Definition of “Engaged in the Business” as a Dealer in Firearms, 61993-62023 [2023-19177]
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[FR Doc. 2023–19365 Filed 9–7–23; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF JUSTICE
Bureau of Alcohol, Tobacco, Firearms,
and Explosives
27 CFR Part 478
[Docket No. ATF 2022R–17; AG Order No.
5781–2023]
RIN 1140–AA58
Definition of ‘‘Engaged in the
Business’’ as a Dealer in Firearms
Bureau of Alcohol, Tobacco,
Firearms, and Explosives, Department of
Justice.
ACTION: Notice of proposed rulemaking;
request for comment.
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AGENCY:
The Department of Justice
(‘‘Department’’) proposes amending
Bureau of Alcohol, Tobacco, Firearms,
and Explosives (‘‘ATF’’) regulations to
implement the provisions of the
Bipartisan Safer Communities Act
(‘‘BSCA’’), effective June 25, 2022, that
broaden the definition of when a person
SUMMARY:
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is considered ‘‘engaged in the business’’
as a dealer in firearms other than a
gunsmith or pawnbroker. This proposed
rule incorporates the BSCA’s definition
of ‘‘predominantly earn a profit,’’
creates a stand-alone definition of
‘‘terrorism,’’ and amends the definitions
of ‘‘principal objective of livelihood and
profit’’ and ‘‘engaged in the business’’ to
ensure each conforms with the BSCA’s
statutory changes and can be relied
upon by the public. The proposed rule
also clarifies what it means for a person
to be ‘‘engaged in the business’’ of
dealing in firearms, and to have the
intent to ‘‘predominantly earn a profit’’
from the sale or disposition of firearms.
In addition, it clarifies the term
‘‘dealer,’’ including how that term
applies to auctioneers, and defines the
term ‘‘responsible person.’’ These
proposed changes would assist persons
in understanding when they are
required to have a license to deal in
firearms. Consistent with the Gun
Control Act (‘‘GCA’’) and existing
regulations, the proposed rule also
defines the term ‘‘personal collection’’
to clarify when persons are not
‘‘engaged in the business’’ because they
make only occasional sales to enhance
a personal collection, or for a hobby, or
if the firearms they sell are all or part
of a personal collection. This proposed
rule further addresses the lawful ways
in which former licensees, and
responsible persons acting on behalf of
such licensees, may liquidate business
inventory upon revocation or other
termination of their license. Finally, the
proposed rule clarifies that a licensee
transferring a firearm to another licensee
must do so by following the verification
and recordkeeping procedures instead
of using a Firearms Transaction Record,
ATF Form 4473.
DATES: Written comments must be postmarked and electronic comments must
be submitted on or before December 7,
2023. Commenters should be aware that
the electronic Federal Docket
Management System will not accept
comments after midnight Eastern Time
on the last day of the comment period.
ADDRESSES: You may submit comments,
identified by docket number ATF
2022R–17, by either of the following
methods—
• Federal eRulemaking Portal:
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Helen Koppe, Mail Stop 6N–
518, Office of Regulatory Affairs,
Enforcement Programs and Services,
Bureau of Alcohol, Tobacco, Firearms,
and Explosives, 99 New York Ave. NE,
Washington, DC 20226; ATTN: ATF
2022R–17.
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Instructions: All submissions received
must include the agency name and
docket number (ATF 2022R–17) for this
notice of proposed rulemaking
(‘‘NPRM’’ or ‘‘proposed rule’’). All
properly completed comments received
from either of the methods described
above will be posted without change to
the Federal eRulemaking portal,
www.regulations.gov. This includes any
personal identifying information (‘‘PII’’)
submitted in the body of the comment
or as part of a related attachment.
Commenters who submit through the
Federal eRulemaking portal and who do
not want any of their PII posted on the
internet should omit PII from the body
of their comment or in any uploaded
attachments. Commenters who submit
through mail should likewise omit their
PII from the body of the comment and
provide any PII on the cover sheet only.
For detailed instructions on submitting
comments and additional information
on the rulemaking process, see the
‘‘Public Participation’’ heading of the
SUPPLEMENTARY INFORMATION section of
this document.
FOR FURTHER INFORMATION CONTACT:
Helen Koppe, Office of Regulatory
Affairs, Enforcement Programs and
Services, Bureau of Alcohol, Tobacco,
Firearms, and Explosives, U.S.
Department of Justice, 99 New York
Ave. NE, Washington, DC 20226;
telephone: (202) 648–7070 (this is not a
toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
The Department is proposing to
amend ATF regulations to implement
the provision of the Bipartisan Safer
Communities Act, Public Law 117–159,
sec. 12002, 136 Stat. 1313, 1324 (2022)
(‘‘BSCA’’), that amended the definition
of ‘‘engaged in the business’’ in the Gun
Control Act of 1968 (‘‘GCA’’) at 18
U.S.C. 921(a)(21)(C), and to facilitate
compliance with the statute.
The Attorney General is responsible
for enforcing the GCA. This
responsibility includes the authority to
promulgate regulations necessary to
enforce the provisions of the GCA. See
18 U.S.C. 926(a). Congress and the
Attorney General have delegated the
responsibility for administering and
enforcing the GCA to the Director of
ATF (‘‘Director’’), subject to the
direction of the Attorney General and
the Deputy Attorney General. See 28
U.S.C. 599A(b)(1)–(2), (c)(1); 28 CFR
0.130(a)(1) and (2); Treasury Department
Order No. 221, sec. (2)(a), (d), 37 FR
11696, 11696–97 (June 10, 1972).
Accordingly, the Department and ATF
have promulgated regulations necessary
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to implement the GCA. See 27 CFR part
478.
The GCA, at 18 U.S.C. 922(a)(1)(A),
makes it unlawful for any person,
except a licensed dealer, to ‘‘engage in
the business’’ of dealing in firearms.1
The GCA further provides that no
person shall engage in the business of
dealing in firearms until the person has
filed an application with and received a
license to do so from the Attorney
General (18 U.S.C. 923(a)), who has
delegated that function to ATF (28 CFR
0.130(a)(1)). The application contains
information necessary to determine
eligibility for licensing and must
include a photograph, fingerprints of the
applicant, and a license application fee.
The fee for dealers in firearms other
than destructive devices is currently set
by the GCA at $200 for the first threeyear period and $90 for a renewal
period of three years. 18 U.S.C.
923(a)(3)(B); 27 CFR 478.42(c)(2). The
Application for Federal Firearms
License, ATF Form 7(5310.12)/7CR
(5310.16) (‘‘Form 7’’), requires the
applicant to include a completed
Federal Bureau of Investigation (‘‘FBI’’)
Form FD–258 (‘‘Fingerprint Card’’) and
a photograph for all responsible
persons, including sole proprietors. See
ATF Form 7, Instruction 6.
Significantly, under the GCA, once
licensed, firearms dealers are required
to conduct background checks through
the FBI’s National Instant Criminal
Background Check System (‘‘NICS’’) on
prospective firearm recipients to
prevent prohibited persons from
receiving firearms, and to maintain
firearms transaction records for crime
gun tracing purposes. See 18 U.S.C.
922(t); 923(g)(1)(A). Persons who
willfully engage in the business of
dealing in firearms without a license are
subject to a term of imprisonment of up
to five years, a fine of up to $250,000,
or both. Id. 922(a)(1)(A); 924(a)(1)(D);
3571(b)(3).
A. Advance Notice of Proposed
Rulemaking (1979)
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The term ‘‘dealer’’ is defined by the
GCA, 18 U.S.C. 921(a)(11)(A), and 27
CFR 478.11, to mean ‘‘any person
engaged in the business of selling
firearms at wholesale or retail.’’
However, as originally enacted, the GCA
did not define the term ‘‘engaged in the
1 Persons who engage in the business of
manufacturing or importing firearms, including
those that are 3D printed or assembled from parts,
must also be licensed. 18 U.S.C. 922(a)(1)(A),
923(a). Once licensed, importers and manufacturers
may also engage in the business of dealing but only
at their licensed premises and only in the same type
of firearms their license authorizes them to import
or manufacture. See 27 CFR 478.41(b).
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business.’’ 2 Nor did ATF define the
term ‘‘engaged in the business’’ in the
original GCA implementing
regulations.3 Although courts had
‘‘continually found that the current
situation’’ was ‘‘adequate for
enforcement purposes,’’ ATF published
an Advance Notice of Proposed
Rulemaking (‘‘ANPRM’’) in the Federal
Register in 1979 in an effort to ‘‘develop
a workable, commonly understood
definition of [‘engaged in the
business’].’’ See 44 FR 75186, 75186–87
(Dec. 19, 1979) (‘‘1979 ANPRM’’); 45 FR
20930 (Mar. 31, 1980) (extending the
comment period for 30 more days). The
ANPRM referenced the lack of a
common understanding of that term by
the courts and requested comments
from the public and industry on how
the phrase should be defined and the
feasibility and desirability of defining it.
ATF received 844 comments in
response, of which approximately 551,
or 65.3 percent, were in favor of ATF
defining that term.4 This included
approximately 324 firearms dealers in
favor of defining the term. However,
none of the proposed definitions
appeared ‘‘to be broad enough to cover
all possible circumstances and still be
narrow enough to be of real benefit in
any particular case.’’ 5 One possible
definition ATF considered would have
established a threshold number of
firearms sales per year to serve as a
baseline for when a person would
qualify as a dealer. The threshold
numbers proposed ranged from ‘‘more
than one’’ to ‘‘more than 100’’ per year.
ATF did not adopt that proposal
because it would have potentially
interfered with tracing firearms by
persons who avoided obtaining a license
(and therefore kept no records) by
selling firearms under the minimum
threshold.6 Ultimately, ATF decided not
to proceed further with rulemaking at
that time. Congress also had not yet
acted on then-proposed legislation—the
McClure-Volkmer bill (discussed
below)—which, among other provisions,
sought to define ‘‘engaged in the
business.’’ 7 For additional reasons why
ATF has not adopted a minimum
2 See generally Public Law 90–617, 82 Stat. 1213
(1968).
3 33 FR 18555 (Dec. 14, 1968).
4 Memorandum for Assistant Director, Regulatory
Enforcement, ATF, from Chief, Regulations and
Procedures Division, ATF, Re: Evaluation of
Comments Received Concerning a Definition of the
Phrase ‘‘Engaged in the Business,’’ Notice No. 331,
at 1–2 (June 9, 1980) (‘‘ATF Internal
Memorandum’’), attach. Summary Sheet on
‘‘Engaged in the Business,’’ ANPRM No. 331,
Published December 19, 1979, at 1.
5 Id.
6 See id. at 2.
7 ATF Internal Memorandum at 4.
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number of sales, see Section II.D of this
preamble.
B. Firearms Owners’ Protection Act of
1986
Approximately six years later, the
McClure-Volkmer bill was enacted as
part of the Firearms Owners’ Protection
Act (‘‘FOPA’’), Public Law 99–308, 100
Stat. 449 (1986). With its passage, FOPA
added a statutory definition of ‘‘engaged
in the business’’ to the GCA. As applied
to a person selling firearms at wholesale
or retail, it defined the term ‘‘engaged in
the business’’ in 18 U.S.C. 921(a)(21)(C)
as ‘‘a person who devotes time,
attention, and labor to dealing in
firearms as a regular course of trade or
business with the principal objective of
livelihood and profit through the
repetitive purchase and resale of
firearms.’’ 8 The term excluded ‘‘a
person who makes occasional sales,
exchanges, or purchases of firearms for
the enhancement of a personal
collection or for a hobby, or who sells
all or part of his personal collection of
firearms.’’ 9 FOPA further defined the
term ‘‘with the principal objective of
livelihood and profit’’ to mean ‘‘that the
intent underlying the sale or disposition
of firearms is predominantly one of
obtaining livelihood and pecuniary
gain, as opposed to other intents, such
as improving or liquidating a personal
firearms collection.’’ 10 Congress
amended FOPA a few months later,
clarifying that ‘‘proof of profit’’ was not
required ‘‘as to a person who engages in
the regular and repetitive purchase and
disposition of firearms for criminal
purposes or terrorism.’’ 11
Consistent with their text, the
definitions’ purposes were to clarify that
individuals not otherwise engaged in
the business of dealing firearms who
make only occasional firearms sales for
a hobby are not required to obtain a
license, and to benefit law enforcement
‘‘by establishing clearer standards for
investigative officers and assisting in the
prosecution of persons truly intending
to flout the law.’’ 12 The legislative
history also reveals that Congress did
not intend to limit the license
requirement to only persons for whom
selling or disposing of firearms is a
principal source of income or a
principal business activity. The
Committee Report stated, ‘‘[t]hus, this
provision would not remove the
necessity for licensing from part-time
8 Public
Law 99–308, sec. 101, 100 Stat. at 450.
9 Id.
10 Id.
11 Public Law 99–360, sec. 1(b), 100 Stat. 766, 766
(1986).
12 S. Rep. No. 98–583, at 8 (1984).
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businesses or individuals whose
principal income comes from sources
other than firearms, but whose main
objective with regard to firearm transfers
is profit, rather than hobby.’’ 13
Two years after enactment, FOPA’s
definition of ‘‘engaged in the business’’
was incorporated into ATF’s
implementing regulations at 27 CFR
178.11 (now 478.11) in defining the
term ‘‘Dealer in firearms other than a
gunsmith or a pawnbroker.’’ 14 At the
same time, consistent with the statutory
text and legislative history, ATF
amended the regulatory term ‘‘dealer’’ to
clarify that the term includes ‘‘any
person who engages in such business or
occupation on a part-time basis.’’ 15
With respect to ‘‘personal
collections,’’ FOPA included a
provision, codified at 18 U.S.C. 923(c),
that expressly authorized licensees to
maintain and dispose of private firearms
collections separately from their
business operations. However, under
FOPA, as amended, the ‘‘personal
collection’’ provision was and remains
subject to three limitations. 18 U.S.C.
923(c). First, if a licensee records the
disposition (i.e., transfer) of any firearm
from their business inventory into a
personal collection, that firearm legally
remains part of the licensee’s business
inventory until one year has elapsed
after the date of transfer. Should the
licensee wish to sell or otherwise
dispose of any such ‘‘personal’’ firearm
during that one-year period, the licensee
must re-transfer the applicable firearm
back into the business inventory at the
licensee’s business premises ‘‘with
appropriate recording.’’ 16 A subsequent
transfer from the business inventory
would then be subject to the
recordkeeping and background-check
requirements of the GCA applicable to
all other firearms in the business
inventory. Second, if a licensee acquires
or disposes of any firearm for the
purpose of willfully evading the
restrictions placed upon licensees under
the GCA, that firearm always legally
remains part of the business inventory.
Thus, ‘‘circuitous transfers are not
exempt from otherwise applicable
licensee requirements.’’ 17 Third, even
when a licensee has made a bona fide
transfer of a firearm from their personal
13 Id. The Committee Report further explained
that a statutory reference to pawnbrokers in the
definition of ‘‘engaged in the business’’ was deleted
because ‘‘all pawnbrokers whose business includes
the taking of any firearm as security for the
repayment of money would automatically be a
‘dealer.’ ’’ Id. at 9.
14 53 FR 10480, 10491 (Mar. 31, 1988).
