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

Discussion in 'Gunsmithing' 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. msalm

    msalm Well-Known Member

    Jul 18, 2007
    This is copied from a thread on Benchrest Central. It's my understanding that if the customer SUPPLIES you with the action, the 07 is not required, but that obviously is not what you were told by the agent. BUT LOOK AT #5. I guess everyone should research this themselves, but I have an application in right now for an 01 license as it is required for a gunsmith providing those services to customers.

    The info below pretty much draws the line at buying and building FOR RESALE or SALE, and actually providing that same work on a customer's supplied gun. In that case it is not being built for sale, but is being returned to the customer for his use.

    U.S. Department of Justice
    Bureau of Alcohol, Tobacco,
    Firearms and Explosives
    Firearms Technology Branch
    August 15, 2008
    Martinsburg, West Virginia 25405
    Manufacturing of Firearms
    Below are examples of operations performed on firearms and guidance as to whether or not such operations would be considered manufacturing under the Gun Control Act (GCA). These examples do not address the question of whether the operations are considered manufacturing for purposes of determining excise tax.
    Any questions concerning the payment of excise tax should be directed to the Alcohol and Tobacco Tax and Trade Bureau, U.S. Department of the Treasury.
    Generally, a person should obtain a license as a manufacturer of firearms if the
    1) is performing operations that create firearms or alter firearms (in the case of alterations, the work is not being performed at the request of customers, rather the person who is altering the firearms is purchasing them, making the changes, and then reselling them); 2) is performing the operations as a regular course of business or trade; and 3) is performing the operations for the purpose of sale or distribution of the firearms.
    1. A company produces a quantity of firearm frames or receivers for sale to customers who will assemble firearms.
    The company is engaged in the business of manufacturing firearms and should be licensed as a manufacturer of firearms.
    2. A company produces frames or receivers for another company that assembles and sells the firearms.
    Both companies are engaged in the business of manufacturing firearms, and each should be licensed as a manufacturer of firearms.
    3. A company provides frames to a subcontractor company that performs machining operations on the frames and returns the frames to the original company that assembles and sells the completed firearms.
    Both companies are engaged in the business of manufacturing firearms and should be licensed as manufacturers of firearms.
    4. A company produces barrels for firearms and sells the barrels to another company that assembles and sells complete firearms.
    Because barrels are not firearms, the company that manufactures the barrels is not a manufacturer of firearms. The company that assembles and sells the firearms should be licensed as a manufacturer of firearms.
    5. A company receives firearm frames from individual customers, attaches stocks and barrels, and returns the firearms to the customers for the customers' personal use.
    The operations performed on the firearms were not for the purpose of sale or distribution. The company should be licensed as a dealer or gunsmith, not as a manufacturer of firearms.
    6. A company acquires one receiver, assembles one firearm, and sells the firearm.
    The company is not manufacturing firearms as a regular course of trade or business and is not engaged in the business of manufacturing firearms. This company does not need to be licensed as a manufacturer.
    7. An individual acquires frames or receivers and assembles firearms for his or her personal use, not for sale or distribution.
    The individual is not manufacturing firearms for sale or distribution and is not required to be a licensed manufacturer.
    8. A gunsmith regularly buys military-type firearms, Mausers, etc., and "sporterizes" them for resale.
    The gunsmith is in the business of manufacturing firearms and should be licensed as a manufacturer.
    9. A gunsmith buys semiautomatic pistols and modifies the slides to accept a new style of sights. The sights are not usually sold with these firearms and do not attach to the existing mounting openings. The gunsmith offers these firearms for sale.
    This would be considered the manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.
    10. A gunsmith buys government model pistols and installs "drop-in"
    trigger parts or other "drop-in parts" for the purpose of resale.
    This would be considered the manufacturing of firearms, as the gunsmith is purchasing the firearms, modifying the firearms, and selling them. The gunsmith should be licensed as a manufacturer.
    11. A gunsmith buys surplus military rifles, bends the bolts to accept a scope, and then drills the receivers for a scope base. The gunsmith offers these firearms for sale.
    This would be considered the manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.
    12. A gunsmith buys surplus military rifles or pistols and removes the stocks, adds new stocks or pistol grips, cleans the firearms, then sends the firearms to a separate contractor for bluing. These firearms are then sold to the public.
    This would be considered manufacturing of firearms, and the gunsmith should be licensed as a manufacturer.

