This may be the wrong forum for this post but wanted the largest number of people to read it as I could. Len, if you want to move it, thats fine.
Earlier this summer I was contacted by one of my receiver makers and was given a heads up about a potential SERIOUS problem that may be effecting me that I was not aware of.
Seems he had an ATF agent in his shop going through his log books and noticed there were alot of 01 FFL holders that were ordering his receivers. The agent asked him what were these 01 FFL holders doing with all these custom receivers? His reply was building rifles on them he assumed.
The agent closed the log book and told the shop owner he would give him 30 days before he came back. In those 30 days, he was to contact all the 01 dealers and inform them that it was a federal offense to build a rifle using a custom receiver and selling it to a customer without an 07 manufacturers FFL license.
He told him to contact the FFL holders tell them to get their applications turned in for the manufacturing license and he would be back in 30 days, at that time, he would be checking to see which of the dealers have and have not applied for the correct license.
After getting this information, I instantly started the process to get my license updated and last month I had an ATF agent show up at the shop to inspect things and give the final OK or NO GO for the manufacturers application. Everything was in order and there was no problem getting the approval for the license.
after the inspection and interview was over, I asked the Agent several questions. The most important one being, "When does someone need a manufacturing license to build and sell firearms to customers?"
His commend was about as clear as mud but he did state that anytime a custom receiver is used, you MUST have an 07 FFL. No questions asked.
He also said that anytime you significantly change the appearance of a factory rifle you are required to have an 07 FFL. He gave an example of someone bringing me a Rem 700 and I rebarreled the rifle and changed the stock to a custom stock. He said in that case you need an 07 FFL license.
He also said if you are not a gunsmith but do finish work where you will be working on partially assembled rifles or barreled receivers you need an 07 FFL. He example here was someone that would receiver a barreled receiver and they would do the stock work and transfer the finished rifle to a customer, they are required to have the same 07 FFL even though they did not do the metal work. His reasoning was that the firearm was not functional until the performed their services on the rifle so they were held to the same standards and requirements as the smith doing the metal work.
He did say that if someone brings in a Rem 700 and you replace the factory barrel with a barrel of same contour and design or replace the stock with a factory equivelant stock, the standard 01 FFL was all that was needed because the appearance of the rifle had not been significantly changed from the original factoy status.
I then asked him about federal excise taxes and how they are applicable to rifles I build in the shop.
- If you build and sell 49 or under custom rifles
annually, you are not subject to the 11% excize tax on firearms. If you build 50 or more, you are liable for the 11% excise tax, not only on that #50 rifle but also on the previous 49 rifles as well!!!
- Once you file a federal Excise tax form, you HAVE to submit the same form monthly for the entire time you are in business, even if you have no taxes to pay......
I then asked again, what was considered a custom rifle
, and his discription was the same for this as what he discribed for the 07 FFL.
I then asked is there a standard definition of these limitations on what defines a custom rifle
or firearm and he said yes but in general agents have the final decision on how the rules are inturpreted so it can vary greatly from one agent to another..............Thats good to hear!!!
Simply put, if your building rifles, your best served to get the 07 FFL just to make sure your ***** is covered from the ATFs point of view no matter the opinion of the agent. The 07 FFL allows you to do anything the 01 does but also allows you to manufacturer and sell custom firearms which the 01 FFL does not do.
Many of you may already know this, most of my fellow gunsmith friends had no idea about it, neither did I so I just wanted to get the word out to fellow smiths to take the proper steps to get the license needed to cover your shop activities from a legal stand point.