15 Id. 10490–91.
16 S. Rep. No. 98–583, at 13.
17 Id.
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collection, section 923(c) requires the
licensee to record the description of the
firearm in a bound volume along with
the name, place of residence, and date
of birth of an individual transferee, or if
a corporation or other business entity,
the transferee’s identity and principal
and local places of business.18 ATF
incorporated these provisions into its
FOPA implementing regulations in
1988.19
Courts interpreting the 1986 FOPA
definition of ‘‘engaged in the business’’
found a number of factors relevant to
assessing whether a person met that
standard. For example, in one leading
case, the U.S. Court of Appeals for the
Third Circuit listed the following
nonexclusive factors for consideration
to determine whether the defendant’s
principal objective was livelihood and
profit (i.e., economic): (1) quantity and
frequency of sales; (2) location of the
sales; (3) conditions under which the
sales occurred; (4) defendant’s behavior
before, during, and after the sales; (5)
price charged for the weapons and the
characteristics of the firearms sold; and
(6) intent of the seller at the time of the
sales. United States v. Tyson, 653 F.3d
192, 200–01 (3d Cir. 2011). The court
expanded further that, ‘‘[a]s is often the
case in such analyses, the importance of
any one of these considerations is
subject to the idiosyncratic nature of the
fact pattern presented.’’ Id. at 201. In a
separate case, the Third Circuit also
stated, ‘‘[a]lthough the definition
explicitly refers to economic interests as
the principal purpose, and
repetitiveness as the modus operandi, it
does not establish a specific quantity or
frequency requirement. In determining
whether one is engaged in the business
of dealing in firearms, the finder of fact
must examine the intent of the actor and
all circumstances surrounding the acts
alleged to constitute engaging in
business. This inquiry is not limited to
the number of weapons sold or the
timing of the sales.’’ United States v.
Palmieri, 21 F.3d 1265, 1268 (3d Cir.
1994), vacated on other grounds, 513
U.S. 957 (1994).20
18 See Public Law 99–360, sec. 1(c), 100 Stat. at
766–67.
19 See 53 FR 10480; 27 CFR 178.125a (now
478.125a).
20 See also United States v. Brenner, 481 F. App’x
124, 127 (5th Cir. 2012) (‘‘Needless to say, in
determining the character and intent of firearms
transactions, the jury must examine all
circumstances surrounding the transaction, without
the aid of a ‘bright-line rule.’’’); United States v.
Bailey, 123 F.3d 1381, 1392 (11th Cir. 1997) (‘‘In
determining whether one is engaged in the business
of dealing in firearms, the finder of fact must
examine the intent of the actor and all
circumstances surrounding the acts alleged to
constitute engaging in business.’’ (quotation marks
and citation omitted)); United States v.
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C. Executive Action To Reduce Gun
Violence (2016)
On January 4, 2016, President Obama
announced several executive actions to
reduce gun violence and to make
communities across the United States
safer. Among them was a requirement
that ATF clarify, in a manner consistent
with court rulings on the issue: (1) that
a person can be engaged in the business
of dealing in firearms regardless of the
location in which firearm transactions
are conducted, and (2) that there is no
specific threshold number of firearms
purchased or sold that triggers the
licensure requirement.21 To provide this
clarification, ATF published a guidance
document entitled Do I Need a License
to Buy and Sell Firearms?, ATF
Publication 5310.2 (Jan. 2016), https://
www.atf.gov/file/100871/download,
which addressed these topics. The
guidance was developed to assist
unlicensed persons in understanding
when they will likely need to obtain a
license as a dealer in firearms. ATF is
updating this guidance to conform with
the ‘‘engaged in the business’’ definition
as amended by the BSCA. Further, once
a final rule is adopted based on this
NPRM, ATF intends to update the
guidance to include additional detail as
needed to conform with the rule.
D. Bipartisan Safer Communities Act
(2022)
Over 35 years after FOPA’s
enactment, on June 25, 2022, President
Biden signed into law the Bipartisan
Safer Communities Act, Public Law
117–159, 136 Stat. 1313. Section 12002
of the BSCA broadened the definition of
‘‘engaged in the business’’ under 18
U.S.C. 921(a)(21)(C) to all persons who
intend to ‘‘predominantly earn a profit’’
from wholesale or retail dealing in
firearms by eliminating the requirement
that a person’s ‘‘principal objective’’ of
purchasing and reselling firearms must
include both ‘‘livelihood and profit.’’
The statute now provides that, as
applied to a dealer in firearms, the term
Nadirashvili, 655 F.3d 114, 119 (2d Cir. 2011)
(‘‘[T]he government need not prove that dealing in
firearms was the defendant’s primary business. Nor
is there a ‘magic number’ of sales that need be
specifically proven. Rather, the statute reaches
those who hold themselves out as a source of
firearms. Consequently, the government need only
prove that the defendant has guns on hand or is
ready and able to procure them for the purpose of
selling them from [time] to time to such persons as
might be accepted as customers.’’ (quoting United
States v. Carter, 801 F.2d 78, 81–82 (2d Cir. 1986))).
21 See The White House, Office of the Press
Secretary, FACT SHEET: New Executive Actions to
Reduce Gun Violence and Make Our Communities
Safer (Jan. 4, 2016), https://obamawhitehouse.
archives.gov/the-press-office/2016/01/04/fact-sheetnew-executive-actions-reduce-gun-violence-andmake-our.
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‘‘engaged in the business’’ means ‘‘a
person who devotes time, attention, and
labor to dealing in firearms as a regular
course of trade or business to
predominantly earn a profit through the
repetitive purchase and resale of
firearms.’’ However, the BSCA
definition does not include ‘‘a person
who makes occasional sales, exchanges,
or purchases of firearms for the
enhancement of a personal collection or
for a hobby, or who sells all or part of
his personal collection of firearms.’’ 18
U.S.C. 921(a)(21)(C).
As now defined by the BSCA, the
term ‘‘to predominantly earn a profit’’
means that the person who engages in
selling or disposing of firearms has a
predominant intent of obtaining
pecuniary gain, as opposed to other
intents, such as improving or
liquidating a personal firearms
collection. The statutory definition
further provides that proof of profit is
not required as to a person who engages
in the regular and repetitive purchase
and disposition of firearms for criminal
purposes or terrorism. 18 U.S.C.
921(a)(22). According to the BSCA’s
sponsors, the BSCA’s change to the
definition was driven by ‘‘confusion
about the GCA’s definition of ‘engaged
in the business,’ as it pertained to
individuals who bought and resold
firearms repetitively for profit, but
possibly not as the principal source of
their livelihood.’’ 22 The sponsors
‘‘maintain[ed] that these changes clarify
who should be licensed, eliminating a
‘gray’ area in the law, ensuring that one
aspect of firearms commerce is more
adequately regulated.’’ 23 Congress did
22 William J. Krouse, Cong. Research Serv.,
IF12197, Firearms Dealers ‘‘Engaged in the
Business’’ at 2 (Aug. 19, 2022).
23 Id.; 168 Cong. Rec. H5906 (daily ed. June 24,
2022) (Statement of Rep. Jackson Lee) (‘‘[O]ur bill
would . . . further strengthen the background
check process by clarifying who is engaged in the
business of selling firearms and, as a result, is
required to run background checks.’’); 168 Cong.
Rec. S3055 (daily ed. June 22, 2022) (Statement of
Sen. Murphy) (‘‘We clarify in this bill the definition
of a federally licensed gun dealer to make sure that
everybody who should be licensed as a gun owner
is. In one of the mass shootings in Texas, the
individual who carried out the crime was mentally
ill. He was a prohibited purchaser. He shouldn’t
have been able to buy a gun. He was actually denied
a sale when he went to a bricks-and-mortar gun
store, but he found a way around the background
check system because he went online and found a
seller there who would transfer a gun to him
without a background check. It turned out that
seller was, in fact, engaged in the business, but
didn’t believe the definition applied to him because
the definition is admittedly confusing. So we
simplified that definition and hope that will
result—and I believe it will result—in more of these
frequent online gun sellers registering, as they
should, as federally licensed gun dealers which
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not make the same amendment to the
various definitions of ‘‘engaged in the
business’’ in 18 U.S.C. 921(a)(21) with
respect to licensed gunsmiths,
manufacturers, or importers.24
E. Executive Order 14092 (2023)
On March 14, 2023, President Biden
issued Executive Order 14092,
‘‘Reducing Gun Violence and Making
Our Communities Safer.’’ That order
requires the Attorney General to report
actions taken to implement the BSCA
and to develop and implement a plan to:
(1) clarify the definition of who is
engaged in the business of dealing in
firearms, and thus required to become
Federal firearms licensees (‘‘FFLs’’), in
order to increase compliance with the
Federal background check requirement
for firearm sales, including by
considering a rulemaking, as
appropriate and consistent with
applicable law; and (2) prevent former
FFLs whose licenses have been revoked
or surrendered from continuing to
engage in the business of dealing in
firearms.25
This NPRM proposes to implement
the ‘‘engaged in the business’’
provisions of the BSCA 26 and the
Department’s plan in response to
Executive Order 14092 by making
conforming changes to the new or
amended definitions, by clarifying the
updated BSCA definition of ‘‘engaged in
the business,’’ and by preventing former
FFLs whose licenses have been revoked
or surrendered from continuing to
engage in the business of dealing in
firearms. The rule proposes to
accomplish this clarity and deterrence
by setting forth specific activities
demonstrating when an unlicensed
person’s buying and selling of firearms
presumptively rises to the level of being
then requires them to perform background
checks.’’); see also Letter for Director, ATF, et al.,
from Sens. John Cornyn and Thom Tillis at 2–3
(Nov. 1, 2022) (‘‘Cornyn/Tillis Letter’’) (‘‘The BSCA
provides more clarity to the industry for when
someone must obtain a federal firearms dealers
license. In Midland and Odessa, Texas, for example,
the shooter—who at the time was prohibited form
possessing or owning a firearm under federal law—
purchased a firearm from an unlicensed firearms
dealer.’’).
24 The BSCA retained the existing term ‘‘with the
principal objective of livelihood and profit,’’ which
still applies to persons engaged in the business as
manufacturers, gunsmiths, and importers. That
definition became 18 U.S.C. 921(a)(23), and
Congress renumbered other definitions in section
921 accordingly.
25 Reducing Gun Violence and Making Our
Communities Safer, E.O. 14092, secs. 2, 3(a)(i)–(ii),
88 FR 16527, 16527–28 (Mar. 14, 2023).
26 The Department is also issuing a separate
rulemaking to amend ATF’s regulations to conform
with other provisions in the BSCA.
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‘‘engaged in the business,’’ thus
requiring that person to obtain a dealer’s
license, conduct background checks,
and abide by the other requirements set
forth in the GCA. At the same time, it
recognizes that individuals who
purchase firearms for the enhancement
of a personal collection or a legitimate
hobby are permitted by the GCA to
occasionally buy and sell firearms for
those purposes without the need to
obtain a license.
II. Proposed Rule
As stated previously, the BSCA
revised 18 U.S.C. 921(a)(21)(C) to
change part of the definition of persons
‘‘engaged in the business’’ of dealing in
firearms. This amendment broadened
the definition to reflect that it applies to
persons who engage in the business of
purchasing and selling firearms at
wholesale or retail with the
predominant purpose of earning a
profit, rather than just to persons whose
primary purpose is both livelihood and
profit. This means ‘‘that the intent
underlying the sale or disposition of
firearms is predominantly one of
obtaining pecuniary gain, as opposed to
other intents, such as improving or
liquidating a personal firearms
collection.’’ 18 U.S.C. 921(a)(22). ‘‘As a
result, the BSCA definitional changes
could make some, but not all, intrastate,
private firearm transfers subject to GCA
recordkeeping and background check
requirements’’ that previously were not
subject to those requirements, ‘‘if those
transfers are made by profit-oriented,
repetitive firearms buyers and
sellers.’’ 27
To implement the new statutory
language, this proposed rule amends
paragraph (c) of the regulatory
definition of ‘‘engaged in the business,’’
in § 478.11, pertaining to a ‘‘dealer in
firearms other than a gunsmith or
pawnbroker,’’ to conform with 18 U.S.C.
921(a)(21)(C) by removing the phrase
‘‘with the principal objective of
livelihood and profit’’ and replacing it
with the phrase ‘‘to predominantly earn
a profit.’’ This proposed rule also
amends § 478.11 to conform with new
18 U.S.C. 921(a)(22) by adding the
statutory definition of ‘‘predominantly
earn a profit’’ as a new regulatory
definition. Additionally, this rule
proposes to move the regulatory
definition of ‘‘terrorism,’’ which
currently exists in the regulations under
27 Krouse, Cong. Research Serv., Firearms Dealers
‘‘Engaged in the Business’’ at 2.
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the definition of ‘‘principal objective of
livelihood and profit,’’ to a new standalone definition. This is because the
BSCA definitions of ‘‘to predominantly
earn a profit’’ (18 U.S.C. 921(a)(22)) and
‘‘with the principal objective of
livelihood and profit’’ (18 U.S.C.
921(a)(23)) both include the same
exception to the requirement to prove
intent to profit when a licensee engages
in the firearms business for the purpose
of terrorism.
To further implement these statutory
changes, this rule then proposes to
clarify when a person is ‘‘engaged in the
business’’ as a dealer in firearms at
wholesale or retail by: (a) clarifying the
definition of ‘‘dealer’’; (b) defining the
terms ‘‘purchase’’ and ‘‘sale’’ as they
apply to dealers; (c) clarifying when a
person would not be engaged in the
business of dealing in firearms as an
auctioneer, or when purchasing firearms
for, and selling firearms from, a personal
collection; (d) setting forth conduct that
is, in civil and administrative
proceedings, presumed to constitute
‘‘engaging in the business’’ of dealing in
firearms and presumed to demonstrate
the intent to ‘‘predominantly earn a
profit’’ from the sale or disposition of
firearms, absent reliable evidence to the
contrary; (e) adding a single definition
for the terms ‘‘personal collection,’’
‘‘personal firearms collection,’’ and
‘‘personal collection of firearms’’; (f)
adding a definition for the term
‘‘responsible person’’; (g) clarifying that
the intent to ‘‘predominantly earn a
profit’’ does not require the person to
have received pecuniary gain, and that
intent does not have to be shown when
a person purchases or sells a firearm for
criminal or terrorism purposes; (h)
addressing how former licensees, and
responsible persons acting on behalf of
former licensees, may lawfully liquidate
business inventory upon revocation or
other termination of their license; and
(i) clarifying that licensees must follow
the verification and recordkeeping
procedures in 27 CFR 478.94 and
subpart H of title 27, part 478, rather
than using a Firearms Transaction
Record, ATF Form 4473 (‘‘Form 4473’’)
when firearms are transferred to other
licensees, including transfers by a
licensed sole proprietor to that person’s
personal collection.
A. Definition of ‘‘Dealer’’
In enacting the BSCA, Congress
expanded the definition of ‘‘engaged in
the business’’ ‘‘as applied to a dealer in
firearms,’’ as noted above. 18 U.S.C.
921(a)(21)(C). Consistent with the text
and purpose of the GCA, ATF
regulations have long defined the term
‘‘dealer’’ to include persons engaged in
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the business of selling firearms at
wholesale or retail, or as a gunsmith or
pawnbroker, on a part-time basis. 27
CFR 478.11 (definition of ‘‘Dealer’’).28
Due to the BSCA amendments, the
Department has further considered what
it means to be a ‘‘dealer’’ engaged in the
firearms business in light of new
technologies, mediums of exchange, and
forums in which firearms are bought
and sold with the predominant intent of
obtaining pecuniary gain.
Since 1968, advancements in
manufacturing (e.g., 3D printing) and
distribution technology (e.g., internet
sales) and changes in the marketplace
for firearms and related products (e.g.,
large-scale gun shows) have increased
the ways in which individuals shop for
firearms, and therefore have created a
need for further clarity in the regulatory
definition of ‘‘dealer.’’ 29 The
proliferation of new communications
technologies and e-commerce has made
it simple for persons to advertise and
sell firearms to a large potential market
at minimal cost and with minimal effort,
28 53 FR at 10481 (‘‘The final rule retains the
sentence [including part-time dealers] since it
comports with legislative intent as expressed in
committee reports.’’); see also United States v.