    13. A company purchases surplus firearms, cleans the firearms, then offers them for sale to the public.
    The company does not need to be licensed as a manufacturer.
    14. A company produces firearms or firearm receivers and sends the firearm/receivers out for colorizing (bluing, camouflaging, phosphating, or
    plating) and/or heat treating. Do the companies performing the colorization and/or heat treating need to be licensed as manufacturers, and are the companies required to place their markings on the firearm?
    ATF has determined that both colorization and heat treating of firearms are manufacturing processes. The companies performing the processes are required to be licensed as manufacturers. If the companies providing colorization and/or heat treating have not received variances to adopt the original manufacturer's markings, they would be required to place their own markings on any firearm on which they perform the manufacturing process of colorization and/or heat treating.
  4. NesikaChad

    NesikaChad Well-Known Member

    Jan 28, 2007
    Please take a peak at this below which I copied from another site that advocates gun owner's rights. It's long, but a good/informative read so I'll break it up a bit.


    James H. Jeffries, III

    "There is no wholly satisfactory substitute for brains, but
    silence does pretty well." Anonymous

    Probably one of the least favorite events for any Federal
    Firearms Licensee (hereafter "FFL") is a visit from the Bureau of
    Alcohol, Tobacco and Firearms (hereafter "BATF"). This can occur
    in one of at least six very different ways and your legal rights
    and recommended responses vary accordingly.

    For purposes of the following discussion I will assume that
    you are a law-abiding licensed dealer or collector who tries to
    comply honestly with the federal firearms laws. If some of the
    discussion below seems excessively cautious, or even hostile to
    BATF, it is based on real world experience with an agency which has
    been found by Congress, by various federal judges and juries, by
    other federal and local law enforcement agencies, and even by some
    Presidents to be inept, indifferent to citizens' rights, and
    capable of the most outrageous abuses of the law.

    BATF operates under the rationale of requiring you to comply
    with the law. I operate under the rationale of requiring BATF to
    comply with the law. I required this of BATF as a federal
    prosecutor for almost 30 years, and I require it as a private
    citizen and as a lawyer. You should require it as an FFL.

    A non-licensee has no legal duty whatsoever to talk to or
    otherwise cooperate with a BATF agent (or any other governmental
    official). It is a sad commentary on our times and the state of
    our federal government (and especially BATF) that the appropriate
    legal advice from a defense lawyer to a non-licensee confronted by
    a federal or state law enforcement officer can be capsulized in a
    single sentence called RULE ONE: Silence is golden; or what part of
    "no" don't you understand?

    If you are an FFL, however, additional considerations come
    into play.

    1. The Tracing Center Inquiry. Most active dealers have had
    a telephone call from BATF's Tracing Center at some time or other
    inquiring about the disposition of a firearm whose serial number
    traces to the dealer. This is usually an inquiry concerning a
    third party and does not implicate the dealer. It should normally
    occur during your listed business hours, although emergency traces
    in high-profile matters could occur at any time of the day or

    These inquiries are authorized by law in official criminal
    investigations and as a licensee you have a statutory duty to
    cooperate by furnishing the requested information. Be aware,
    however, that the Tracing Center is a part of BATF's criminal
    enforcement apparatus whose function (and principal interest) is to
    put people (including firearms dealers) in jail. You should always
    obtain the full name and telephone number of the caller and note it
    in writing. An entry in your bound book alongside the entry for
    the firearm involved would not be inappropriate. If in doubt about
    the caller's identity, you should terminate the call and call back
    before giving any information. Cooperation would include supplying
    copies of any related documents. Never surrender an original
    document or legally-possessed firearm (or other property for that
    matter) except in response to a summons, subpoena, or court order,
    and then only after obtaining legal advice.

    When faced with the prospect of providing information to the
    government, keep in mind that there are only two legal options:
    silence or complete truthfulness. Lying (even by partial truths or
    literal but misleading true answers) is never an option. A false
    statement to a federal officer in his official capacity is a felony
    akin to perjury, and usually much easier to prosecute and prove
    than the matter being investigated. If you cannot speak truthfully
    without incriminating yourself or injuring your legal interests,
    then remember RULE ONE.

