The Run Up To and Going Over the Line: When to Apply for an FFL

It’s a topic that applies equally to an individual person and a multi-national corporation:  do you know the point at which you need to apply for a Federal Firearms License?  A recent federal court case in Georgia highlights the need to know as a convicted defendant faces up to 25 years in prison plus a fine.

The dividing line between what we’ll call an “amateur” or “hobbyist” and someone requiring an FFL is whether one is “engaged in the business” pursuant to 18 U.S.C. §921(a)(21).  The statute breaks down into six subsections by manufacturer of firearms/ammunition, dealer in firearms, and importer in firearms/ammunition.

The definition itself is expressed as a single sentence in each case, but let’s break it down into its three components:  (1.) a person who devotes time, attention, and labor to

[manufacturing, dealing, importing] either [firearms, ammunition]; (2.) as a regular course of trade or business; and, (3.) with the principal objective of livelihood and profit through [sale or distribution, repetitive purchase and resale].  Portions 1 and 2 of the definition are objective measures relative to time spend engaged in the activity.  Portion 3 goes to the mindset of the person while engaged in the activity.

The very next statute offers further clarification on the definition of “with the principal objective of livelihood and profit”, specifically, “predominantly one of obtaining livelihood and pecuniary gain.”

Let’s run a hypothetical for an individual.  The average gun owner might have 8-10 firearms in the collection.  He might decide that he has moved up both in quality and sophistication and decide to sell out three from the gun safe and apply those proceeds to the next tick up on the wish list.  This person remains an individual without need for an FFL, even if he has made some simply after market modifications or added some accessories. 

However, let’s say that the individual, who has a history of attending gun shows, starts picking and flipping his gun show finds, at a volume of perhaps two to three guns per show across his state, going to more than 6 gun shows per year, he has walked into a need for an FFL license to deal in firearms.  The individual has crossed the line between his own hobby and personal firearms use into firearms passing through his hands for financial gain.

Where this creepage can occur for existing FFLs is in the cross-over into other areas beyond the primary FFL.  An FFL might be, for instance, typed as a manufacturer, who sells through distributors or a dealer network, but which then starts selling firearms at gun shows and at a factory store.  Or an FFL might have been importing a small but steady number of firearms for research and development purposes, but then starts selling those firearms out of inventory as obsolete for design team use.

The practical pointer to take away from the discussion is to have an awareness of all operations being conducted within the individual’s domain or the company’s operations.  Be proactive! is the practical advice.  If you have a question whether you are at or over the line of needing to apply for an FFL or a different FFL, seek out an expert and run the data past the expert.  At the very least, if you are inside the line, you will know where it is and how quickly you might be headed towards it.