McGowan, 746 F. App’x 679, 680 (9th Cir. 2018)
(‘‘Selling firearms need not have been McGowan’s
primary source of income.’’); United States v. Focia,
869 F.3d 1269, 1281 (11th Cir. 2017) (‘‘[N]othing in
the [FOPA] amendments or the rest of the statutory
language indicates that a person violates
§ 922(a)(1)(A) only by selling firearms as his
primary means of income.’’); United States v.
Valdes, 681 F. App’x 874, 877 (11th Cir. 2017)
(‘‘The government must prove the defendant’s
activity rose above ‘the occasional sale of a
hobbyist,’ but does not need to show ‘the
defendant’s primary business was dealing in
firearms or that [she] necessarily made a profit from
dealing.’ ’’); United States v. Ibarra, 581 F. App’x
687, 690 (9th Cir. 2014) (‘‘The statute requires that
the defendant have a ‘principal objective of
livelihood and profit,’ . . . but nowhere requires a
principal objective that that profit be one’s primary
source of income.’’); United States v. Shipley, 546
F. App’x 450, 454 (5th Cir. 2013) (upholding
conviction for dealing in firearms as a regular side
business to supplement lawful income); United
States v. Gray, 470 F. App’x 468, 472 (6th Cir. 2012)
(‘‘[A] defendant need not deal in firearms as his
primary business for conviction.’’); Nadirashvili,
655 F.3d at 119 (quoting Carter, 801 F.2d at 81–81,
as holding that ‘‘[t]he government need not prove
that dealing in firearms was the defendant’s
primary business’’); United States v. Manthey, 92 F.
App’x 291, 297 (6th Cir. 2004) (‘‘[A] defendant need
not deal in firearms as his primary business for
conviction.’’); United States v. Allah, 130 F.3d 33,
43–44 (2d Cir. 1997) (‘‘[I]t is not a necessary
element of the crime [of dealing without a license]
that a defendants’ only business be that of selling
firearms’’); United States v. Beecham, Nos. 92–
5147, 92–5399, 1993 WL 188295, at *3 (4th Cir.
June 2, 1993) (‘‘The government need not prove that
a defendant’s primary business was dealing in
firearms or that he necessarily made a profit from
it.’’ (internal quotation marks omitted)).
29 See Cornyn/Tillis Letter at 3 (‘‘Our legislation
aims at preventing someone who is disqualified
from owning or possessing a firearm from shopping
around for an unlicensed firearm dealer.’’).
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61997
using a variety of means, and often as
a part-time activity. The proliferation of
sales at larger-scale gun shows, flea
markets, other similar events, and
online has also altered the marketplace
since the GCA was enacted in 1968.
Therefore, to provide additional
guidance on what it means to be
engaged in the business as a ‘‘dealer’’
within the diverse modern marketplace,
this rule first proposes to amend the
regulatory definition of ‘‘dealer’’ in 27
CFR 478.11 to clarify that firearms
dealing may occur wherever, or through
whatever medium, qualifying activities
may be conducted. This includes at any
domestic or international public or
private marketplace or premises. The
revised definition provides
nonexclusive examples of such
marketplaces: a gun show 30 or event,31
flea market,32 auction house,33 or gun
range or club; at one’s home; by mail
order; 34 over the internet; 35 through the
use of other electronic means (e.g., an
30 See ATF FFL Newsletter, July 2017, at 9 (gun
show guidelines); Important Notice to Dealers and
Other Participants at This Gun Show, ATF
Information 5300.23A (Sept. 2010); ATF Ruling 69–
59.
31 See ATF Q&A, How may a licensee participate
in the raffling of firearms by an unlicensed
organization?, https://www.atf.gov/firearms/qa/
how-may-licensee-participate-raffling-firearmsunlicensed-organization (May 22, 2020); ATF FFL
Newsletter, June 2021, at 8–9 (addressing conduct
of business at firearm raffles); Letter to Pheasants
Forever, from Acting Chief, Firearms Programs
Division, ATF at 1–2 (July 9, 1999) (addressing
nonprofit fundraising banquets); 1 ATF FFL
Newsletter, Feb. 1999, at 4–5 (addressing dinner
banquets).
32 See ATF FFL Newsletter, June 2010, at 5–6 (flea
market guidelines).
33 See Selling firearms—legally: A Q&A with the
ATF, Auctioneer, at 22–27 (June 2010).
34 See, e.g., United States v. Buss, 461 F. Supp.
1016 (W.D. Pa. 1978) (holding that mail order sales
by unlicensed defendant violated statute
proscribing illegally engaging in business of dealing
in firearms, even though defendant acted in concert
with licensed firearms dealers who recorded the
transfers).
35 See ATF FFL Newsletter, June 2021, at 8
(addressing internet sales of firearms); ATF
Intelligence Assessment, Firearms and Internet
Transactions (Feb. 9, 2016); Felon Seeks Firearm,
No Strings Attached: How Dangerous People Evade
Background Checks and Buy Illegal Guns Online,
City of New York (Sept. 2013), https://
www.nyc.gov/html/om/pdf/2013/felon_seeks_
firearm.pdf; Point, Click, Fire: An Investigation of
Illegal Online Gun Sales, City of New York (Dec.
2011); Focia, 869 F.3d at 1274 (affirming
defendant’s conviction for engaging in the business
without a license by dealing firearms through the
‘‘Dark Web’’).
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online broker,36 online auction,37 text
messaging service,38 social media
raffle,39 or website 40); or at any other
domestic or international public or
private marketplace or premises. These
examples are provided to clarify for
unlicensed persons that firearms dealing
requires a license in whatever place or
through whatever medium the firearms
are purchased and sold, including the
internet and locations other than a
36 See, e.g., Fulkerson v. Lynch, 261 F. Supp. 3d
779, 783–86, 788–89 (W.D. Ky. 2017) (denying
summary judgment to applicant whose license was
denied by ATF for previously willfully engaging in
the business of dealing without a license through
an online broker and granting summary judgement
to the government). Although some dealers may sell
firearms through online services sometimes called
‘‘brokers,’’ like a magazine or catalog company that
only advertises firearms listed by known sellers and
processes orders for them for direct shipment from
the distributor to their buyers, these ‘‘brokers’’ are
not themselves considered ‘‘dealers.’’ This is
because these online ‘‘brokers’’ do not purchase the
firearms for valuable consideration (i.e., take or
transfer title to them). Rather, they typically only
collect a commission or fee for providing contracted
services to market and process the transaction for
the seller. This is distinguished from a broker who,
for example, purchases the firearms from a
manufacturer, importer, or other distributor, sells
the firearms to the buyer, and has them shipped
directly to the buyer from the distributor. Such
persons must be licensed as dealers since they are
purchasing and selling the firearms with the
predominant intent to earn a profit. See, e.g., ATF
FFL Newsletter, Sept. 2016, at 3; 2 ATF FFL
Newsletter, Mar. 2023, at 6–7.
37 See, e.g., Press Release, Department of Justice
Office of Public Affairs (‘‘OPA’’), Minnesota Man
Indicted for Dealing Firearms without a License
(Feb. 18, 2016), https://www.justice.gov/opa/pr/
minnesota-man-indicted-dealing-firearms-withoutlicense (defendant dealt in firearms through
websites such as gunbroker.com, an online auction
website).
38 See, e.g., Press Release, OPA, Odenton,
Maryland Man Exiled to 8 Years in Prison for
Firearms Trafficking Conspiracy, DOJ/OPA (Apr.
27, 2017), https://www.justice.gov/usao-md/pr/
odenton-maryland-man-exiled-8-years-prisonfirearms-trafficking-conspiracy (defendant texted
photos of firearms for sale to his customer and
discussed prices).
39 See ATF FFL Newsletter, June 2021, at 9
(‘‘Social media gun raffles are gaining popularity on
the internet. In most instances, the sponsor of the
event is not a Federal firearms licensee, but will
enlist the aid of a licensee to facilitate the transfer
of the firearm to the raffle winner. Often, the
sponsoring organization arranges to have the
firearm shipped from a distributor to a licensed
third party and never takes physical possession of
the firearm. If the organization’s practice of raffling
firearms rises to the level of being engaged in the
business of dealing in firearms, the organization
must obtain a Federal firearms license.’’).
40 See, e.g., Press Release, Department of Justice
United States Attorney’s Office (‘‘USAO’’),
Snapchat Gun Dealer Convicted of Unlawfully
Manufacturing and Selling Firearms (Oct. 4, 2022),
https://www.justice.gov/usao-edca/pr/snapchatgun-dealer-convicted-unlawfully-manufacturingand-selling-firearms; Press Release, USAO, Sebring
Resident Sentenced to Prison for Unlawfully
Dealing Firearms on Facebook (Nov. 7, 2016),
https://www.justice.gov/usao-sdfl/pr/sebringresident-sentenced-prison-unlawfully-dealingfirearms-facebook.
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traditional brick and mortar store.41
However, regardless of the medium or
location at which a dealer buys and sells
firearms, to obtain a license under the
GCA, the dealer must still have a fixed
premises in a State from which to
conduct business subject to the license,
and comply with all applicable State
and local laws regarding the conduct of
such business.42 18 U.S.C. 923(d)(1)(E)–
(F).
Even though an applicant must have
a business premises in a particular State
to obtain a license, under the GCA,
firearms purchases or sales requiring a
license in the United States may involve
conduct outside of the United States.
Specifically, 18 U.S.C. 922(a)(1)(A) has
long prohibited any person without a
license from shipping, transporting, or
receiving any firearm in foreign
commerce while in the course of being
engaged in the business of dealing in
41 See Letter for Outside Counsel to National
Association of Arms Shows, from Chief, Firearms
and Explosives Division, ATF, Re: Request for
Advisory Opinion on Licensing for Certain Gun
Show Sellers at 1 (Feb. 17, 2017) (‘‘Anyone who is
engaged in the business of buying and selling
firearms, regardless of the location(s) at which those
transactions occur is required to have a Federal
firearms license. ATF will issue a license to persons
who intend to conduct their business primarily at
gun shows, over the internet, or by mail order, so
long as they otherwise meet the eligibility criteria
established by law. This includes the requirement
that they maintain a business premises at which
ATF can inspect their records and inventory, and
that otherwise complies with local zoning
restrictions’’); ATF FFL Newsletter, June 2010, at 5
(Unless there is a permanent business premises
from which to conduct firearms business (e.g., an
identified rented space that can securely hold
required records), ‘‘[t]he GCA prohibits any person
from engaging in the business of selling, dealing, or
trading in firearms at flea markets. The only
exceptions would be an unlicensed individual
making an occasional firearm sale or for a Federal
firearms licensee to display firearms and take orders
of firearms.’’); Letter for Sen. Dan Coats, from
Deputy Director, ATF (Aug. 22, 1990) (an FFL
cannot be issued at a table or booth at a temporary
flea market); ATF Internal Memorandum #23264
(June 15, 1983) (same); United States v. Allman, 119
Fed. App’x. 751, 754 (6th Cir. 2005) (‘‘Illegal gun
transactions at flea markets are not atypical.’’);
United States v. Orum, 106 F. App’x 972 (6th Cir.
2004) (defendant illegally displayed and sold
firearms at flea markets and gun shows).
42 See Abramski v. United States, 573 U.S. 169,
172, 181 (2014) (‘‘The statute establishes a detailed
scheme to enable the dealer to verify, at the point
of sale, whether a potential buyer may lawfully own
a gun. Section 922(c) brings the would-be purchaser
onto the dealer’s ‘business premises’ by prohibiting,
except in limited circumstances, the sale of a
firearm ‘to a person who does not appear in person’
at that location.’’); National Rifle Ass’n v. Brady,
914 F. 2d 475, 480 (4th Cir. 1990) (holding that
FOPA did not eliminate the requirement that a
licensee have a business premises from which to
conduct business ‘‘so that regulatory authorities
will know where the inventory and records of a
licensee can be found’’); Meester v. Bowers, No.
12CV86, 2013 WL 3872946 (D. Neb. July 25, 2013)
(upholding ATF’s denial of license in part because
the applicant lacked a means of accessing the
premises).
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firearms,43 and 18 U.S.C. 924(n)
prohibits travelling from a foreign
country to a State in furtherance of
conduct that constitutes a violation of
section 922(a)(1)(A).
Further, as recently amended by the
BSCA, the GCA now expressly prohibits
a person from smuggling or knowingly
taking a firearm out of the United States
with intent to engage in conduct that
would constitute a felony for which the
person may be prosecuted in a court in
the United States if the conduct had
occurred within the United States. 18
U.S.C. 924(k)(2). Willfully engaging in
the business of dealing in firearms
without a license is an offense
punishable by more than one year in
prison, see 18 U.S.C. 924(a)(1)(D), and
constitutes a felony. Therefore,
unlicensed persons who purchase
firearms in the United States and
smuggle or take them out of the United
States (or conspire or attempt to do so)
for resale in another country would still
be engaging in unlawful dealing in
firearms without a license, among other
violations of United States law.
Accordingly, this rule proposes to
clarify in the definition of ‘‘dealer’’ that
purchases or sales of firearms as a
wholesale or retail dealer may occur
either domestically or internationally.
B. Definition of ‘‘Engaged in the
Business’’—‘‘Purchase’’ and ‘‘Sale’’
To further clarify the regulatory
definition of a dealer ‘‘engaged in the
business’’ with the predominant intent
of earning a profit through the repetitive
purchase and resale of firearms in 27
CFR 478.11, this rule also proposes to
define, based on common dictionary
definitions and relevant case law, the
terms ‘‘purchase’’ and ‘‘sale’’ (and
derivative terms thereof, such as
‘‘purchases,’’ ‘‘purchasing,’’
‘‘purchased,’’ and ‘‘sells,’’ ‘‘selling,’’ or
‘‘sold’’). This should help clarify,
through examples, how those terms
apply to dealing in firearms.
Specifically, this rule proposes to define
‘‘purchase’’ (and derivative terms
thereof) as ‘‘the act of obtaining a
firearm in exchange for something of
43 See, e.g., United States v. Baptiste, 607 F.
App’x 950, 953 (11th Cir. 2015) (upholding section
922(a)(1) conviction where firearms purchased in
the United States were to be resold in Haiti); United
States v. Murphy, 852 F.2d 1, 8 (1st Cir. 1988) (same
with firearms to be resold in Ireland); United States
v. Hernandez, 662 F.2d 289, 291 (5th Cir. 1981)
(same with firearms to be resold in Mexico). But see
United States v. Mowad, 641 F.2d 1067 (2d Cir.
1981) (reversing conviction for purchasing firearms
for resale in Lebanon on the basis that there was
no mention of exporting firearms in the GCA or any
suggestion of Congressional concern about firearm
violence in other countries).
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value,’’ 44 and the term ‘‘sale’’ (and
derivative terms thereof, including
‘‘resale’’) as ‘‘the act of providing a
firearm in exchange for something of
value.’’ 45 The term ‘‘something of
value’’ includes money, credit, personal
property (e.g., another firearm 46 or
ammunition 47), a service,48 a controlled
substance,49 or any other medium of
exchange 50 or valuable
consideration.’’ 51
Defining these terms to include any
method of payment for a firearm would
clarify that persons cannot avoid
licensing by, for instance, bartering or
providing or receiving services in
exchange for firearms with the
predominant intent to earn pecuniary
gain even where no money is
exchanged. It would also clarify that a
44 This definition is consistent with the common
meaning of ‘‘purchase,’’ which is ‘‘to obtain (as
merchandise) by paying money or its equivalent.’’
Webster’s Third New International Dictionary 1844
(1971); see also Black’s Law Dictionary 1491 (11th
Ed. 2019) (The term ‘‘purchase’’ means ‘‘[t]he
acquisition of an interest in real or personal
property by sale, discount, negotiation, mortgage,
pledge, lien, issue, reissue, gift, or any other
voluntary transaction.’’).