    If the inquiry is about a Title II firearm, you should attempt
    to determine if the trace was initiated by local law enforcement.
    If it was, you should remind the caller that the information
    requested is privileged tax information and that it is a federal
    felony for BATF to disclose the information outside the agency.
    Your interest in this aspect is that you do not wish to aid and
    abet the commission of a felony -- even one committed by a federal

    Occasionally a tracing inquiry will be made in person by one
    or more special agents. They are, of course, purely criminal
    investigators whose only function (and interest) is to put people
    (including firearms dealers) in jail. Write down the names and
    badge numbers of all present. If anyone present is not a BATF
    special agent, inquire why that person is present (and later note
    the response in writing). If there is more than one agent, inquire
    why. If anyone refuses to display official identification direct
    them to immediately leave the premises. If they refuse, call the
    local sheriff or police and make a trespassing complaint.

    Do not allow anyone to search your records, premises or
    inventory for the information or items being sought. You or your
    employee do the searching, retrieving and copying. The same rules
    apply with respect to refusing to turn over original documents or
    items of personal property. If an agent should physically insist
    on taking custody of an original record or legally-possessed
    firearm or other item of property, resist verbally and vigorously,
    but not physically. Advise him calmly that your first call after
    he leaves will be to your lawyer and his first call will be to the
    Inspector General of the Treasury Department. Successive calls
    will then also be made to BATF's Office of Internal Affairs, the
    agent's SAC (Special Agent in Charge), the United States Attorney,
    the FBI and the sheriff -- the latter three to report the theft of
    your property by a federal agent. Then do it. In short, if an
    agent is stupid enough to violate your Fourth Amendment right to be
    secure in your papers and effects in front of God and everybody,
    then he needs to have his whole day ruined.

    A tracing inquiry is usually directed at a third party
    recipient of a firearm which has passed through your hands at some
    point and generally is not targeted at you. However, if you sense
    that the inquiry is, in fact, targeted at you, you should
    immediately terminate the inquiry, ask the agents to leave the
    premises (after which they are legally trespassers), request them
    to put their inquiry in writing, and seek legal counsel. Remember

    Failure to cooperate in a tracing request can put your license
    at risk, but loss of a license (or the expense of defending it)
    compares very favorably with a prison sentence (or the cost of
    defending a criminal indictment). And your license is not
    realistically at risk if BATF is trying to further a criminal
    investigation of you through a pretext tracing inquiry. The
    majority of all inmates talk their way into prison; you have no
    legal obligation to help put yourself there. This type of
    confrontation is an IQ test. Don't flunk it; remember RULE ONE.

    Clients occasionally inquire about tape-recording their
    telephone or in-person conversations with BATF employees (and
    others). This is legal under federal law so long as one party to
    the conversation (you) knows of the interception. However, state
    laws vary on the issue and you should be certain that such
    consensual recording is legal under the law of the state where the
    recording is taking place. You should never record a conversation
    (telephone or otherwise) where no one present knows of the
    interception. This is a felony violation of the federal
    wiretapping statute, and you are creating the very evidence needed
    to prove it. You can, of course, legally tape-record any
    transaction in any jurisdiction when all parties are aware of the
    taping. Any such tape should itself reflect that all present are
    aware of the taping.

    You should never knowingly consent to your own interview or
    conversation being tape recorded without making a tape of your own.
    More important, the taping of your interview is a strong signal to
    invoke RULE ONE and immediately seek legal counsel.

    2. The Third-Party Inquiry. A third-party inquiry is broader
    than a simple tracing inquiry, but otherwise involves the same
    principles and recommended reactions. It could be a telephone
    call, but will ordinarily be a personal visit by one or more
    special agents who are after more detailed information than just
    the acquisition and disposition of one or more firearms which have
    passed into or through your inventory. All other factors remain
    the same and your responses should be the same as for the in-person
    tracing inquiry.

    Needless to say, if the inquiry is not about a third-party
    transaction but rather is directed solely at you, invoke RULE ONE
    and seek legal counsel immediately. Remember, refusing to talk to
    federal criminal investigators and seeking legal counsel are not
    admissions of guilt or signs of a guilty conscience. They are
    manifestations that you are an American citizen aware of your legal
    rights and an individual who will not be bullied, coerced or
    frightened into giving up those rights. The agents already believe
    you are guilty; their job is to prove it. Your job is to avoid
    helping them prove it.

