Class III license myth, or truth?

[DarkRose]

Trying to separate fact from fiction here... I'm assuming fiction, but want to get the real scoop...

Was told this at a local pawn shop by their FFL holder... And I've gotten some whoppers in the past... Such as machining your own 80% lower is highly illegal... And MSRP for (obviously) used guns is totally reasonable...

So here's this one...

Asked if they'd ever considered becoming a Class III dealer just out of curiosity, and he said he had, but wanted to see how the local market was, because the ATF requires Class III dealers to show an increase in sales by a certain percentage every year, or get their Class III pulled.

Assuming BS, but with some of the weird crap the BATFE has pulled before, there's a shred of possibility...

Fact or Fiction?

 

[Leo]

I have never heard it stated that way, but a couple years ago there was a push from Washington to eliminate people dealing guns from their homes, as they were too time consuming to regulate. This was an answer to where "criminals were getting guns". It was on the news. I do not know if it was political "sabre rattling" or if policies were officially enacted.

 

[amafrank]

The regs are actually pretty clear on FFL's and what is required. It states that you must be in the business with the intent of profit in order to have a dealer or manufacturers FFL. There is a collectors FFL but since its not good for dealing you don't need any sales....
There is no requirement of any kind to increase sales for a class 3. The class 3 is not a license....it is a tax status. If you already have a type 1 FFL which is a license to deal in firearms other than destructive devices or a type 9 FFL which is a license to deal in firearms including destructive devices all you have to do to become a class 3 dealer is pay a special occupational tax (SOT). There is no other license involved, no additional requirements on the license you have and no real application or approval. You simply pay the tax and it allows you to deal in NFA (other than destructive devices in the case of a type 1FFL). Its the simplest thing in the world for any FFL dealer to do and it opens up a whole new range of firearms for them to deal in. Many think as you noted that they have to take a test or do some sort of superman dance to become a class 3 dealer.......
As another aside here, if you have a type 7 FFL (manufacturer of other than destructive devices) or type 10 FFL (manufacturer of destructive devices) you can pay the SOT and you become a class 2 manufacturer. As such you can do anything a dealer can do and in addition you can make and register NFA firearms. There are also a couple FFL's for importers and they become class 1 FFLs when they pay the SOT.
So to answer your question, the guy doesn't know what he's talking about. ATF does want to see some transfers in order to renew your FFL but it doesn't matter whether they are NFA or Title 1 (pistols, rifles etc). There is a question on the FFL renewal form which asks:
"How many firearms have you acquired with your FFL in the last 3 years?" and another which asks: "How many firearms have you disposed of in the last 3 years?" . If you can show any acquisitions and disposals they have no grounds to deny the renewal.

Hope that helps

Frank

 

[Hop]

^ always good info from Frank. You need to post more often.

 

[Kirk Freeman]

The class 3 is not a license....it is a tax status.

Thank you. That is a laser of clarity for INGO.

 

[Hop]

"Shall not be infringed" is sooo easy to figure out isn't it.

How many other occupations are taxed like this? I'm sorry Mr taxi driver you need to pay .gov $5000 per year to do that job whether or not you actually drive people around or not. It's the law!

/rant

 

[ol' poke]

So.....inquiring minds want to know, and besides, I'm just plain nosey.....just how much does this SOT cost?

 

[JettaKnight]

"Shall not be infringed" is sooo easy to figure out isn't it.

How many other occupations are taxed like this? I'm sorry Mr taxi driver you need to pay .gov $5000 per year to do that job whether or not you actually drive people around or not. It's the law!

/rant

Well, actually, a quite a few.

As to your example, I'm not sure if you were being sarcastic or not, but have you heard of the medallion system in NYC?


Don't you have to pay a tax on your car whether you drive it or not?

 

[amafrank]

So.....inquiring minds want to know, and besides, I'm just plain nosey.....just how much does this SOT cost?

You can have a look at the ATF website...I don't have a link but there is info there on FFLs and SOT. Short story is that if your total income from all sources is less than $500,000 per year you can pay the reduced rate of $500 per year if you are a type 1 or 7FFL. If you have a type 9 or 10 FFL you pay $1000 per year for the SOT. If you make more than $500K per year you pay $1000 per year. This isn't just income from your FFL....if you have a farm, car dealership or you just make a lot of cash you'll pay the higher rate if it adds up to $500,001 or more. You can also get the cost on all the various FFLs. I know type 1 dealer is $90 for three years after your initial 3yrs. I can't recall what the initial is but I think its around $200? For a type 7 FFL (manufacturer) you pay $150 for 3 years. There are other costs involved too.