45 This definition is consistent with the common
meaning of ‘‘sale,’’ which is ‘‘a contract transferring
the absolute or general ownership of property from
one person or corporate body to another for a price
(as a sum of money or any other consideration).’’
Webster’s Third New International Dictionary 2003
(1971). The related term ‘‘resale’’ is ‘‘the act of
selling again.’’ Id. at 1929.
46 See, e.g., United States v. Gross, 451 F.2d 1355,
1360 (7th Cir. 1971) (defendant ‘‘had traded
firearms [for other firearms] with the object of profit
in mind’’).
47 See, e.g., United States v. Huffman, 518 F.2d
80 (4th Cir. 1975) (defendant traded large quantities
of ammunition in exchange for firearms).
48 See, e.g., United States v. 57 Miscellaneous
Firearms, 422 F. Supp. 1066, 1070–71 (W.D. Mo.
1976) (defendant obtained the firearms he sold or
offered for sale in exchange for carpentry work he
performed).
49 See, e.g., Johnson v. Johns, No. 10–CV–
904(SJF), 2013 WL 504446 (E.D.N.Y. Feb. 5, 2013)
(on at least one occasion, petitioner, who was
engaged in the unlicensed dealing in firearms
through straw purchasers, compensated a straw
purchaser with cocaine base).
50 See, e.g., Focia, 869 F.3d at 1274 (defendant
sold pistol online to undercover ATF agent for 15
bitcoins).
51 The term ‘‘medium of exchange’’ generally
means ‘‘something commonly accepted in exchange
for goods and services and recognized as
representing a standard of value,’’ and ‘‘valuable
consideration’’ is ‘‘an equivalent or compensation
having value that is given for something (as money,
marriage, services) acquired or promised and that
may consist either in some right, interest, profit, or
benefit accruing to one party or some responsibility,
forbearance, detriment, or loss exercised by or
falling upon the other party.’’ Webster’s Third New
International Dictionary 1403, 2530 (1971). See,
e.g., United States v. Berry, 644 F.2d 1034, 1036
(5th Cir. 1981) (defendant sold firearms in exchange
for large industrial batteries to operate his
demolition business); United States v. Reminga, 493
F. Supp. 1351, 1357 (W.D. Mich. 1980) (defendant
traded his car for three guns that he later sold or
traded).
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person requires a license to engage in
the business of dealing in firearms even
when the medium of payment or
consideration is unlawful, such as
exchanging illicit drugs or performing
illegal acts for firearms, and that it is a
distinct crime to do so without a
license.
or over a period of time. In this
‘‘consignment-type’’ auction, the
auctioneer generally inventories,
evaluates, and tags the firearms for
identification.53 Therefore, under
‘‘consignment-type’’ auctions, an
auctioneer would generally need to be
licensed.
C. Definition of ‘‘Engaged in the
Business’’ as Applied to Auctioneers
Because the definitions of ‘‘purchase’’
and ‘‘sale’’ broadly include services
provided in exchange for firearms, both
as defined by common dictionaries and
as proposed in this rule, the Department
further proposes to make clear that
certain persons who provide auctioneer
services are not required to be licensed
as dealers. ATF has long interpreted the
statutory definition of ‘‘engaged in the
business’’ as excluding auctioneers who
provide only auction services on
commission by assisting in liquidating a
personal collection of firearms at an
‘‘estate-type’’ auction.52 The new
definition in the BSCA does not affect
that determination. The Department is
proposing to incorporate this
longstanding interpretation into the
regulations while otherwise clarifying
the regulatory definition.
In this context, the auctioneer is
generally providing services only as an
agent of the owner or executor of an
estate who is liquidating a personal
collection. The firearms are within the
estate’s control and the sales made on
the estate’s behalf. This limited
exclusion from the definition of
‘‘dealer’’ is conditioned on the
auctioneer not purchasing the firearms,
taking possession of the firearms prior
to the auction, or consigning the
firearms for sale. If the auctioneer were
to engage in any of that conduct, the
auctioneer would need to have a
dealer’s license because that person
would be engaged in the business of
purchasing and reselling firearms to
earn a profit. An ‘‘estate-type’’ auction
as described above differs from
liquidating a personal collection of
firearms by means of a ‘‘consignmenttype’’ auction, in which the auctioneer
is paid to accept firearms into a business
inventory and then resells them in lots,
D. Presumptions That a Person Is
‘‘Engaged in the Business’’
The Department has observed through
its enforcement efforts and subjectmatter expertise that persons who are
engaged in certain firearms purchaseand-sale activities are highly likely to be
‘‘engaged in the business’’ of dealing in
firearms at wholesale or retail. These
activities have been observed through a
variety of criminal, civil, and
administrative enforcement actions and
proceedings brought by the Department,
to include: (1) ATF inspections of
prospective and existing wholesale and
retail dealers of firearms who are
engaged, or intend to engage in the
business; 54 (2) criminal investigations
and prosecutions of persons who
engaged in the business of dealing in
firearms without a license; 55 (3) civil
and administrative actions under 18
U.S.C. 924(d) to seize and forfeit
firearms intended to be sold by persons
engaged in the business without a
license; 56 (4) ATF cease and desist
letters issued to prevent section
922(a)(1)(A) violations; 57 and (5) ATF
administrative proceedings under 18
U.S.C. 923 to deny licenses to persons
who willfully engaged in the business of
dealing in firearms without a license, or
to revoke or deny renewal of existing
52 See ATF Q&A, Does an auctioneer who is
involved in firearms sales need a dealer’s license?,
https://www.atf.gov/firearms/qa/does-auctioneerwho-involved-firearms-sales-need-dealer-license
(July 10, 2020); ATF Federal Firearms Regulations
Reference Guide, P 5300.4, Q&A L1, at 207 (2014);
ATF FFL Newsletter, May 2001, at 3; ATF Ruling
96–2, Engaging in the Business of Dealing in
Firearms (Auctioneers); 1 ATF FFL Newsletter,
1990, at 7; Letter for Editor, CarPac Publishing
Company, from Acting Assistant Director
(Regulatory Enforcement), ATF, CC–28,953 (July 26,
1979).
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53 Id.
54 In Fiscal Year 2022, for example, ATF
conducted 11,156 qualification inspections of new
applicants for a license, and 6,979 compliance
inspections of active licensees. See ATF, Fact
Sheet—Facts and Figures for Fiscal Year 2022 (Jan.
2023), https://www.atf.gov/resource-center/factsheet/fact-sheet-facts-and-figures-fiscal-year-2022.
55 See footnotes 62 through 72, infra.
56 See, e.g., United States v. Four Hundred
Seventy Seven (477) Firearms, 698 F. Supp. 2d 890
(E.D. Mich. 2010) (civil forfeiture of firearms
intended to be sold from an unlicensed gun store);
United States v. One Bushmaster, Model XM15–E2
Rifle, No. 5:06–CV–156 (WDO), 2006 WL 3497899
(M.D. Ga. Dec. 5, 2006) (civil forfeiture of firearms
intended to be sold by an unlicensed person who
acquired an unusually large amount of firearms
quickly for the purpose of selling or trading them);
United States v. Twenty Seven (27) Assorted
Firearms, No. SA–05–CA–407–XR, 2005 WL
2645010 (W.D. Tex. Oct. 13, 2005) (civil forfeiture
of firearms intended to be sold at gun shows
without a license).
57 Over the years, ATF has issued numerous
letters warning unlicensed persons not to continue
to engage in the business of dealing in firearms
without a license, also called a ‘‘cease and desist’’
letter. See, e.g., United States v. Kubowski, 85 F.
App’x 686, 687 (10th Cir. 2003) (defendant served
cease and desist letter after selling five handguns
and one rifle to undercover ATF agents).
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licenses held by licensees who aided
and abetted that misconduct.58 In
addition, numerous courts have
identified certain activities or factors
they deemed relevant to determining
whether a person is ‘‘engaged in the
business’’ even prior to Congress’s
decision to expand the definition in the
BSCA.59 This rule, therefore, proposes
to establish rebuttable presumptions in
certain contexts to help unlicensed
persons, industry operations personnel,
and others determine when a person is
presumed to be ‘‘engaged in the
business’’ requiring a dealer’s license.
These rebuttable presumptions would
apply in civil and administrative
proceedings. While the criteria set forth
in the proposed rule may be useful to
a court in a criminal case—for example,
to inform appropriate jury instructions
regarding permissible inferences 60—the
regulatory text makes clear that the
58 See, e.g., In the Matter of Scott, Application
Nos. 9–93–019–01–PA–05780 and 05781 (Seattle
Field Division, Apr. 3, 2018) (denied applicant for
license to person who purchased and sold
numerous handguns within one month; In the
Matter of S.E.L.L. Antiques, Application No. 9–87–
035–01–PA–00725 (Phoenix Field Division, Feb. 21,
2006) (denied applicant who repetitively sold
modern firearms from unlicensed storefront).
59 See footnote 20, supra, and accompanying text.
60 While rebuttable presumptions may not be
presented to a jury in a criminal case, jury
instructions may include, for example, reasonable
permissive inferences. See Francis v. Franklin, 471
U.S. 307, 314 (1985) (‘‘A permissive inference
suggests to the jury a possible conclusion to be
drawn if the [government] proves predicate facts,
but does not require the jury to draw that
conclusion.’’); County Court of Ulster County v.
Allen, 442 U.S. 140 (1979) (upholding jury
instruction that gave rise to a permissive inference
available only in certain circumstances, rather than
a mandatory conclusion); Baghdad v. Att’y Gen. of
the U. S., 50 F.4th 386, 390 (3d Cir. 2022) (‘‘Unlike
mandatory presumptions, permissive inferences
. . . do not shift the burden of proof or require any
outcome. They are just an ‘evidentiary device . . .
[that] allows—but does not require—the trier of fact
to infer’ that an element of a crime is met once basic
facts have been proven beyond a reasonable
doubt.’’); Patton v. Mullin, 425 F.3d 788 (10th Cir.
2005) (upholding jury instruction that created a
permissive inference rather than a rebuttable
presumption); United States v. Warren, 25 F.3d 890,
897 (9th Cir. 1994) (same); United States v.
Washington, 819 F.2d 221 (9th Cir. 1987) (same);
Lannon v. Hogan, 719 F.2d 518 (1st Cir. 1983)
(same); United States v. Gaines, 690 F.2d 849 (11th
Cir. 1982) (same); cf., e.g., United States v.
Antonoff, 424 F. App’x 846, 848 (11th Cir. 2011)
(district court relied on permissive inference of
current drug use in ATF’s definition of ‘‘unlawful
user’’ in 27 CFR 478.11 to conclude that the
defendant’s drug use was ‘‘contemporaneous and
ongoing’’ sufficient to apply the 2K2.1 sentencing
guideline); United States v. McCowan, 469 F.3d
386, 392 (5th Cir. 2006) (upholding application of
a sentencing enhancement based on the permissive
inference of current drug use in 27 CFR 478.11);
United States v. Stanford, No. 11–10211–01–EFM,
2012 WL 1313503 (D. Kan. Apr. 16, 2012)
(upholding arrest under 18 U.S.C. 922(g)(3) relying,
in part, on ATF’s regulatory definition of ‘‘unlawful
user’’).
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presumptions shall not apply to
criminal cases.61
The Department has considered, but
not proposed in the NPRM, an
alternative that would have set a
minimum numerical threshold of
firearms sold by a person within a
certain period of time. That approach
has not been proposed for several
reasons. First, while selling large
numbers of firearms or engaging or
offering to engage in frequent
transactions may be highly indicative of
business activity, neither the courts nor
the Department has recognized a set
minimum number of firearms purchased
or resold that triggers the licensing
requirement. Similarly, there is no
minimum number of transactions that
determines whether a person is
‘‘engaged in the business’’ of dealing in
firearms. Instead, the established
approach for determining whether an
individual is ‘‘engaged in the business’’
is to look at the totality of
circumstances. Thus, even a single
firearm transaction, or offer to engage in
a transaction, when combined with
other evidence, may be sufficient to
require a license. For example, even
under the previous statutory definition,
courts have upheld convictions for
dealing without a license when few
firearms, if any, were actually sold,
provided other factors were also
present, such as the person representing
to others a willingness and ability to
repetitively purchase firearms for resale.
See, e.g., United States v. King, 735 F.3d
1098, 1107 n.8 (9th Cir. 2013)
(upholding conviction where defendant
attempted to sell one firearm and
represented that he could purchase
more for resale and noting that ‘‘Section
922(a)(1)(A) does not require an actual
sale of firearms’’).62 Second, in addition
61 See generally 2 Handbook of Fed. Evid. § 303:4
(9th ed. 2020) (explaining Federal Rule of Evidence
Standard 303(c), which ‘‘provides that whenever
the existence of a presumed fact against the accused
is submitted to the jury, the court should instruct
the jury that it may regard the basic facts as
sufficient evidence of the presumed fact but is not
required to do so. In addition, if the presumed fact
establishes guilt, is an element of the offense, or
negatives a defense, the court should instruct the
jury that its existence on all the evidence must be
proved beyond a reasonable doubt. . . . The
applicability and constitutionality of Standard
303(b) must be evaluated in light of the Supreme
Court decisions in County Court of Ulster v. Allen,
Sandstrom v. Montana, and Francis v. Franklin. As
a result of these decisions it is clear, if it wasn’t
before, that it is never permissible to shift to the
defendant the burden of persuasion to disprove an
element of a crime charged by means of a
presumption, and of course, that a conclusive or
irrebuttable presumption operating against the
criminal defendant is also unconstitutional.’’).
62 See Do I Need a License to Buy and Sell
Firearms?, ATF Publication 5310.2 (Jan. 2016). See
also Nadirashvili, 655 F.3d at 120–21 (despite
defendants’ knowledge of only a single firearms
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to the tracing concerns expressed by
ATF in response to comments on the
1979 ANPRM, a person could structure
their transactions to avoid a minimum
threshold by spreading out their sales
over time. Finally, the Department does
not believe there is a sufficient
evidentiary basis, without consideration
of additional factors, to support a
specific minimum number of firearms
bought or sold for a person to be
considered ‘‘engaged in the business.’’
Rather than establishing a minimum
threshold number of firearms purchased
or sold, this rule proposes to clarify that,
absent reliable evidence to the contrary,
a person will be presumed to be engaged
in the business of dealing in firearms
when the person:
(1) sells or offers for sale firearms, and
also represents to potential buyers or
otherwise demonstrates a willingness
and ability to purchase and sell
additional firearms; 63
(2) spends more money or its
equivalent on purchases of firearms for
the purpose of resale than the person’s
reported taxable gross inome during the
applicable period of time; 64
(3) repetitively purchases for the
purpose of resale, or sells or offers for
sale firearms—
transaction, there was sufficient evidence to prove
they had ‘‘engaged in the business’’ because they
knew co-defendant held himself out generally as a
source of firearms, and was ready to procure them
for customers); United States v. Shan, 361 F. App’x
182 (2d Cir. 2010) (defendant sold two firearms
within roughly a month and acknowledged he had
a source of supply for other weapons); United States
v. Shan, 80 F. App’x 31 (9th Cir. 2003) (sale of
weapons in one transaction where the defendant
was willing and able to find more weapons for
resale); Murphy, 852 F.2d at 8 (‘‘[T]his single
transaction was sufficiently large in quantity, price
and length of negotiation to constitute dealing in
firearms.’’); United States v. Swinton, 521 F.2d
1255, 1259 (10th Cir. 1975) (‘‘Swinton’s sale [of one
firearm] to Agent Knopp, standing alone, without
more, would not have been sufficient to establish
a violation of section 922(a)(1). That sale, however,
when considered in conjunction with other facts
and circumstances related herein, established that
Swinton was engaged in the business of dealing in
firearms. The unrebutted evidence of the
Government established not only that Swinton
considered himself to be and held himself out as
a dealer, but that, most importantly, he was actively
engaged in the business of dealing in guns.’’