    3. The Undercover Solicitation. This may be a contact by
    BATF which, if you are fortunate, you never learn was made. It is
    a sad fact that a high percentage of non-violent federal gun crimes
    committed in the United States (perhaps even a majority) are
    manufactured by BATF -- crimes that would never have occurred but
    for the fact of an offer from or solicitation by a BATF informant
    or undercover agent to an unwitting citizen. Technically, most of
    these BATF-sponsored offenses do not rise to legal entrapment. But
    they would never have happened if BATF had not planted the idea and
    created the opportunity. This is done for the simplest and ugliest
    of all bureaucratic reasons: agent and agency self-preservation and
    budget and case statistics.

    Sometimes you will know you are being shopped -- perhaps by
    recognizing the agent or perhaps by the sheer stupidity of the
    approach. You are probably also being recorded, possibly even
    videotaped. Your response should be precisely the same whether it
    ultimately turns out that you were speaking to a government
    microphone or to the village idiot. You should firmly, but not
    politely, advise the proponent that what he/she is proposing is
    illegal and that he/she is no longer welcome on your premises or at
    your table. Then remember RULE ONE. Do not engage in a discussion
    of the law or alternative solutions to the "customer's" proposal;
    terminate the conversation. Politeness is not called for when
    someone is either intentionally or ignorantly soliciting you to
    commit a federal felony. And your politeness on a federal tape
    recording in a subsequent criminal prosecution can often be
    construed as acquiescence in or lack of strong feeling about
    committing a crime.
  5. NesikaChad

    NesikaChad Well-Known Member

    Jan 28, 2007

    Some of my bolder clients, who are truly tired of being
    harassed this way, are fully prepared to make a citizen's arrest in
    such circumstances and then call the local sheriff to come collect
    the offender (attempts and solicitations to commit an offense are
    also crimes under federal and state law). If this appeals to you,
    make sure first that the law of your state permits a citizen's
    arrest. Know the amount of legal force you can use to effect such
    an arrest. Then cuff the son of a bitch and give him a taste of
    what he's probably trying to do to you.

    A criminal solicitation by someone you've known for years, and
    who you know cannot be an agent, is especially dangerous. It
    probably means that your acquaintance has gotten his own tail in a
    crack and is now making cases for BATF in an attempt to lighten his
    own load. Finally, bear in mind that an undercover approach may be
    made by a female agent or by a mixed couple.

    4. The Compliance Inspection. Compliance inspections are
    conducted by inspectors of the regulatory enforcement branch of
    BATF. These individuals have no criminal law enforcement authority
    -- or training (although they have recently been issued badges,
    perhaps in an effort to bolster morale or create an appearance of
    authority for low-paid personnel). Theoretically, inspectors are
    charged with the civil and regulatory aspects of firearms law.
    They do not have the power of arrest or the authority to serve
    subpoenas or warrants. Nor may they make seizures of any kind. I
    say "theoretically" because in some recent instances inspectors
    have been observed accompanying special agents on raids and even
    illegally carrying firearms. In short, there are some cop wannabes
    among the inspector force whose intrinsic suspicion of firearms
    dealers as criminals must be guarded against.

    The legally-authorized purpose of compliance inspections (and
    pre-licensing inspections) is to ensure that the firearms statutes
    are generally being complied with by the firearms industry. The
    true job of inspectors is to spot and correct discrepancies in
    compliance with federal firearms statutes, to establish the
    qualifications of license applicants, and to enforce and collect
    the excise tax on the manufacture and importation of firearms. If
    an inspector discovers evidence of a criminal violation he is
    supposed to make a referral to the criminal enforcement branch of
    BATF (the special agents).

    As a licensee you are required to display your license on your
    licensed premises, to maintain certain required books and records
    accurately, and to submit to a compliance inspection of your
    licensed premises, your inventory and your required records as
    often as once annually.

