Any Gunsmith with an 01 FFL license, read this now....

Discussion in 'Rifles, Bullets, Barrels & Ballistics' started by Fiftydriver, Aug 17, 2008.

  1. Fiftydriver

    Fiftydriver <strong>Official LRH Sponsor</strong>

    Jun 12, 2004
    To all,

    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 A$$ 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.
  2. ss7mm

    ss7mm Writers Guild

    Jun 11, 2005
    Ah yes, part time bookeeper, part time secretary, part time lawyer, part time politician, part time babysitter, part time janitor, part time purchasing agent, part time gopher and in your spare time you get to be a top notch gunsmith.;):rolleyes:;)

    Isn't our government wonderful in the ways they look out for us?:cool:;):cool:

  3. Marine sniper

    Marine sniper Well-Known Member

    Sep 11, 2005
    Well said. That is the way it is for every small business owner though.....
  4. BountyHunter

    BountyHunter Writers Guild

    Jun 13, 2007
    They have been doing that back East for a couple years now. The local agents added a couple twists.

    No 49 rifle exemption AND if you sell them the action and build a complete rifle, it automatically is mftring.

    Couple gunsmiths in this area got hit hard and for back excise taxes.

  5. davewilson

    davewilson Well-Known Member

    Feb 19, 2004
    i'm not a smith and didn't even stay at a holiday inn recently. what is the difference between an 01 and 07 license? i take it we're not talking about the year here. i'm guessing it's kinda like different rating drivers licenses?
  6. ss7mm

    ss7mm Writers Guild

    Jun 11, 2005
    Federal Firearms License types

    Type Usage Type 1 Title 1 dealer or gunsmith Type 2 Title 1 dealer doing business as a pawnbroker Type 3 Licensed collector of Curio & Relic (C&R) firearms Type 6 Licensed manufacturer of ammunition and reloading components other than Armor Piercing ammunition Type 7 Title 1 manufacturer of firearms, ammunition and ammunition components other than NFA, Destructive Devices and Armor Piercing ammunition Type 8 Importer of Title 1 firearms and ammunition Type 9 Dealer in Title 1 firearms including NFA destructive devices, but no other NFA items Type 10 Manufacturer of Title 1 firearms, ammunition and ammunition components, including NFA Destructive Devices but no other NFA items, and not including Armor Piercing ammunition Type 11 Importer of Title 1 firearms, ammunition and NFA Destructive Devices, but no other NFA items
    [edit] Special Operations Tax Classes

    Class Usage Class 1 importer of NFA firearms Class 2 manufacturer of NFA firearms Class 3 dealer of NFA firearms To get a Class 1 SOT status, you need an importer FFL, which includes Type 8, 11
    To get a Class 2 SOT status, you need a manufacturer FFL, which includes Type 7, 10
    To get a Class 3 SOT status, you need a dealer or manufacturer FFL which includes Type 1, 2, 7, 8, 9, 10 or 11

    [edit] Collectors of Curio and Relic (C&R) Firearms

    A special type of FFL is available to individual collectors of curio or relic (C&R) firearms. C&R firearms are defined in Title 27, Code of Federal Regulations, Part 478.11[1] as those "which are of special interest to collectors by reason of some quality other than is associated with firearms intended for sporting use or as offensive or defensive weapons." An application for a C&R FFL is filed using ATF Form 7CR.
    To be recognized by ATF as a C&R firearm, a firearm must fall into at least one of the following three categories:

    1. Firearms which were manufactured at least 50 years prior to the current date, but not including replicas thereof;
    2. Firearms which are certified by the curator of a municipal, State, or Federal museum which exhibits firearms to be curios or relics of museum interest; and
    3. Any other firearms which derive a substantial part of their monetary value from the fact that they are novel, rare, bizarre, or because of their association with some historical figure, period, or event. Proof of qualification of a particular firearm under this category may be established by evidence of present value and evidence that like firearms are not available except as collector's items, or that the value of like firearms available in ordinary commercial channels is substantially less.
    Some examples of C&R firearms are most manually-operated and semi-automatic firearms used by a military force prior to 1946. This includes most firearms used by the warring nations in World Wars I and II. However, the firearm must normally also be in its original configuration in order to retain the C&R designation, so for example, an unaltered Mauser Kar98k rifle used by the German Army in World War II would be considered as a C&R firearm, while the same rifle having been "sporterized" with a new stock and finish would generally not be considered a C&R firearm. This is an ambiguous point in how the license is currently administered. Some firearms that were altered by the militaries that issued them have been confirmed by the BATFE to retain C&R status, though whether this applies to all such conversions (the examples given by the BATFE were the Spanish M1916 Guardia Civil, FR-7, and FR-8 Mausers) also remains ambiguous. As long as the receiver (the part of the firearm that is regulated by the BATFE) is over 50 years old the firearm technically qualifies as a Curio & Relic. Individual license holders Interpret this different with some abiding by the 50 year old rule and some by only accepting what is on the list published by BATFE and BATFE only replies with the above 3 criteria for eligibility when inquiries have been made. Certain automatic weapons have been designated as C&R firearms, and although a C&R FFL can be used to acquire these as well, they are also subject to the controls imposed by the National Firearms Act of 1934. ATF maintains a current list [2] of approved C&R firearms on its website.
    Licensed collectors (who have been issued a C&R FFL) may acquire C&R firearms in interstate commerce, e.g., via mail or phone order or the Internet, or in person. (This is especially important for collectors of pistols and revolvers since they may not otherwise be acquired outside a collector's state of residence.) However, the selling FFL dealer or collector must have a copy of the buyer's C&R FFL before the C&R firearm can be shipped to the licensed collector. Licensed collectors are not considered to be FFL dealers and have no special privileges concerning non-C&R firearms, nor may they "engage in the business" of regularly selling C&R firearms to persons who do not have an FFL. The purpose of the C&R license is to enable a collector to acquire C&R firearms for his/her personal collection and not to become a firearms dealer.[citation needed][3].

    [edit] Conditions of Application

    ATF will approve the application if the applicant:

    • Is 21 years or older.
    • Is not prohibited from handling or possessing firearms or ammunition
    • Has not violated the Gun Control Act or its regulations
    • Has not failed to disclose information or facts in connection with their application
    • Has premises for conducting business or collecting
    The applicant must also certify that:

    1. The business to be conducted under the license is not prohibited by State or local law in the place where the licensed premise is located
    2. Within 30 days after the application is approved the business will comply with the requirements of State and local law applicable to the conduct of the business
    3. The business will not be conducted under the license until the requirements of State and local law applicable to the business have been met
    4. The applicant has sent or delivered a form to the chief law enforcement officer where the premises are located notifying the officer that the applicant intends to apply for a license.
    5. Secure gun storage and safety devices will be available at any place in which firearms are sold under the license to persons who are not licensees

    [edit] Application Fees

    [edit] Non-Destructive Devices

    Licensee Application Renewal Manufacturer $150 $150 Importer $150 $150 Pawnbroker $200 $90 Dealer $200 $90 Collector $30 $30
    [edit] Destructive Devices

    Licensee Application Renewal Manufacturer $3000 $3000 Importer $3000 $3000 Dealer $3000 $3000
    [edit] Ammunition

    Licensee Application Renewal Manufacturer $30 $30 Importers and manufacturers of machine guns, short-barreled rifles and shotguns, and destructive devices must also pay a special occupational tax of $500 per year if gross revenues do not exceed $500,000, and $1,000 if revenues exceed $500,000.

    [edit] See also
  7. royinidaho

    royinidaho Writers Guild

    Jan 20, 2004
    What the crap is this? Am I a bad guy........again?

    I buy a factory action from a LRH Board guy.
    I buy a factory barrel from a LRH Board guy.
    I buy/trade for a factory stock from a LRH Board guy.
    I buy enough stuff to complete assembly from a back east outfit that ships via pony express or some other slow poke outfit.:rolleyes:

    The rifle is for me but, sooner or later it'll impress some one and they'll want it. I'll want something of equal value in trade and may even except USDs.

    What the hell kind of license do I need?