(internal citation omitted)).
63 See King, 735 F.3d at 1107 (defendant
attempted to sell one of the 19 firearms he had
ordered, and represented to the buyer that he was
buying, selling, and trading in firearms and could
procure any item in a gun publication at a cheaper
price).
64 See, e.g., Focia, 869 F.3d at 1282 (‘‘And finally,
despite efforts to obtain Focia’s tax returns and
Social Security information, agents found no
evidence that Focia enjoyed any source of income
other than his firearms sales. This evidence
overwhelmingly demonstrates that Focia’s sales of
firearms were no more a hobby than working at
Burger King for a living could be described that
way.’’).
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(A) through straw or sham
businesses,65 or individual straw
purchasers or sellers; 66 or
(B) that cannot lawfully be purchased
or possessed, including:
(i) stolen firearms (18 U.S.C. 922(j)); 67
(ii) firearms with the licensee’s serial
number removed, obliterated, or altered
(18 U.S.C. 922(k); 26 U.S.C. 5861(i)); 68
65 See, e.g., MEW Sporting Goods, LLC. v.
Johansen, 992 F. Supp. 2d 665, 674–75 (N.D.W.V.
2014), aff’d, 594 F. App’x 143 (4th Cir. 2015)
(corporate entity disregarded where it was formed
to circumvent firearms licensing requirement);
King, 735 F.3d at 1106 (defendant felon could not
‘‘immunize himself from prosecution’’ for dealing
without a license by ‘‘hiding behind a corporate
charter.’’); United States v. Fleischli, 305 F.3d 643,
652 (7th Cir. 2002) (‘‘In short, a convicted felon who
could not have legitimately obtained a
manufacturer’s or dealer’s license may not obtain
access to machine guns by setting up a sham
corporation.’’); National Lending Group, L.L.C. v.
Mukasey, No. CV 07–0024, 2008 WL 5329888 (D.
Ariz. Dec. 19, 2008), aff’d, 365 F. App’x 747 (9th
Cir. 2010) (straw ownership of corporate pawn
shops); Casanova Guns, Inc. v. Connally, 454 F.2d
1320, 1322 (7th Cir. 1972) (‘‘[I]t is well settled that
the fiction of a corporate entity must be disregarded
whenever it has been adopted or used to
circumvent the provisions of a statute.’’); XVP
Sports, LLC v. Bangs, No. 2:11CV379, 2012 WL
4329258, at *5 (E.D. Va. Sept. 17, 2012) (‘‘unity of
interest’’ existed between firearm companies
controlled by the same person); Virlow LLC v.
Bureau of Alcohol, Tobacco, Firearms & Explosives,
No. 1:06–CV–375, 2008 WL 835828 (W.D. Mich.
Mar. 28, 2008) (corporate form disregarded where
a substantial purpose for the formation of the
company was to circumvent the statute restricting
issuance of firearms licenses to convicted felons);
Press Release, OPA, Utah Business Owner
Convicted of Dealing in Firearms without a License
and Filing False Tax Returns (Sept. 23, 2016),
https://www.justice.gov/opa/pr/utah-businessowner-convicted-dealing-firearms-without-licenseand-filing-false-tax-returns (defendant illegally sold
firearms under the auspices of a company owned
by another Utah resident).
66 See, e.g., Bryan v. United States, 524 U.S. 184,
189 (1998) (defendant used straw purchasers to buy
pistols in Ohio for resale in New York); United
States v. Ochoa, 726 F. App’x 651, 652 (9th Cir.
2018) (‘‘[W]hile the evidence demonstrated that
Ochoa did not purchase and sell the firearms
himself, it was sufficient to demonstrate that he had
the princip[al] objective of making a profit through
the repetitive purchase and sale of firearms, even
if those purchases and sales were carried out by
others.’’); United States v. Hosford, 843 F.3d 161,
163 (4th Cir. 2016) (defendant purchased firearms
through a straw purchaser who bought them at gun
shows); United States v. Paye, 129 F. App’x 567,
570 (11th Cir. 2005) (defendant paid straw
purchaser to buy firearms for him to sell); United
States v. Bryan, 122 F.3d 90, 92 (2d Cir. 1997)
(defendant enlisted the aid of two straw purchasers
to buy guns for resale in another state).
67 See, e.g., United States v. Simmons, 485 F.3d
951 (7th Cir. 2007); United States v. Perkins, 633
F.2d 856 (8th Cir. 1981).
68 See, e.g., United States v. Ilarraza, 963 F.3d 1
(1st Cir. 2020); United States v. Fields, 608 F. App’x
806 (11th Cir. 2015); United States v. Barrero, 578
F. App’x 884 (11th Cir. 2014); United States v.
Teleguz, 492 F.3d 80 (1st Cir. 2007); United States
v. Bostic, 371 F.3d 865 (6th Cir. 2004); United
States v. Kitchen, 87 F. App’x 244 (3d Cir. 2004);
United States v. Ortiz, 318 F.3d 1030 (11th Cir.
2003); United States v. Jackson, No. 97–6756, 1997
WL 618902 (4th Cir. Oct. 8, 1997); United States v.
Rosa, 123 F.3d 94 (2d Cir. 1997); United States v.
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(iii) firearms imported in violation of
law (18 U.S.C. 922(l), 22 U.S.C. 2778, or
26 U.S.C. 5844, 5861(k)); or
(iv) machineguns or other weapons
defined as firearms under 26 U.S.C.
5845(a) that were not properly
registered in the National Firearms
Registration and Transfer Record (18
U.S.C. 922(o); 26 U.S.C. 5861(d)); 69
(4) repetitively sells or offers for sale
firearms—
(A) within 30 days after they were
purchased; 70
(B) that are new, or like new in their
original packaging; 71 or
(C) that are of the same or similar kind
(i.e., make/manufacturer, model,
caliber/gauge, and action) and type (i.e.,
the classification of a firearm as a rifle,
shotgun, revolver, pistol, frame,
receiver, machinegun, silencer,
destructive device, or other firearm); 72
Twitty, 72 F.3d 228 (1st Cir. 1995); United States
v. Collins, 957 F.2d 72 (2d Cir. 1992).
69 See, e.g., United States v. Fridley, 43 F. App’x
830 (6th Cir. 2002) (defendant purchased and sold
unregistered machineguns); United States v.
Idarecis, No. 97–1629, 1998 WL 716568 (2d Cir.
Oct. 9, 1998) (defendant converted rifles to
automatic weapons and obliterated the serial
numbers on the firearms he sold).
70 See, e.g., Press Release, OPA, Minnesota Man
Indicted for Dealing Firearms without a License
(Feb. 18, 2016), https://www.justice.gov/opa/pr/
minnesota-man-indicted-dealing-firearms-withoutlicense#:∼:text=U.S.%20Attorney%20
Andrew%20M.,least%20nine%20firearms
%20transaction%20records (defendant sold
firearms he purchased through online websites, and
the average time he actually possessed a gun before
offering it for sale was only nine days); Press
Release, USAO, Ex-Pasadena Police Lieutenant
Sentenced to One Year in Federal Prison for
Unlicensed Selling of Firearms and Lying on ATF
Form (Feb. 25, 2019), https://www.justice.gov/usaocdca/pr/ex-pasadena-police-lieutenant-sentencedone-year-federal-prison-unlicensed-selling
(defendant resold 79 firearms within six days after
he purchased them); United States v. D’Agostino,
No. 10–20449, 2011 WL 219008 (E.D. Mich. Jan. 20,
2011) (some of the weapons defendant sold at gun
shows were purchased ‘‘a short time earlier’’).
71 See, e.g., United States v. Carter, 203 F.3d 187,
189 n.1 (2d Cir. 2000) (defendant admitted to
willfully shipping and transporting interstate
eleven handguns in the course of engaging in the
business of dealing in firearms without a license
that were contained in their original boxes); United
States v. Van Buren, 593 F.2d 125, 126 (9th Cir.
1979) (defendant’s ‘‘gun displays were atypical of
those of a collector because he exhibited many new
weapons, some in the manufacturers’ boxes’’);
United States v. Powell, 513 F.2d 1249 (8th Cir.
1975) (defendant acquired and sold six ‘‘new’’ or
‘‘like new’’ shotguns over several months); United
States v. Posey, 501 F.2d 998, 1002 (6th Cir. 1974)
(defendant offered firearms for sale, some of them
in their original boxes); United States v. Day, 476
F.2d 562, 564, 567 (6th Cir. 1973) (60 of the 96 guns
to be sold by defendant were new handguns still in
the manufacturer’s original packages).
72 See, e.g., Press Release, USAO, FFL Sentenced
for Selling Guns to Unlicensed Dealers (May 27,
2022), https://www.justice.gov/usao-ndtx/pr/fflsentenced-selling-guns-unlicensed-dealers
(defendant regularly sold large quantities of
identical firearms to unlicensed associates who sold
them without a license); Shipley, 546 F. App’x at
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62001
(5) who, as a former licensee (or
responsible person acting on behalf of
the former licensee) sells or offers for
sale firearms that were in the business
inventory of such licensee at the time
the license was terminated (i.e., license
revocation, denial of license renewal,
license expiration, or surrender of
license), and were not transferred to a
personal collection in accordance with
18 U.S.C. 923(c) and 27 CFR 478.125a;
or
(6) who, as a former licensee (or
responsible person acting on behalf of a
former licensee) sells or offers for sale
firearms that were transferred to a
personal collection of such former
licensee or responsible person prior to
the time the license was terminated,
unless: (A) the firearms were received
and transferred without any intent to
willfully evade the restrictions placed
on licensees by chapter 44, title 18, of
the United States Code; and (B) one year
has passed from the date of transfer to
the personal collection.
Any one or a combination of the
circumstances above gives rise to a
presumption in civil and administrative
proceedings that the person is engaged
in the business of dealing in firearms
and must be licensed under the GCA.
The activities set forth in these
rebuttable presumptions are not
exhaustive of the conduct that may
show that, or be considered in
determining whether, a person is
engaged in the business of dealing in
firearms. Further, as noted above, while
the criteria may be useful to courts in
criminal cases when instructing juries
regarding permissible inferences, the
presumptions outlined above shall not
apply to criminal cases.
At the same time, the Department
recognizes that certain transactions are
not likely to be sufficient to support a
presumption that a person is engaging
in the business of dealing in firearms.
For this reason, the proposed rule also
includes examples of when a person is
not presumed to be engaged in the
business of dealing in firearms.
Specifically, under this proposed rule, a
person would not be presumed to be
engaged in the business requiring a
license as a dealer when the person
transfers firearms only as bona fide
453 (defendant sold mass-produced firearms of
similar make and model that were not likely to be
part of a personal collection).
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gifts,73 or occasionally 74 sells firearms
only to obtain more valuable, desirable,
or useful firearms for their personal
collection or hobby, unless their
conduct also demonstrates a
predominant intent to earn a profit.
The rebuttable presumptions set forth
above are supported by the
Department’s investigative and
regulatory enforcement experience,75 as
well as conduct that the courts have
found to require a license even before
the BSCA expanded the definition of
‘‘engaged in the business.’’ Moreover,
these presumptions are consistent with
the case-by-case analytical framework
long applied by the courts in
determining whether a person has
violated 18 U.S.C. 922(a)(1)(A) and
923(a) by engaging in the business of
dealing in firearms without a license
even under the pre-BSCA definition.
The fundamental purpose of the GCA
would be severely undermined if
persons were allowed to repetitively
purchase and resell firearms to
predominantly earn a profit without
conducting background checks, keeping
records, and otherwise complying with
the license requirements of the GCA
simply because the effort needed to
conduct commerce in general has
dramatically diminished. The
Department is therefore providing
objectively reasonable standards for
when a person is presumed to be
‘‘engaged in the business’’ to strike an
appropriate balance that captures
persons who should be licensed,
without limiting or regulating activity
truly for the purposes of a hobby or
enhancing a personal collection.
The first presumption stated above—
that a person will be presumed to be
engaged in the business when the
person sells or offers for sale firearms,
and also represents to potential buyers
or otherwise demonstrates a willingness
and ability to purchase and sell
additional firearms—reflects that the
73 The Department interprets the term ‘‘bona fide
gift’’ to mean a firearm given in good faith to
another person without expecting any item, service,
or anything of value in return. See Form 4473, at
4, Instructions to Question 21.a. (Actual Transferee/
Buyer) (‘‘A gift is not bona fide if another person
offered or gave the person . . . money, service(s),
or item(s) of value to acquire the firearm for him/
her, or if the other person is prohibited by law from
receiving or possessing the firearm.’’); ATF FFL
Newsletter, June 2021, at 2 (same).
74 While the GCA does not define the term
‘‘occasional,’’ that term is commonly understood to
mean ‘‘of irregular occurrence; happening now and
then, infrequent.’’ Letter for Borderview LLC, from
Chief, Firearms Industry Programs Branch, ATF
(Oct. 14, 2015) (citing Collins American English
Dictionary (2015)) (addressing persons engaged in
the business of importing firearms).
75 See the discussion at the beginning of Section
II.D of this preamble. ‘‘Presumptions that a Person
is ‘Engaged in the Business.’ ’’
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definition of ‘‘engaged in the business’’
in 18 U.S.C. 921(a)(21)(C) does not
require that a firearm actually to be sold
by a person so long as the person is
holding themself out as a dealer. This is
because, under the definition of
‘‘engaged in the business’’ in 18 U.S.C.
921(a)(21)(C), the ‘‘repetitive purchase
and resale of firearms’’ is the means
through which the person intends to
engage in the business even if those
firearms are not actually repetitively
purchased and resold.
The second presumption above—that
a person is engaged in the business
when spending more money or its
equivalent on purchases of firearms for
the purpose of resale than the person’s
reported taxable gross income during
the applicable period of time—reflects
that persons who spend more money or
its equivalent on purchases of firearms
for resale than their reported gross
income are likely to be earning
livelihood from those sales, which is
even stronger evidence of an intent to
profit than merely supplementing one’s
income.76 Alternatively, the funds the
person used to purchase the firearms
may have been derived from criminal
activities, for example, if they were
provided by a co-conspirator to
repetitively purchase and resell the
firearms without a license or for other
criminal purposes, or the funds were
laundered from past illicit firearms
transactions. Such illicit and repetitive
firearm purchase and sale activities do
not require proof of profit to prove the
requisite intent under 18 U.S.C.
921(a)(22), which states that proof of
profit is not required as to a person who
engages in the regular and repetitive
purchase and disposition of firearms for
criminal purposes or terrorism.
The first presumption underlying the
third category listed above—that a
person is engaged in the business when
repetitively purchasing, reselling, or
offering to sell firearms through straw or
sham businesses or individual straw
purchasers or sellers—reflects that
persons who willfully engage in the
business of dealing without a license
often do so to conceal their transactions
by setting up straw or sham businesses
or hiring ‘‘middlemen’’ to conduct
transactions on their behalf.77 The
76 Webster’s Online Dictionary defines the term
‘‘livelihood’’ as ‘‘means of support or subsistence.’’
Livelihood, Merriam-Webster.com, https://
www.merriam-webster.com/dictionary/livelihood
(last visited Aug. 25, 2023).
77 See footnotes 65 and 6666, supra; Abramski,
573 U.S. at 180 (‘‘[C]onsider what happens in a
typical straw purchase. A felon or other person who
cannot buy or own a gun still wants to obtain one.