    The only firearms records which you are required by law to
    maintain, and to submit for inspection, are an acquisition and
    disposition book (your bound book), original BATF Forms 4473,
    "Firearms Transaction Record" for each firearm sold, original BATF
    Forms 5300.35 "Statement of Intent to Obtain a Handgun(s)" (the
    Brady Act form), and your retained copies (copy 4) of BATF Forms
    3310.4, "Report of Multiple Sale or Other Disposition of Pistols
    and Revolvers" for each multiple sale of handguns. Special
    occupational taxpayers may also be required to produce their Forms
    2, 3, 5, 6 and 10 for firearms on hand. There may be additional
    state law records required of a dealer, but BATF has no
    jurisdiction over these records and arguably no jurisdiction to
    inspect them.

    When a BATF inspector shows up for a compliance inspection,
    require credentials to be displayed by everyone present and note
    the full name of the inspector(s) in writing. Never permit a
    special agent or a state or local or non-BATF federal official to
    participate in a compliance inspection. These individuals have no
    authority under the inspection laws, and are there for some
    different (and more ominous) reason. A state official might have
    independent state-law authority to conduct an inspection or
    investigation, but he has no right to do it in tandem with a BATF
    compliance inspection. You should require other inspectors or
    investigators to get in line so that you can deal with them at a
    separate time. If they refuse to leave, call the sheriff and swear
    out a trespassing complaint. If a BATF special agent, a firearms
    specialist from BATF's Technology Branch in Washington (part of the
    criminal enforcement branch), or other criminal law enforcement
    type is present, this is not an ordinary compliance inspection and
    you should immediately terminate it, direct the individuals to
    leave and contact legal counsel.

    BATF inspectors can inspect at any time during your listed
    business hours, without prior notice or appointment. If they do
    not give you advance notice then restrict their inspection
    activities to your listed hours. If you are subjected to an
    unannounced inspection, be on guard. You may be under suspicion or
    you may be dealing with one of the cop wannabes. If the inspector
    has the courtesy to advise you ahead of time of an intended
    inspection you are free to, and should, accommodate the time, date
    and hours of inspection to the inspector's convenience. You should
    never consent to more than one compliance inspection in any
    twelve-month period. Require BATF to obtain an inspection warrant
    and immediately seek legal counsel.

    Under general principles of law a compliance inspection must
    be "reasonable" in terms of time, duration, scope, number of
    inspectors, lack of disruption to your business, etc. If the
    inspector is reasonable and professional, you should be too. The
    process does not have to be adversarial or antagonistic. If the
    inspector is not reasonable or professional, keep in mind that your
    license does not require you to talk to him, or to provide him
    access to your copy machine, rest room, etc. If you are dealing
    with an idiot, remember RULE ONE -- and let him bring his own copy
    machine. Also remember that he has no right to use your

    The inspector is legally entitled to inspect all your required
    records, your business premises, and your firearms inventory. He
    is legally entitled to inspect nothing else. You should not permit
    inspection of non-required records unless there is a satisfactory
    explanation of why it is desired (such as inspecting a purchase or
    sale invoice for the correct serial number where the bound book and
    the Form 4473 show different serial numbers for the same firearm).
    You should not permit inspection of non-business portions of the
    premises when your home is the licensed premises. (When your
    business is conducted from your home, you should carefully
    delineate that portion dedicated to the firearms business and
    confine the business strictly to that portion of the premises.)

    You should accommodate the inspector by making copies of any
    records desired (within reason). Never permit original records (or
    firearms or other property) to be removed from the premises without
    a summons, subpoena or court order, and without seeking legal
    counsel. The inspector has no power of seizure and may attempt to
    bluff his way into removing original records or may try to obtain
    your consent. Do not be bluffed and do not consent. Inspections
    should be conducted on your premises. (If you store firearms off
    premises, the inspector is also entitled to inspect such storage

    A compliance inspection of a special occupational taxpayer
    will begin with the inspector attempting to reconcile his NFA
    Branch printout of Title II firearms shown as registered to you in
    BATF's records with the actual Title II firearms in your
    possession. He will be unable to do so because of the abysmal
    state of the national registry. Have mercy on him and help BATF
    untangle its records. Try to refrain from thinking about whose
    records and recordkeeping should really be under audit here. The
    inspector will also likely need your technical expertise in
    identifying anything more esoteric than a rifle, pistol or shotgun.
    Try to conceal your contempt for a "federal firearms inspector" who
    probably doesn't know a wipe from a baffle, or a lightning link
    from a drop-in sear, and who may think a Mauser broomhandle is
    something used by a German hausfrau.

