Manufacturer Firearms in Transit to the NRA Annual Convention

If you are a manufacturer of firearms with a booth display at the NRA annual convention in Houston, don’t forget to read ATF Ruling 2010-1.

The ATF Ruling discusses two scenarios pertinent to gun shows.  One, where the firearm is in the possession of an employee for a limited period, and the employee does not engage the firearm in personal use.  Two, where the firearm is going to be in the possession of an independent contractor, even if not going to be in personal use.

There are three basic requirements that begin the analysis under the Gun Control Act of 1968:

(1) it is unlawful for someone other than the Federal Firearms Licensee to cross state lines or national borders with a firearm;
(2) it is unlawful for an FFL to sell or deliver a firearm to an out-of-state resident;
(3) FFLs must maintain records of importation, production, shipment, receipt, sale, or other disposition of firearms on site and in a form consistent with federal regulations.

Add to this list two additional factors from federal regulations:

(4) each firearm sale or disposition must be recorded in a form consistent with federal regulations; and,
(5) Form 4473 must be completed for each sale or disposition.

ATF Ruling 2010-1 sets out the ATF position that a temporary assignment of a firearm to an employee for bona fide business purposes does not constitute a sale, transfer, or other disposition.  In other words, when someone is a direct employee of an FFL takes temporary assignment of a firearm for business purposes such as a trade show, title and control of the firearm remains with the FFL. 

The ATF Ruling does caution the importance of inventory control, particularly in this situation.  It would appear to be a best practice under this Ruling to have a formal (written) company policy for such employee assignments, including internal paperwork for the employee plus a designated supervisor to check out the firearm and then ensure the return of the exact same firearm to its proper inventory location.  This internal paperwork would be separate from the mandatory Acquisitions & Dispositions book.

By contrast, the ATF Ruling is essentially a prohibition against a temporary assignment of a firearm to a non-employee.  The simple way to delineate these two scenarios is that the employee is a W-2 wage earner, while the independent contractor is a Form 1099 third party.  The ATF Ruling both as to the difference between the employee and the non-employee, as well as the rationale for the ruling, is basic employment law.  The employer is seen to have more control over a direct employee than a contractor, agent, or representative.

The ATF Ruling offers two solutions to this potential dilemma when using a third party to man a booth display at a show.  First, the third party can become an FFL, creating an FFL-to-FFL transfer.  Alternatively, the FFL may transfer the firearm to another FFL in the foreign state, where that second FFL can go through the necessary steps to oversee transfer of the firearm to the third party.  In both of these scenarios, because the firearm is leaving the exclusive control of the manufacturer, the transactions are to be treated as actual transfers or dispositions in the nature of sales, requiring record-keeping in the bound book of disposition, along with all associated paperwork such as the Form 4473.