As for some of the other questions concerning regulated industries you might be surprised to know that Alcoholic beverage producers, Tobacco producers and drug producers/sellers pay the SOT as well. I have no idea what the cost is for them but I found it pretty interesting that Brown and Williamson (who was a sponsor of our race team years ago) was having a BATF compliance check about the time I was getting my FFL/SOT. I had a pretty good conversation with the PR lady at one of the races about it. Look at the top of a cigarette pack or any other tobacco product and note the tax stamp. If you know a brewpub have a look behind the bar for their Special Occupational Tax "stamp" (certificate?). We are hounded all over the place by greedy politicians who know we can't fight back......


Frank

 

[DarkRose]

I have never heard it stated that way, but a couple years ago there was a push from Washington to eliminate people dealing guns from their homes, as they were too time consuming to regulate. This was an answer to where "criminals were getting guns". It was on the news. I do not know if it was political "sabre rattling" or if policies were officially enacted.

I heard that was the reason behind the requiring a storefront and/or business license, too many dealers operating out of basements, with their only location being online, no overhead to speak of...

 

[shootersix]

Trying to separate fact from fiction here... I'm assuming fiction, but want to get the real scoop...

Was told this at a local pawn shop by their FFL holder... And I've gotten some whoppers in the past... Such as machining your own 80% lower is highly illegal... And MSRP for (obviously) used guns is totally reasonable...

So here's this one...

Asked if they'd ever considered becoming a Class III dealer just out of curiosity, and he said he had, but wanted to see how the local market was, because the ATF requires Class III dealers to show an increase in sales by a certain percentage every year, or get their Class III pulled.

Assuming BS, but with some of the weird crap the BATFE has pulled before, there's a shred of possibility...

Fact or Fiction?

I bet he says the lifetime ltch is going away!
and he says the glock 7 is real!
and he says black talons open in up and turn into a buzz saw and drill a hole right through you!
and the sore on his mouth is only a coldsore!
and that pawn shops are a great place to buy a used gun!

sounds like he's a wealth of misinformation!

 

[jd4320t]

Lots of great info in this thread. Thank you.

 

[DarkRose]

I bet he says the lifetime ltch is going away!
and he says the glock 7 is real!
and he says black talons open in up and turn into a buzz saw and drill a hole right through you!
and the sore on his mouth is only a coldsore!
and that pawn shops are a great place to buy a used gun!

sounds like he's a wealth of misinformation!

Actually I think I did hear the "Black Talons are illegal" in there, but forget if it came from him or someone else. When it was going around, I heard the Lifetime LTCH rumor all kinds of places...

 

[kaveman]

As Frank says,............the SOT is a tax status only and you don't even need to have it to deal in NFA. If you've got an FFL you can deal in MG's, suppressors, SBR/SBSs all you want. You'll just do all inbound and outbound transfers on $200 tax-paid form4s and the delays and taxes will eat you alive. Pay the reduced rate SOT of $500/yr and now your inbound transfers are (mostly) tax-free form3s and quite a bit quicker. I can't imagine wanting to avoid the SOT payment but if you expect to only do an ocassional transfer it might make sense.

Your dealer needs to educate himself(or not if he just likes to spew BS,........and many do).

 

[Hkindiana]

What about ITAR fees?

 

[HHollow]

What about ITAR fees?

I am friendly with a couple of class3/SOT payers and at first neither wanted to discuss the whole ITAR thing. It turns out that at least some class3/SOT's refuse to pay the ITAR tax because international commerce is not and would never be a part of their business. It would be interesting to know the percent who actually pay.

 

[amafrank]

You may not realize is that the klinton bunch who tried to get rid of a lot of FFL's did so by claiming they were selling out of their car trunks and back seats. Of course they had to get rid of that even though it was their regs who forced guys to get FFLs to do the stuff they wanted to do. The reality now is that you can get an FFL and work out of your basement or garage but you can't get an FFL just to do internet sales. If your local zoning allows the business in your kitchen ATF is fine with it. You just need to insure you can make it through any zoning or local business regs.

Frank