    If you are a firearms manufacturer or importer, an inspector
    may plan to conduct an excise tax audit at the same time as a
    compliance inspection. The authority for these two types of
    inspections/audits derive from entirely different legal authorities
    and they involve entirely separate legal considerations. You
    should insist that either the audit or the inspection be conducted
    first and separately. The reasons are expanded on under Paragraph
    5, below.

    Curio and relic (collector) licensees have the legal option of
    bringing their records and firearms to the nearest designated BATF
    office for a compliance inspection. Although I am unaware of any
    compliance inspection of a collector, this is an option to be
    considered seriously. The simple truth is that you never want a
    BATF employee in your home if it can be avoided.

    In summary, the firearms regulatory process does not assume
    you are a criminal, but rather seeks to ensure that dealers
    generally are complying with the requirements of the law. If bona
    fide, the process does not require invocation of your various
    rights to notice, counsel, warning, non-self-incrimination, etc.,
    which all come into play when you are the target of a criminal
    investigation. Unfortunately, BATF sometimes attempts to avoid
    these constitutional "inconveniences" by illegally using the access
    of civil inspectors to further a criminal investigation without
    alerting the targeted dealer. You should never cooperate in such
    a subterfuge.

    5. The Excise Tax Audit. If you are simply a dealer in
    firearms or ammunition, you will have no occasion to undergo an
    excise tax audit. However, if you manufacture or import firearms
    or ammunition you are subject to audit by the regulatory
    enforcement branch of BATF.

    The manufacturers excise tax on firearms and ammunition is one
    of the most complex and least understood federal tax statutes. It
    is said that only three people in the world completely understand
    it. One is dead, one went mad trying to explain it, and modesty
    prevents me from naming the third. Suffice to say, however, that
    BATF, which acquired jurisdiction over the tax from IRS in 1991, is
    hopelessly inept in administering it.

    An excise tax audit is governed by the general principles of
    the Internal Revenue Code of 1986 and not the National Firearms Act
    of 1934 or the Gun Control Act of 1968.

    You are required to maintain the same records any other
    taxpayer/return filer is required to maintain: whatever records are
    necessary to support the figures on your return. There are no
    records specifically required by law to be maintained such as those
    required of dealers by the Gun Control Act. And, absent tax fraud
    or evasion, there are no criminal penalties for failing to maintain
    such records. Therefore, the only penalty for failing to keep
    excise tax records, or to produce them, is that BATF could choose
    to treat all your sales as taxable events.
  6. NesikaChad

    NesikaChad Well-Known Member

    Jan 28, 2007
    As a practical matter a logbook of operable Title I firearms
    manufactured by you plus any BATF Forms 2 (Title II firearms
    manufactured by you), and a file of BATF Forms 6A, operable
    firearms imported by you, accompanied by your bound book showing
    the same firearms sold by you and sales invoices showing the sale
    price, would be all the records required for a proper excise tax
    audit (in addition, perhaps to your retained copies of excise tax
    returns filed). You should decline to produce any other records
    for an excise tax audit unless you have an alternative pricing
    issue under the excise tax regulations or tax-exempt sales (to a
    government entity, the military, or for export).

    You should also be aware that the definition of firearm under
    the excise tax statute is different from other statutory
    definitions of "firearm." Excise taxable firearms are only those
    complete portable firearms which go bang. The tax does not apply
    to crew-served weapons, silencers, frames or receivers, conversion
    kits, parts, most destructive devices, etc., etc. The tax only
    becomes due on a sale or its commercial equivalent. A transfer of
    a complete Title II firearm which goes bang is not always a sale
    and does not always trigger the excise tax. Even when it is a
    sale, it is not taxable if the Title II transfer tax is being paid
    (a Form 4 transfer). There is also no excise tax due on the
    manufacture or importation and sale of blank ammunition. I cover
    these points because BATF inspectors are generally excise-tax
    illiterate and much excise tax is asserted and collected which is
    not legally due and owing.

    If you are a firearms manufacturer or exporter, you should
    have competent tax counsel.

    6. The Raid. This is an event which means you are in deep,
    serious. It is the execution of a judicially-issued search and
    seizure warrant (and occasionally also an arrest warrant) by BATF
    special agents, frequently accompanied by agents of other federal
    or local agencies, on premises owned, occupied or inhabited by you.

