRS. Sorry if it caused any confusion. |
It depends on what you are assembling. Assembling uppers from parts requires nothing..no license, no tax. Assembling lowers from parts is another thing. I believe that this makes you a manufacturer and requires a manufacturing license, but no tax payment. Assembling complete firearms from parts requires a manufacturing license and FET tax payments. One key difference as stated by Bravo is the definition of Manufacturer. Once you start handling the frame/lower as part of a business, whether you make money or not, you are considered either a manufacturer or a dealer. It is key that you look up the definition of manufacturer, as well as 'business', 'firearm' and any other terms used in the definition. Be especially careful that you don't mix up definitions, which is the difficult part. Some laws/rules/regulations, have very specific definitions that only apply to the law/rule/regulation being discussed and do not apply to other laws/rules/regulations. For example, the ATF definition of a business is different from the IRS definition of a business. But it gets worse. Even within ATF, the definition of what is considered a Firearm changes depending on the what is being discussed. (Not all this is ATF's fault, many of the laws passed include definitions as part of the law, so Congress changes the definitions as new laws are passed, changed or ammended). For instance, the definition of a firearm, when it applies to Serial Number requirements means the frame/lower only, but when discussing FET taxes, a firearm means a complete firearm, not just the frame/lower. You have to be very careful of these subtle differences and not apply the wrong definition. Aren't you glad you asked?  |
|
Now here is the big monkey wrench in your plans. The International Traffic in Arms Regulations require anyone manufacturing a firearm to register with the State Department. The registration fee is $1750. Ouch. Rumor #1. I read there is an update to the FET, I can't find the source at this time, that says the FET is only due when you sell 50 or more guns. Can't state this as fact but I have seen it on ARFCOM more than once (so that makes it law  ).Rumor #2. I've been told by manufacturers in the gun industry that the ATF allows up to 8 guns to be made as prototypes. Once you make the 9th gun, you are now manufacturing. |
I've heard of #1 also. I believe it was supposedly adopted to protect small time gunsmiths who make and sell highly customized guns from off the shelf guns. I don't know if it actually was been implemented. Never heard of #2, but with ATF, it wouldn't surprise me. |
|
my local FFL says he can't legally build complete rifles from parts and then sell them, not even his personal put togethers (because he holds ffl). he can and does work on them, install ff rails, nm triggers, and in general assemble any parts that customers buy from him or elsewhere. he sure builds some nice stuff for himself though... rival some on this board. |
|
To summarize all the responses. If you buy/build lowers and assemble complete rifles with the intent to sell them, you must have a 07 FFL (manufacturers license). It is only $150 for 3 years but takes about 60-90 days to get through the ATF. You also need a IRS tax ID number and a city/county/state business license to conduct a business. If this is intended to be a business, then the excise tax needs to be paid on complete guns. If you buy/build complete rifles for your own use but later decide to sell them, no license is required. There is a gray area in the way the law is written as it uses terms like "with the intent to sell" which is subjective and intent is sometimes difficult to prove. So, as others have said, if you build guns for yourself and later sell them, keep the number small so as not to run afoul of the ATF. This can all be done for around $300 depending on your state business license fees. You need to sell a small number of guns to break even as the mark up for guns is not that much. Is this a little clearer. |
|
The fee is 11% per long gun paid as an excise tax to the IRS. There are no additional fees. Cost list; IRS EIN (Employer ID number) free online with IRS Business license (depends on state), mine was $135 for a LLC. FFL license - $150 for 3 years to BATFE ITAR registration fee - $1750 per year to State Department Excise tax on all guns over 50, 11% per long gun paid to the IRS. Since you plan to assemble someone elses products into a complet gun, there are no additional fees. By getting set up a business and 07 FFL, you can get parts at dealer cost, increasing your profit margine. If you did this off the books, you would have to pay for all parts at retail and the profit margin is much smaller. And you risk getting caught by the ATF or the State Department. I can not caution you strongly enough not to make any insinuations or inuendos about breaking the law. If you intend to sell guns small time, the cost of the licenses and fees will eventually pay for themselves. But feel free to do what you will with this information. |
|
woah nelly, for the record I already have my FFL. I have always purchased and sold complete guns. Never built anything either for myself or anyone else. just wanted to see how many more poor chumps have another version of the their understanding. So far its still pretty clear the do 's and dont's. But as you can tell, just about everyone is misinformed or the laws are not clear. Not looking for any loopholes here. Just wanting to do a few project guns and then have fun with them and after that if I get tired of them, sell them legally....................thats all. Thanks for everyones input |
AR Sponsor