(Or, alternatively, a person who could legally buy
a firearm wants to conceal his purchase, maybe so
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second presumption under that
category—that a person is engaged in
the business when repetitively
purchasing, reselling, or offering to sell
firearms that cannot lawfully be
possessed—reflects that such firearms
are actively sought by criminals and
earn higher profits for the illicit dealer.
Such dealers will often buy and sell
stolen firearms and firearms with
obliterated serial numbers because such
firearms are preferred by both sellers
and buyers to avoid background checks
and crime gun tracing.78 They
sometimes sell unregistered National
Firearms Act (‘‘NFA’’) weapons 79 and
unlawfully imported firearms because
those firearms are more difficult to
obtain, cannot be traced through the
National Firearms Registration and
Transfer Record, and may sell for a
substantial profit. Although these
presumptions do not directly address an
individual’s intent to profit, they are
supported by 18 U.S.C. 921(a)(22),
which does not require the government
to prove an intent to profit where a
person repetitively purchases and
disposes of firearms for criminal
purposes. This includes willfully
engaging in the business of dealing in
contraband firearms. These
presumptions are also implicitly
supported by 18 U.S.C. 923(c), which
deems any firearm acquired or disposed
of with the purpose of willfully evading
the restrictions placed on licensed
dealers under the GCA to be business
inventory, not part of a personal
collection. Indeed, concealing the
identity of the seller or buyer of a
firearm, or the identification of the
firearm, undermines the requirements
imposed on legitimate dealers to
conduct background checks on actual
purchasers (18 U.S.C. 922(t)) and
maintain transaction records (18 U.S.C.
he can use the gun for criminal purposes without
fear that police officers will later trace it to him.)’’).
78 See footnote 68, supra; Twitty, 72 F.3d at 234
n.2 (defendant resold firearms with obliterated
serial numbers, which was ‘‘probably designed in
part to increase the selling price of the weapons’’);
United States v. Hannah, No. CRIM.A.05–86, 2005
WL 1532534, at *3 (E.D. Pa. 2005) (defendant told
buyers to obliterate the serial numbers on the
firearms so he would not ‘‘get in trouble’’).
79 The National Firearms Act of 1934, 26 U.S.C.
7801 et seq., restricts certain firearms that Congress
determined were particularly dangerous ‘‘gangstertype’’ weapons, to include short-barreled rifles and
shotguns, machineguns, silencers, and destructive
devices. NFA provisions still refer to the ‘‘Secretary
of the Treasury.’’ See generally 26 U.S.C. ch. 53.
However, the Homeland Security Act of 2002,
Public Law 107–296, 116 Stat. 2135, transferred the
functions of ATF from the Department of the
Treasury to the Department of Justice, under the
general authority of the Attorney General. 26 U.S.C.
7801(a)(2); 28 U.S.C. 599A(c)(1). Thus, for ease of
reference, this final rule refers to the Attorney
General throughout.
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923(g)(1)–(2)) through which firearms
involved in crime can be traced.
The first presumption under the
fourth category listed above—repetitive
sales or offers for sale of firearms within
30 days from purchase—reflect that
firearms for a personal collection are not
likely to be repetitively sold within such
a short period of time from purchase.80
Likewise, under the second and third
presumptions under this category,
persons who repetitively sell firearms in
new condition or in like-new condition
in their original packaging, or firearms
of the same kind and type, are not likely
to be selling such firearms from a
personal collection. Individuals who are
bona fide collectors are less likely to
amass firearms of the same kind and
type than amass older, unique, or less
common firearms that hold special
interest. In contrast, persons engaged in
the business can earn the greatest profit
80 Further support for this 30-day presumption
comes from the fact that, while many retailers do
not allow firearm returns, some retailers and
manufacturers do allow a 30-day period within
which a customer who is dissatisfied with a firearm
purchased for a personal collection or hobby can
return or exchange the firearm. Dissatisfied
personal collectors and hobbyists—persons not
intending to engage in the business—are more
likely to return new firearms rather than incurring
the time, effort, and expense to resell them within
that period of time. See, e.g., Cabela’s Return Policy:
Here’s How it Actually Works, rather-beshopping.com, https://www.rather-beshopping.com/blog/cabelas-return-policy/ (Jan. 31,
2023) (‘‘[I]f they sell you a fully functioning gun,
and you take it to the range, and it will not eject
a shell or casing or will not perform basic functions,
THEY TYPICALLY WILL exchange it. . . . Make
sure you fully test the firearm within 30 days of
purchase as it will be MUCH more difficult to
exchange the gun after 30 days.’’); LEARN ABOUT
THE 30 DAY MONEY BACK GUARANTEE! HOW
TO RETURN YOUR FIREARM!, Waltherarms.com,
https://waltherarms.com/guarantee#:∼:
text=Walther%20understands%20
this%20and%20that,
it%20is%20right%20for%20you/(last visited Aug.
10, 2023); Retail Policies, centertargetsports.com,
https://centertargetsports.com/retail-range/ (last
visited Aug. 10, 2023) (‘‘When you purchase any
gun from Center Target Sports, we guarantee your
satisfaction. Use your gun for up to 30 days and if
for any reason you’re not happy with your
purchase, return it to us within 30 days and receive
a store credit for the FULL purchase price.’’);
Warranty & Return Policy, Century Arms (Mar. 6,
2019), https://www.centuryarms.com/media/
wysiwyg/Warranty_and_Return_v02162021.pdf
(‘‘Customer has 30 days to return surplus firearms,
ammunition, parts, and accessories for repair/
replacement if the firearm does not meet the
advertised condition.’’); I Love You PEW 30 Day
Firearm Guarantee, Alphadog Firearms, https://
alphadogfirearms.com/i-love-you-pew/ (last visited
Aug. 10. 2023) (‘‘Original purchaser has 30 calendar
days to return any new firearm purchased for store
credit.’’); Return Exceptions Policy, Big 5 Sporting
Goods, https://www.big5sportinggoods.com/static/
big5/pdfs/Customer-Service-RETURNEXCEPTIONS-POLICY-d.pdf (last visited Aug. 10,
2023) (‘‘Firearm purchases must be returned to the
same store at which they were purchased. No
refunds or exchanges unless returned in the original
condition within thirty (30) days from the date of
release.’’).
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by selling firearms in the best (i.e., in a
new) condition, or by selling the
particular makes and models of firearms
(i.e., of the same kind and type) that
their customers want the most and
would generate the greatest profit.
The presumption under the fifth
category listed above—that a former
licensee, or responsible person acting on
behalf of such former licensee, is
engaged in the business when they sell
or offer for sale firearms that were in the
business inventory upon license
termination—recognizes the fact that the
licensee likely intended to
predominantly earn a profit from the
repetitive purchase and resale of those
firearms, not to acquire the firearms as
a ‘‘personal collection.’’ Consistent with
the GCA’s plain language under section
921(a)(21)(C), this presumption
recognizes that former licensees who
thereafter intend to predominantly earn
a profit from selling firearms that they
had previously purchased for resale can
still be considered to be ‘‘engaging in
the business’’ after termination of their
license. The GCA does not provide
exceptions to the definition of ‘‘engaged
in the business’’ based on one’s prior
license status, even if the firearms were
purchased while the person had that
license.81
The final presumption above—that
the personal inventory of a former
licensee (or responsible person acting
on behalf of the former licensee)
remains business inventory until one
year has passed from license
termination or transfer to their personal
collection—is consistent with 18 U.S.C.
923(c) of the GCA, which deems
firearms transferred from a licensee’s
business inventory to their personal
collection as business inventory until
one year after the transfer.82
81 The Department is aware of non-binding dicta
in United States v. Shumann, 861 F.2d 1234, 1238
(11th Cir. 1988), in which the court expressed its
view that had the FOPA definition of ‘‘engaged in
the business’’ been applicable (which the court
ruled it was not) it would have absolved the
petitioner of liability in a forfeiture action if, as he
claimed, he was merely closing out his gun
business and liquidating his inventory, saying
‘‘[w]hile the government presented evidence of
firearms sales by Schumann to undercover BATF
agents . . . there was no proof of firearms
purchases, much less a proven pattern of ‘repetitive
purchase and resale.’ ’’ However, none of the
amendments to the GCA made by FOPA defined the
terms ‘‘collection’’ or ‘‘personal collection.’’ The
fact remains that the firearms to be liquidated were
repetitively purchased for resale by the same person
while licensed. And whether a person is ‘‘engaged
in the business’’ under post-BSCA section
921(a)(21)(C) is not dependent on the license status
of the person so engaged.
82 Even if one year has passed from the date of
transfer, business inventory transferred to a
personal collection of a former licensee (or
responsible person acting on behalf of that licensee)
prior to termination of the license cannot be treated
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62003
The Department notes that these
presumptions may be rebutted in an
administrative or civil proceeding with
reliable evidence demonstrating that a
person is not ‘‘engaged in the business’’
of dealing in firearms.83 If, for example,
where there is reliable evidence that a
few collectible firearms were purchased
from a licensed dealer where ‘‘all sales
are final’’ and resold back to the
licensee within 30 days because the
purchaser was not satisfied, the
presumption that the unlicensed reseller
is engaged in the business may be
rebutted. Similarly, the presumption
may be rebutted based on evidence that
a collector occasionally sells one
specific kind and type of curio or relic
firearm to buy another one of the same
kind and type that is in better condition
to ‘‘trade-up’’ or enhance the seller’s
personal collection. Another example in
which evidence may rebut the
presumption would be the occasional
sale, loan, or trade of an almost-new
firearm in its original packaging to an
immediate family member, such as for
their use in hunting, without the intent
to earn a profit or to circumvent the
requirements placed on licensees.84
E. Definition of ‘‘Personal Collection,’’
‘‘Personal Collection of Firearms,’’ and
‘‘Personal Firearms Collection’’
The statutory definition of ‘‘engaged
in the business’’ excludes ‘‘a person
who makes occasional sales, exchanges,
or purchases of firearms for the
enhancement of a personal collection or
as part of a personal collection if the licensee
received or transferred those firearms with the
intent to willfully evade the restrictions placed
upon licensees by the GCA (e.g., willful violations
as cited in a notice of license revocation or denial
of renewal). This is because, under section 923(c),
any firearm acquired or disposed of with intent to
willfully evade the restrictions placed upon
licensees by the GCA is automatically business
inventory. Therefore, because the firearms are
statutorily deemed to be business inventory under
either of these circumstances, a former licensee (or
responsible person acting on behalf of such
licensee) who sells such firearms is presumed to be
engaged in the business, requiring a license.
83 An example of an administrative proceeding
where rebuttable evidence might be introduced
would be where ATF denied a firearms license
application, pursuant to 18 U.S.C. 923(d)(1)(C) and
(f)(2), on the basis that the applicant was presumed
under this rulemaking to have willfully engaged in
the business of dealing in firearms without a
license. An example of a civil case would be an
asset forfeiture proceeding, pursuant to 18 U.S.C.
924(d)(1), on the basis that the seized firearms were
intended to be involved in willful conduct
presumed to be engaging the business without a
license under this rulemaking.
84 See, e.g., Clark v. Scouffas, No. 99–C–4863,
2000 WL 91411 (N.D. Ill. 2000) (license applicant
was not a ‘‘dealer’’ who was ‘‘engaged in the
business’’ as defined under section 921(a)(21)(C)
where he only sold a total of three .38 Special
pistols—two to himself, and one to his wife,
without any intent to profit).
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for a hobby, or who sells all or part of
his personal collection of firearms.’’ 18
U.S.C. 921(a)(21)(C). To clarify this
definitional exclusion, this proposed
rule would: (1) add a single definition
for the terms ‘‘personal collection,’’
‘‘personal collection of firearms,’’ and
‘‘personal firearms collection’’; (2)
explain how those terms apply to
licensees; and (3) make clear that
licensees must follow the verification
and recordkeeping procedures in 27
CFR 478.94 and subpart H, rather than
using ATF Form 4473, when they
acquire firearms from other licensees,
including a sole proprietor who
transfers a firearm to their personal
collection in accordance with 27 CFR
478.125a.
Specifically, this rule proposes to
define ‘‘personal collection,’’ ‘‘personal
collection of firearms,’’ and ‘‘personal
firearms collection’’ as ‘‘personal
firearms that a person accumulates for
study, comparison, exhibition, or for a
hobby (e.g., noncommercial,
recreational activities for personal
enjoyment such as hunting, or skeet,
target, or competition shooting).’’ This
reflects a common definition of the
terms ‘‘collection’’ and ‘‘hobby.’’ 85 The
phrase ‘‘or for a hobby’’ was adopted
from 18 U.S.C. 921(a)(21)(C), which
excludes from the definition of
‘‘engaged in the business’’ firearms
acquired ‘‘for’’ a hobby. Also expressly
excluded from the definition of
‘‘personal collection’’ is ‘‘any firearm
purchased for resale or made with the
predominant intent to earn a profit’’
because of their inherently commercial
nature. 18 U.S.C. 921(a)(21)(C).
Under the GCA, 18 U.S.C. 923(c), and
implementing regulations, 27 CFR
478.125(e) and 478.125a, a licensee who
acquires firearms for a personal
collection is subject to certain
additional requirements before the
firearms can become part of such a
‘‘personal collection.’’ 86 Accordingly,
85 See Webster’s Third New International
Dictionary 444, 1075, 1686 (1971) (defining the
term ‘‘personal’’ to include ‘‘of or relating to a
particular person,’’ ‘‘collection’’ to include ‘‘an
assembly of objects or specimens for the purposes
of education, research, or interest’’ and ‘‘hobby’’ as
‘‘a specialized pursuit . . . that is outside one’s
regular occupation and that one finds particularly
interesting and enjoys doing’’); Webster’s Online
Dictionary (2023) (defining the term ‘‘personal’’ to
include ‘‘of, relating to, or affecting a particular
person,’’ ‘‘collection’’ to include ‘‘an accumulation
of objects gathered for study, comparison, or
exhibition or as a hobby’’, and ‘‘hobby’’ as a
‘‘pursuit outside one’s regular occupation engaged
in especially for relaxation’’); see also United States
v. Idarecis, 164 F.3d 620 (2d Cir. 1998) (Table)
(‘‘There is no case authority to suggest that there is
a distinction between the definition of a collector
and of a [personal] collection in the statute.’’).
86 The GCA, 18 U.S.C. 923(c), and implementing
regulations, also require that all firearms disposed
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the proposed rule further explains how
that term would apply to firearms
acquired by a licensee (i.e., a person
engaged in the business as a licensed
manufacturer, licensed importer, or
licensed dealer under the GCA), by
defining ‘‘personal collection,’’
‘‘personal collection of firearms,’’ or
‘‘personal firearms collection,’’ when
applied to licensees, to include only
firearms that were: (1) acquired or
transferred without the intent to
willfully evade the restrictions placed
upon licensees by chapter 44, title 18,
United States Code; 87 (2) recorded by
the licensee as an acquisition in the
licensee’s acquisition and disposition
record in accordance with 27 CFR
478.122(a), 478.123(a), or 478.125(e)
(unless acquired prior to licensure and
not intended for sale); 88 (3) recorded as
a disposition from the licensee’s
business inventory to the person’s
personal collection in accordance with
27 CFR 478.122(a), 478.123(a), or
478.125(e); (4) stored separately from,
and not commingled with the business
inventory, and appropriately identified
as ‘‘not for sale’’ (e.g., by attaching a
tag), if on the business premises; 89 and
(5) maintained in such personal
collection (whether on or off the
business premises) for at least one year
of from a licensee’s personal collection, including
firearms acquired before the licensee became
licensed, that are held for at least one year and that
are sold or otherwise disposed of, must be recorded
as a disposition in a personal bound book. See 18
U.S.C. 923(c); 27 CFR 478.125a(a)(4).