    When a raid team shows up at your premises and announces
    (usually by breaking down your door, sometimes by killing your dogs
    and throwing flash bang grenades at your women and children) that
    they have a federal search warrant, you must instantly do several
    things. You must first of all mentally assimilate the fact that
    they are law officers rather than a rampaging motorcycle gang
    (which they often resemble in both appearance and behavior).
    Having identified them as law rather than outlaw, you must freeze
    in place in a non-threatening posture and attempt to stabilize the
    situation until some of their law-enforcement adrenalin (the most
    dangerous drug on the street) has bled off. If only a search
    warrant is involved, you must then recover your wits sufficiently
    to do the following:

    (A) Try to note and record the identities of as many
    participants as possible, by name, agency, badge number, and
    physical description.
    (B) Ask for a copy of the warrant.
    (C) Disable -- not unplug, disable -- your telephones and fax
    (D) Gather your family, children and pets and leave the
    (E) Call your lawyer.

    You may be prevented from doing some or all of the above
    things by legally illiterate agents, but that will simply lay the
    foundation for your own day in court.

    A federal search warrant authorizes only the search of a
    specified premises and only the seizure of specifically described
    items. Corollary to the execution of a warrant, the law permits
    the agents to make a forcible entry if that becomes necessary after
    knocking and announcing their identity and purpose, to control the
    premises, and to take reasonable precautions for their own safety
    -- such as a pat down for weapons of those persons present and
    assigning an agent to watch over and accompany anyone moving about
    on the premises. The law authorizes the agents to prevent the
    destruction of evidence or contraband and it protects them against
    being assaulted or interfered with. It is a serious federal crime
    to assault a federal officer or to obstruct execution of the
    warrant. Don't turn a possible later indictment into a sure one.

    Never assist the raiding party in locating the items described
    in the warrant. They have the right to search, but not the right
    to find. Do not open locked compartments, safes or rooms for them
    or provide them with keys or combinations. Do not talk to the
    raiding officers other than to request identification and a copy of
    the warrant. Resist the compulsion to show what a good guy you
    are; these are not your friends and they are not there to help you.

    A search warrant does not authorize agents to arrest you or
    anyone else on the premises (although assaulting the agents or
    forcibly interfering with the execution of the warrant will justify
    a warrantless arrest) and it does not authorize them to handcuff
    you, restrict you to a particular place or prevent you from

    You have a perfect right to leave the premises and should do
    so immediately. If you are physically prevented from leaving, you
    have just been falsely arrested in violation of the Fourth
    Amendment and will have your recovery later in court as well as
    taking some of the other retaliatory measures promised in Paragraph
    2, above. You must get yourself and your family out of the house
    for several reasons: (A) to avoid the personal insult, humiliation,
    provocation and indignities which many agents seem to enjoy; (B) to
    avoid a potential life-threatening situation; and (C) to avoid
    creating evidence against yourself (RULE ONE). There is no useful
    purpose your remaining on the premises can serve; if the agents are
    going to plant evidence or destroy property, they will do it
    whether or not you are present.

    You will need as much information about identities, badge
    numbers and descriptions as you can manage in the minutes before
    you leave. These will be useful later when you assert or defend
    your rights. But they are not a reason to delay leaving the
    premises promptly. You are legally entitled to a copy of the
    warrant, but do not remain on the premises if you are refused.

    You should disable your telephones and fax machines before
    leaving in order to prevent the agents from illegally seizing
    evidence (calls and faxes) which might come in while they are on
    the premises. Such items did not exist when the warrant was signed
    and cannot possibly be covered by the warrant. Their seizure will
    probably therefore be illegal; but it is better to prevent such
    seizures from even happening. If you are physically prevented from
    disabling your own property, go somewhere else and place incoming
    calls to all your lines and keep the circuits open.

    Now, call your lawyer.

    [The author is a retired U.S. Department of Justice lawyer and
    a retired colonel in the Marine Corps Reserve practicing firearms
    law in Greensboro, NC. He is a 1959 graduate of the University of
    Kentucky and a 1962 graduate of the UK College of Law, where he was
    Note Editor of the Kentucky Law Journal.]