    It'll really piss 'em off when they look at the 270 AM Kirby built for me. I'll have to dig all of the exterior layers off and show them the B&C carbelite stock that Kirby bedded is still in there.:D:D

    PS: Do ya gotta have a license of some sort to make bullets? My neighbor has some dies for 22 LR cases.;)

    Gov'ts: As my dad used to say. shit and 2s eight.
    Last edited: Aug 17, 2008
  8. Black Diamond 408

    Black Diamond 408 Well-Known Member

    Sep 6, 2003
    That is correct! I had a 01 license for many years, too many to mention. When i started all this custom stuff i asked the ATF agent what was nessasary to manufacture actions, 07 he said, and most of the other stuff. My rule here is 49 for the year and im done. Im not paying all that excise tax if i dont have too, might be different in your case where your doing this as a living, you just have to pass it along to the customer. If you look at various custom gun makers websites they have the excise tax added in with the package price. Oh and there is no excise tax on guns your exporting. Bush recinded the excise tax back in 2005 i believe to the 49 rule, it was allways before you had to pay on every gun you did. We use to do custom reloading also, so it was forms every month for the tax collector.

    Any one involved in the gun business needs to keep up with all the laws and changes, they wont tell you much.

    Lots of custom makers charge excise tax on all work they do, that way if they go past the 49 then they are not out of pocket for the taxes. you do 50 high dollar rigs in one year that is a lot of change to come up with.

  9. TMR

    TMR Well-Known Member

    Mar 26, 2006
    It is such a "gray" area in the ATF rule book concerning this...if you ask 5 ATF agents, you will likely get 5 different answers. When I talked with my inspector, she said that rebarrelling, coating, stock work, trigger work all fell under the type 01 gunsmith license. If I built a few from scratch and sold them, and that wasn't the primary business practice, then I was good to go with the 01 license. After I received the license, I made a few phone calls to other inspectors and smith's and got different answers. I to am changing my license over to a type 07......especially now that we are buying a CNC machine in a couple weeks.:D:D:D

    I agree with Kirby and blackdiamond....better save than sorry.
  10. phorwath

    phorwath Well-Known Member

    Apr 4, 2005
    Sounds like APS rifles are about to cost 11% more than they used to.
  11. SHOTS

    SHOTS Member

    Jul 8, 2008
    I am, and was fully aware of these rules. Because I am an 01 Dealer.

    If you are "NOT A DEALER" you can build anything you want... It is a "Grey Area" as to how long you must own it before you can sell it.

    You as a "Private Party" can build a "Pistol" or a "Rifle" from a "Non-Designated Action". You still have to make sure of the barrel length restrictions for a rifle. You also would be subject to the "Tax Stamp" for a "Short Barreled Rifle". But I was told by BATF you can still do it.

    It seems so unfair that a "Private Party" can build a custom, but a 01 FFL can not.

    The state you live in also has laws about "Excise Tax" and these can run into thousands of dollars per year, along with the tax to BATF, and all the forms and paperwork.

    Rant over for now....

  12. Ernie

    Ernie SPONSOR

    Jun 18, 2007
    Welcome to LRH and to your first post!
  13. Mikecr

    Mikecr Well-Known Member

    Aug 10, 2003
    Ok ,the problem seems to stem from this circumstance:
    The gun maker takes possesion(incl transfer) of actions, which he later transfers to a customer as a 'functional' gun, after modifying it.
    I doubt it would hold water in court, but I can see how this could be interpreted as manufacturing by an agent..

    So why take possesion of the actual gun(the serialized action)?
    Have only the customer accept transfer of the action. That way it's his 'gun' right from the git-go.
    You didn't actually make the action(or any other part), right?
    You just finish parts and screw them onto customer's guns...
    Last edited: Aug 18, 2008
  14. SHOTS

    SHOTS Member

    Jul 8, 2008
    That makes sence, but that is not how they (BATF) look at it.
    All this is only for the poor guy that has an 01 FFL. You as a "private party" can build your own gun from parts....We CAN NOT without the 07 Lic. I can sell you a frame, barrel, wood, etc. You take all the parts home and put it together...that is ok....but I can not do ANY of the work.

    You said "You just finish parts and screw them onto customer's guns", this is how you get yourself into trouble, you must have an 07 to do this.

    Hope this is starting to clear up any miss-understandings.