87 See ATF Q&A, May a licensee create a personal
collection to avoid the recordkeeping and NICS
background check requirements of the GCA?,
https://www.atf.gov/firearms/qa/may-licenseecreate-personal-collection-avoid-recordkeepingand-nics-background-check (July 15, 2020).
88 See ATF Q&A, Does a licensee have to record
firearms acquired prior to obtaining the license in
their acquisition and disposition record?, https://
www.atf.gov/firearms/qa/does-licensee-have-recordfirearms-acquired-prior-obtaining-license-theiracquisition (July 15, 2020); ATF Federal Firearms
Regulations Reference Guide, ATF P 5300.4, Q&A
(F2) at 201 (2014) (‘‘All firearms acquired after
obtaining a firearms license must be recorded as an
acquisition in the acquisition and disposition
record as business inventory.’’); ATF FFL
Newsletter, Feb. 2011, at 7 (‘‘There may be
occasions where a firearms dealer utilizes his
license to acquire firearms for his personal
collection. Such firearms must be entered in his
permanent acquisition records and subsequently be
recorded as a disposition to himself in his private
capacity.’’); ATF FFL Newsletter, Mar. 2006, at 7
(‘‘[E]ven if a dealer acquires a firearm from a
licensee by completing an ATF Form 4473, the
firearm must be entered in the transferee dealer’s
records as an acquisition.’’).
89 See ATF Q&A, May a licensee store personal
firearms at the business premises?, https://
www.atf.gov/firearms/qa/may-licensee-storepersonal-firearms-business-premises (July 15,
2020); ATF FFL Newsletter, Feb. 2011, at 7; ATF
FFL Newsletter, Mar. 2006, at 6; ATF Industry
Circular 72–30, Identification of Personal Firearms
on Licensed Premises Not Offered for Sale (Oct. 10,
1972).
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from the date the firearm was so
transferred, in accordance with 18
U.S.C. 923(c) and 27 CFR 478.125a.90
These proposed parameters to define the
term ‘‘personal collection’’ as applied to
licensees reflect the statutory and
regulatory requirements for personal
collections in 18 U.S.C. 923(c) and 27
CFR 478.122(a), 478.123(a), 478.125(e),
and 478.125a.91 To implement these
changes, the rule also would make
conforming changes by adding
references in 27 CFR 478.125a to the
provisions that relate to the acquisition
and disposition recordkeeping
requirements for importers and
manufacturers.
F. Definition of ‘‘Responsible Person’’
To accompany these changes, this
rule also proposes to add a regulatory
definition of the term ‘‘responsible
person’’ in 27 CFR 478.11, to mean
‘‘[a]ny individual possessing, directly or
indirectly, the power to direct or cause
the direction of the management,
policies, and business practices of a
corporation, partnership, or association,
insofar as they pertain to firearms.’’ This
definition comes from 18 U.S.C.
923(d)(1)(B), and has long been reflected
on the application for license (Form 7)
and other ATF publications since
enactment of a similar definition in the
Safe Explosives Act in 2002.92 As
90 See ATF Q&A, May a licensee maintain a
personal collection of firearms? How can they do
so?, https://www.atf.gov/firearms/qa/may-licenseemaintain-personal-collection-firearms-how-canthey-do-so (July 15, 2020).
91 The existing regulations, 27 CFR 478.125(e)
and 478.125a, which require licensees to record the
purchase of all firearms in their business bound
books, record the transfer of firearms to their
personal collection, and demonstrate that personal
firearms obtained before licensing have been held
at least one year prior to their disposition as
personal firearms were upheld by the Fourth Circuit
in National Rifle Ass’n v. Brady, 914 F.2d 475, 482–
83 (4th Cir. 1990) (‘‘The regulations ensure that
firearms kept in the personal collection are bona
fide personal firearms, and they minimize the
opportunity for licensees to evade the statute’s
recordkeeping requirements for business firearms
by simply designating those firearms ‘personal
firearms’ immediately prior to their
disposition. . . . In addition, the record-keeping
requirements contained in the regulations provide
a means for the [Attorney General] to verify that
personal firearms were actually held for a year by
a licensee prior to sale. Thus, we think the
regulations at issue here are both ‘rational and
consistent with the statute.’ ’’). See also United
States v. Twelve Firearms, 16 F. Supp. 2d 738, 742
n.4 (S.D. Tex. 1998) (‘‘[T]he United States appears
to be correct that Claimant was required to keep
records of the firearms no matter whether they were
part of his business inventory, under § 923(g)(1)(A),
or whether they were his own personal property,
under § 923(c).).’’
92 See 18 U.S.C. 841(s); Application for Federal
Firearms License, ATF Form 7, Instructions at 6
(5300.12); Gilbert v. ATF, 306 F. Supp. 3d 776, 781
(D. Md. 2018); Gossard v. Fronczak, 206 F. Supp.
3d 1053, 1065 (D. Md. 2016), aff’d, 701 F. App’x
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examples, this definition would not
include store clerks or cashiers who
cannot make management or policy
decisions with respect to firearms (e.g.,
what company or store-wide policies
and controls to adopt, which firearms
are bought and sold by the business, and
who is hired to buy and sell the
firearms), even if their clerical duties
include buying or selling firearms for
the business.
G. Definition of ‘‘Predominantly Earn a
Profit’’
The BSCA broadened the definition of
‘‘engaged in the business’’ as a dealer by
substituting ‘‘to predominantly earn a
profit’’ for ‘‘with the principal objective
of livelihood or profit.’’ 18 U.S.C.
921(a)(21)(C). It also defined the term
‘‘to predominantly earn a profit.’’ 18
U.S.C. 921(a)(22). This rule is proposing
to incorporate those statutory changes,
as discussed above.
This rule proposes to further
implement these amendments by: (1)
clarifying that the ‘‘proof of profit’’
proviso also excludes ‘‘the intent to
profit,’’ thus making clear that it is not
necessary for the Federal Government to
prove that a person intended to make a
profit if the person was dealing in
firearms for criminal purposes or
terrorism; (2) clarifying that a person
may have the predominant intent to
profit even if the person does not
actually obtain pecuniary gain from
selling or disposing of firearms; and (3)
establishing a presumption in civil and
administrative proceedings that certain
conduct demonstrates the requisite
intent to ‘‘predominantly earn a profit,’’
absent reliable evidence to the contrary.
These proposed regulatory
amendments are consistent with the
plain language of the GCA. Neither the
pre-BSCA definition of ‘‘with the
principal objective of livelihood and
profit’’ nor the post-BSCA definition of
‘‘to predominantly earn a profit’’ require
the government to prove that the
defendant actually profited from
firearms transactions. See 18 U.S.C.
921(a)(22), (a)(23) (referring to ‘‘the
intent underlying the sale or disposition
of firearms’’); Focia, 869 F.3d at 1282
(‘‘The exact percentage of income
obtained through the sales is not the
test; rather, . . . the statute focuses on
the defendant’s motivation in engaging
in the sales.’’).93
266 (4th Cir. 2017); ATF FFL Newsletter, Sept.
2011, at 6; ATF Letter to Dunham’s Sports (May 30,
2003).
93 See also Valdes, 681 F. App’x at 877 (the
government does not need to show that the
defendant ‘‘necessarily made a profit from dealing’’)
(citing United States v. Wilmoth, 636 F.2d 123, 125
(5th Cir. 1981)); King, 735 F.3d at 1107 n.8 (Section
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ATF’s experience also establishes that
certain conduct related to the sale or
disposition of firearms presumptively
demonstrates that primary motivation.
In addition to conducting criminal
investigations of unlicensed firearms
businesses under 18 U.S.C. 922(a)(1)(A),
ATF has for many decades observed
through qualification and compliance
inspections how dealers who sell or
dispose of firearms demonstrate a
predominant intent to obtain pecuniary
gain, as opposed to other intents, such
as improving or liquidating a personal
collection.
Based on this decades-long body of
experience, the proposed rule provides
that, absent reliable evidence to the
contrary, a person is presumed to have
the intent to ‘‘predominantly earn a
profit’’ when the person: (1) advertises,
markets, or otherwise promotes a
firearms business (e.g., advertises or
posts firearms for sale, including on any
website, establishes a website for selling
or offering for sale their firearms, makes
available business cards, or tags firearms
with sales prices), regardless of whether
the person incurs expenses or only
promotes the business informally; 94 (2)
purchases, rents, or otherwise secures or
sets aside permanent or temporary
physical space to display or store
firearms they offer for sale, including
part or all of a business premises, table
or space at a gun show, or display
case; 95 (3) makes or maintains records,
922(a)(1)(A) does not require an actual sale of
firearms); Allah, 130 F.3d at 43–44 (upholding jury
instruction that selling firearms need not ‘‘be a
significant source of income’’); United States v.
Mastro, 570 F.Supp. 1388 (E.D. Pa. 1983) (the
government need not show that defendant made or
expected to make a profit) (citing cases); United
States v. Shirling, 572 F.2d 532, 534 (5th Cir. 1978)
(‘‘The statute is not aimed narrowly at those who
profit from the sale of firearms, but rather broadly
at those who hold themselves out as a source of
firearms.’’).
94 See, e.g., United States v. Caldwell, 790 F.
App’x 797, 799 (7th Cir. 2019) (defendant placed
192 advertisements on a website devoted to gun
sales); Valdes, 681 F. App’x at 878 (defendant
handed out business card); United States v. Pegg,
542 F. App’x 328 (5th Cir. 2013) (defendant
sometimes advertised firearms for sale in the local
newspaper); United States v. Crudgington, 469 F.
App’x 823, 824 (11th Cir. 2012) (defendant
advertised firearms for sale in local papers, and
tagged them with prices); United States v. Dettra,
238 F.3d 424, at *2 (6th Cir. 2000) (Table) (‘‘Dettra’s
use of printed business cards and his acceptance of
credit payment provide further reason to infer that
he was conducting his firearms activity as a
profitable trade or business, and not merely as a
hobby.’’); United States v. Norman, No. 4–
10CR00059–JLH, 2011 WL 2678821, at *3 (E.D. Ark.
2011) (defendant placed advertisements in local
newspaper and on a website).
95 See, e.g., United States v. Wilkening, 485 F.2d
234, 235 (8th Cir. 1973) (defendant set up a glass
display case and displayed for sale numerous
ordinary long guns and handguns that were not
curios or relics); United States v. Jackson, 352 F.
Supp. 672, 676 (S.D. Ohio 1972), aff’d, 480 F.2d 927
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62005
in any form, to document, track, or
calculate profits and losses from
firearms purchases and sales; 96 (4)
purchases or otherwise secures
merchant services as a business (e.g.,
credit card transaction services, digital
wallet for business) through which the
person makes or offers to make
payments for firearms transactions; 97
(5) formally or informally purchases,
hires, or otherwise secures business
security services (e.g., a central stationmonitored security system registered to
a business,98 or guards for security 99) to
(6th Cir. 1973) (defendant set up glass display case,
displaying numerous long guns and handguns for
sale which were not curios or relics); Press Release
USAO, Asheville Man Sentenced For Dealing
Firearms Without A License, (Jan. 20, 2017), https://
www.justice.gov/usao-wdnc/pr/asheville-mansentenced-dealing-firearms-without-license-0
(defendant sold firearms without a license from his
military surplus store).
96 See, e.g., United States v. White, 175 F. App’x
941, 942 (9th Cir. 2006) (‘‘Appellant also created a
list of all the firearms he remembers selling and the
person to whom he sold the firearm.’’); Dettra, 238
F.3d 424, at *2 (‘‘Dettra carefully recorded the cost
of each firearm he acquired, enabling him to later
determine the amount needed to sell the item in a
profitable manner.’’); United States v. Angelini, 607
F.2d 1305, 1307 (9th Cir. 1979) (defendant kept
sales slips or invoices).
97 See, e.g., King, 735 F.3d at 1106–07 (defendant
incorporated and funded firearms business ‘‘on
behalf’’ of friend whose American citizenship
enabled business to obtain Federal firearms license.
He then misappropriated company’s business
account, using falsified documentation to set up
credit accounts); Dettra, 238 F.3d 424, at *2
(defendant accepted credit card payments).
98 Numerous jurisdictions require all persons
with alarms or security systems designed to seek a
police response to be registered with or obtain a
permit from local police and pay the requisite fee.
See, e.g., Albemarle County (Virginia) Code § 12–
102(A); Arlington County (Virginia) Code § 33–10;
Cincinnati (Ohio) City Ord. Ch. 807–1–A4 (2); City
of Coronado (California) Code § 40.42.050)(A);
Irvine (California) Code § 4–19–105; Kansas City
(Missouri) Code § 50–333(a); Larimer County
(Colorado) Ord. § 3(A); Lincoln (Nebraska) Mun.
Code § 5.56.030(a); Los Angeles (California) Mun.
Code § 103.206(b); Loudoun County (Virginia) Code
§ 655.03(a); Mobile (Alabama) Code § 39–62(g)(1);
Montgomery County (Maryland) Code § 3A–3;
Prince William County (Virginia) Code § 2.5.25(a);
Rio Rancho (New Mexico) Mun. Code § 97.04(A);
Scottsdale (Arizona) Code § 3–10(a); Tempe
(Arizona) Code § 22–76; Washington County
(Oregon) Code § 8.12.040; West Palm Beach
(Florida) Code § 46–32(a); Wilmington (Delaware)
Code § 10–38(c); Woburn (Massachusetts) Code
Title 11 § 8–18. Due to the value of the inventory
and assets they protect, for profit businesses are
more likely to maintain, register, and pay for these
types of alarms rather than individuals seeking to
protect personal property. See generally What is a
Central Station Alarm Monitoring System?,
agmonitoring.com (July 10, 2019), https://
www.agmonitoring.com/blog/industry-news/whatis-a-central-station-monitoring-system; Central
Station Service Certification, UL.com, https://
www.ul.com/resources/central-station-servicecertification#:∼:
text=Station%20Service%20Certification-,
Overview,and%20initiates%20
the%20appropriate%20response.
99 See, e.g., United States v. De La Paz-Rentas,
613 F.3d 18, 22–23 (1st Cir. 2010) (defendant hired
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protect business assets or transactions
that include firearms; (6) formally or
informally establishes a business entity,
trade name, or online business account,
including an account using a business
name on a social media or other
website, through which the person
makes or offers to make firearms
transactions; 100 (7) secures or applies
for a State or local business license to
purchase for resale or to sell
merchandise that includes firearms; or
(8) purchases a business insurance
policy, including any riders that cover
firearms inventory.101 Any of these
nonexclusive, firearms-business-related
activities justifies a rebuttable
presumption that the person has the
requisite intent to predominantly earn a
profit from reselling or disposing of
firearms.
This set of rebuttable presumptions
that establishes an intent ‘‘to
predominantly earn a profit’’—one of
the elements of the definition of
‘‘engaged in the business’’—is separate
from the set of presumptions that
establishes a person meets the definition
of ‘‘engaged in the business.’’ This
second set of presumptions that
addresses only intent ‘‘to predominantly
earn a profit’’ may be used to
independently establish the requisite
intent to profit in a particular
proceeding. As with the ‘‘engaged in the
business’’ presumptions, the activities
set forth in these intent presumptions
are not exhaustive of the conduct that
may show that, or be considered in
determining whether, a person actually
has the requisite intent ‘‘to
predominantly earn a profit.’’ There are
many other fact patterns that do not fall
within the specific conduct that
presumptively requires a license under
this proposed rule (e.g., firearms that
were repetitively resold after 30 days
from purchase, or that were not in a
like-new condition), but that reveal one
or more preparatory steps that
presumptively demonstrate a
predominant intent to earn a profit from
firearms transactions. Again, none of
these presumptions apply to criminal
cases, but could be useful to courts in
criminal cases, for example, to inform
appropriate jury instructions regarding
permissible inferences. These
presumptions are supported by the
as bodyguard for protection in an unlawful firearms
transaction).
100 See, e.g., United States v. Gray, 470 F. App’x
at 469 (defendant sold firearms through his sporting
goods store, advertised his business using signs and
flyers, and displayed guns for sale, some with tags).
101 See, e.g., United States v. Kish, 424 F. App’x
398, 404 (6th Cir. 2011) (defendant could only have
200 firearms on display because of insurance policy
limitations).
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Department’s investigative and
regulatory efforts and experience as well
as conduct that the courts have relied
upon in determining whether a person
was required to be licensed as a dealer
in firearms even before the BSCA
expanded the definition.
H. Disposition of Business Inventory
After Termination of License
One public safety issue that ATF has
encountered over the years relates to
former licensees who have improperly
liquidated their business inventory of
firearms without performing required
background checks or maintaining
required records after the license was
revoked, denied renewal, or otherwise
terminated (e.g., license expiration or
surrender of license).102 Sometimes
former licensees even continue to
acquire more firearms for resale
(‘‘restocking’’) after license termination,
a practice that is clearly inconsistent
with the concept of ‘‘liquidation.’’ These
activities, in turn, have resulted in
numerous firearms being sold by former
licensees (including those whose
licenses have been revoked or denied
due to willful GCA violations) to
potentially prohibited persons without
any ability to trace those firearms if later
used in crime.103
102 The problem of licensees liquidating a former
licensee’s business firearms as firearms from their
‘‘personal collections’’ without background checks
or recordkeeping has been referred to by some
advocacy groups and members of Congress as the
‘‘fire-sale loophole.’’ See Dan McCue, Booker Bill
Takes Aim at Gun Fire Sale Loophole, The Well
News (Sept. 9, 2022), https://
www.thewellnews.com/guns/booker-bill-takes-aimat-gun-fire-sale-loophole/; Shira Toeplitz,
Ackerman proposes gun-control bill to close
‘firesale loophole’, Politico (Jan. 12, 2011), https://
www.politico.com/blogs/on-congress/2011/01/
ackerman-proposes-gun-control-bill-to-closefiresale-loophole-032289; Annie Linskey, Closed
store is a source of guns, The Baltimore Sun (Apr.
15, 2008), https://www.baltimoresun.com/news/bsxpm-2008-04-15-0804150118-story.html (after
revocation of license, a dealer transferred around
700 guns to his ‘‘personal collection’’ and
continued to sell them without recordkeeping).
103 See, e.g., Dettra, 238 F.3d 424, at *2
(defendant continued to deal in firearms after
license revocation); Press Release OPA, Gunsmoke
Gun Shop Owner and Former Discovery Channel
Star Indicted and Arrested for Conspiracy, Dealing
in Firearms without a License and Tax Related
Charges (Feb. 11, 2016), https://www.justice.gov/
opa/pr/gunsmoke-gun-shop-owner-and-formerdiscovery-channel-star-indicted-and-arrestedconspiracy (defendant continued to deal in firearms
at a different address after he surrendered his FFL
due to his violations of the Federal firearms laws
and regulations); Kish, 424 F. App’x at 405
(defendant continued to sell firearms after
revocation of license); Gilbert v. Bangs, 813 F.
Supp. 2d 669, 672 (D. Md. 2011), aff’d 481 F. App’x
52 (4th Cir. 2012) (license denied to applicant who
willfully engaged in the business after license
revocation); ATF Letter to AUSA (Mar. 13, 1998)
(advising that seized firearms offered for sale were
not deemed to be part of a ‘‘personal collection’’
after surrender of license).
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For this reason, the proposed rule also
would revise the regulation’s sections
on discontinuing business, 27 CFR
478.57 and 478.78, to clarify statutory
requirements regarding firearms that
remain in the possession of a former
licensee (or a responsible person of the
former licensee) at the time the license
is terminated. Again, firearms that were
in the business inventory of a former
licensee at the time the license was
terminated (i.e., license revocation,
denial of license renewal, license
expiration, or surrender of license) and
that remain in the possession of the
licensee (or a responsible person acting
on behalf of the former licensee), are not
part of a ‘‘personal collection.’’ While 18
U.S.C. 921(a)(21)(C) allows an
unlicensed person to ‘‘sell all or part of
his personal collection’’ without being
considered ‘‘engaged in the business,’’
in this context, these firearms were
purchased by the former licensee as
business inventory and were not
accumulated by that person for study,
comparison, exhibition, or for a hobby.
Also, firearms that were transferred by
a former licensee to a personal
collection prior to the time the license
was terminated cannot be considered
part of a personal collection unless one
year has passed from the date the
firearm was transferred into the
personal collection before the license
was terminated. This gives effect to 18
U.S.C. 923(c), which requires that all
firearms acquired by a licensee be
maintained as part of a personal
collection for a period of at least one
year before they lose their status as
business firearms.
Under amended 27 CFR 478.57
(discontinuance of business) and 27
CFR 478.78 (operations by licensee after
notice), as proposed, once a license has
been terminated (i.e., license revocation,
denial of license renewal, license
expiration, or surrender of license), the
former licensee will have 30 days, or
such additional period designated by
the Director for good cause, to either: (1)
liquidate any remaining business
inventory by selling or otherwise
disposing of the firearms to a licensed
importer, licensed manufacturer, or
licensed dealer for sale, auction, or
pawn redemption in accordance with
this part; or (2) transfer the remaining
business inventory to a personal
collection of the former licensee (or a
responsible person of the former
licensee), provided the recipient is not
prohibited by law from receiving or
possessing firearms. Except for the sale
of remaining inventory to a licensee
within the 30-day period (or designated
additional period), a former licensee (or
responsible person of such licensee)
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who resells any such inventory,
including business inventory transferred
to a personal collection, would be
subject to the same presumptions in 27
CFR 478.11 (definition of ‘‘engaged in
the business’’ as a dealer other than a
gunsmith or pawnbroker) that apply to
a person who repetitively purchased
those firearms for the purpose of resale.
The 30-day period from license
termination for a former licensee to
transfer the firearms to either another
licensee or to a personal collection is
derived from the disposition of records
requirement in the GCA, 18 U.S.C.
923(g)(4), which is a reasonable period
for that person to wind down operations
after discontinuance of business without
acquiring new firearms.104 That period
of liquidation may be extended by the
Director for good cause, such as to allow
pawn redemptions if required by State,
local, or Tribal law. However, former
licensees (or responsible persons of
such licensees) who choose not to sell
the remaining business inventory to a
licensee within the 30-day period (or
designated additional period), and who
continue to sell those firearms, are not
permitted under the GCA to engage in
the business of dealing in firearms
without a license. Former licensees (or
responsible person) who sell business
inventory after that period (or within
that period to unlicensed persons), or
within one year from transfer to a
personal collection, have no special
legal exemptions that give them greater
privileges to conduct business than a
licensee.
Moreover, a former licensee is not
permitted to continue to engage in the
business of importing, manufacturing,
or dealing in firearms by importing or
manufacturing additional firearms for
purposes of sale or distribution, or
purchasing additional firearms for resale
(i.e., ‘‘restocking’’) without a license.
Therefore, a former licensee (or
responsible person) is subject to the
same presumptions in 27 CFR 478.11
(definition of ‘‘engaged in the business’’
as a dealer other than a gunsmith or
pawnbroker) that apply to persons who
sell firearms that were repetitively
purchased with the predominant intent
to earn a profit and any sales by such
a person will be closely scrutinized by
ATF on a case-by-case basis.
I. Transfer of Firearms Between FFLs
and Form 4473
Finally, to ensure the traceability of
all firearms acquired by licensees from
104 See also 27 CFR 478.57 (requiring the owner
of a discontinued or succeeded business to notify
ATF of such discontinuance or succession within
30 days), and 478.127 (requiring discontinued
businesses to turn in records within 30 days).
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other licensees, the proposed rule
would make clear that licensees cannot
satisfy their obligations under 18 U.S.C.
923(g)(1)(A) by completing a Form 4473
when selling or otherwise disposing of
firearms to another licensed importer,
licensed manufacturer, or licensed
dealer, or a curio or relic to a licensed
collector, including a sole proprietor
licensee who transfers the firearm to
their personal collection in accordance
with 27 CFR 478.125a.105 Form 4473
was not intended for use by licensees
when transferring firearms to other
licensees or by a sole proprietor
transferring to their personal collection.
Pursuant to 18 U.S.C. 926(a)(1) and 27
CFR 478.94, when a licensee transfers a
firearm to another licensee, the
transferor must first verify the
recipient’s identity and license status by
examining a certified copy of the
recipient’s license and recording the
transfer as a disposition to that licensee
in the bound book record. In turn, the
recipient licensee must record the
receipt as an acquisition in their bound
book record. See 27 CFR 478, subpart H.
If a recipient licensee were to complete
a Form 4473 for the purchase of a
firearm, but not record that receipt in
their bound book record asserting it is
a ‘‘personal firearm,’’ then tracing efforts
pursuant to the GCA could be hampered
if the firearm was later used in a crime.
However, this clarification that FFLs
may not satisfy their obligations by
completing a Form 4473 to transfer
firearms between themselves would not
include dispositions by a licensed legal
entity such as a corporation, LLC, or
partnership, to the personal collection
of a responsible person of such an
entity. This is because when an
individual responsible person does not
acquire a firearm as an employee on
behalf of the business entity, it results
in a change in dominion or control, or
‘‘transfer,’’ subject to all GCA
requirements.106 Such an entity,
including a corporation or partnership,
must therefore use a Form 4473, NICS
check, and disposition record entry
when transferring a firearm to one of its
individual officers (or partners, in the
105 See ATF FFL Newsletter, Mar. 2006, at 7 (‘‘A
dealer who purchases a firearm from another
licensee should advise the transferor licensee of his
or her licensed status so the transferor licensee’s
records may accurately reflect that this is a
transaction between licensees. An ATF Form 4473
should not be completed for such a transaction,
because this form is used only for a disposition to
a nonlicensee.’’).
106 See ATF Ruling 2010–1 (permanently
assigning a firearm to a specific employee for
personal use is considered a ‘‘transfer’’ that would
trigger the recordkeeping and NICS background
check requirements).
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62007
case of a partnership) for their personal
use.107
III. Statutory and Executive Order
Review
A. Executive Orders 12866, 13563, and
14094
Executive Order 12866 (‘‘Regulatory
Planning and Review’’) directs agencies
to assess the costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 13563
(‘‘Improving Regulation and Regulatory
Review’’) emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. Executive
Order 14094 (‘‘Modernizing Regulatory
Review’’) amends section 3(f) of
Executive Order 12866.
The Office of Management and Budget
(‘‘OMB’’) has determined that this
proposed rule is a ‘‘significant
regulatory action’’ under Executive
Order 12866, as amended by Executive
Order 14094, though it is not a section
3(f)(1) significant action. Accordingly,
the proposed rule has been reviewed by
OMB. While portions of this proposed
rule merely incorporate the BSCA’s
statutory definitions into ATF’s
regulations, this rulemaking, if
finalized, may result in additional
unlicensed persons becoming FFLs if
the unlicensed persons intend to
regularly purchase and resell firearms to
predominantly earn a profit.
1. Need for Federal Regulation
This proposed rule would implement
the BSCA by incorporating statutory
definitions into ATF’s regulations and
clarifying the criteria for determining
when a person is ‘‘engaged in the
business’’ requiring a license to deal in
firearms. The rulemaking is necessary to
implement a new statutory provision on
being engaged in the business as a
wholesale or retail dealer; to clarify
prior regulatory provisions that relate to
that topic; and to codify practices and
policies on that issue. In addition to
establishing specific, easy-to-follow
standards regarding when buying and
selling firearms presumptively crosses
the threshold into being ‘‘engaged in the
107 See ATF Q&A, Does an officer or employee of
an entity that holds a federal firearms license, such
as a corporation, have to undergo a NICS check
when acquiring a firearm for their own personal
collection?, https://ww.atf.gov/firearms/qa/doesofficer-or-employee-entity-holds-federal-firearmslicense-such-cororation-have (May 22, 2020); 2 ATF
FFL Newsletter, Sept. 2013, at 4.
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business,’’ the rule also would recognize
that individuals are allowed by law to
occasionally buy and sell firearms for
the enhancement of a personal
collection or a legitimate hobby without
the need to obtain a license.
2. Population
This proposed rule implements a
statutory requirement that affects
persons who repetitively purchase and
resell (including bartering) firearms and
are required to be, but are not currently,
licensed. As described in the preamble
of this NPRM, these may be persons
who purchase, sell, or transfer firearms
from places other than traditional brickand-mortar stores, such as at a gun show
or event, flea market, auction house, or
gun range or club; at one’s home; by
mail order, or over the internet; through
the use of other electronic means (e.g.,
an online broker, online auction, text
messaging service, social media raffle,
or website); or at any other domestic or
international public or private
marketplace or premises. A person may
be required to have a license to deal in
firearms regardless of where, or the
medium through which, they purchase
or sell (or barter) firearms, including
locations other than a traditional brick
and mortar store.
The GCA prohibits ATF from
prescribing regulations that establish
any ‘‘system of registration’’ of firearms,
firearms owners, or firearms
transactions or dispositions.108
Furthermore, because those willfully
engaged in the business of dealing in
firearms without a license are violating
Federal law, these individuals often take
steps to avoid detection by law
enforcement, making it additionally
difficult for ATF to precisely estimate
the population. Therefore, for purposes
of this analysis, ATF used information
gleaned from ArmsList, an online broker
website that facilitates the sales or
bartering of firearms, as a means of
estimating a population of unlicensed
persons selling firearms using online
resources.109 ATF focused its efforts on
estimating an affected population using
ArmsList since that website is
considered to be the largest source for
unlicensed persons to sell firearms on
the internet.110 Out of a total listing of
108 18
U.S.C. 926(a).
www.Armslist.com.
110 Colin Lecher & Sean Campbell, The Craigslist
of Guns: Inside Armslist, the online ‘gun show that
never ends’, The Verge (Jan. 16, 2020), https://
www.theverge.com/2020/1/16/21067793/gunsonline-armslist-marketplace-craigslist-sales-buycrime-investigation (‘‘Over the years, [Armslist] has
become a major destination for firearm buyers and
sellers.’’); Tasneem Raja, Semi-Automatics Without
A Background Check Can Be A Click Away, NPR
(June 17, 2016), https://www.npr.org/sections/
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109 See
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30,806 entries in the ‘‘private party’’
category (unlicensed users) on
ArmsList, ATF viewed a sample of 379
listings, and found that a given seller on
ArmsList had an average of three
listings per seller.111 Based on
approximately 30,806 ‘‘private party’’
(unlicensed) sales listings on ArmsList,
ATF estimates that there are
approximately 12,270 unlicensed
persons who sell on that website alone,
selling an average of three firearms per
user.112 ATF estimates that ArmsList
may hold approximately 50 percent of
the market share among websites that
unlicensed sellers may frequent. This
means the 12,270 estimated unlicensed
persons on ArmsList would be about
half, and the estimated number of
unlicensed sellers on all such websites
would be approximately 24,540
nationwide. The estimate of ArmsList’s
market share is based on ATF Firearms
Industry Programs Branch (‘‘FIPB’’)
subject matter expert (‘‘SME’’) opinion,
news reports,113 and public web traffic
lists.114
To better estimate both online and
offline sales, ATF assumed, based on
best professional judgment of FIPB
SMEs and with limited available
information, that the national online
marketplace estimate above may
represent 25 percent of the total national
firearms market, which would also
include in-person, local, or other offline
transactions like flea markets, Statewide exchanges, or websites within
each of the 50 States.
While this would bring the total
estimated market to approximately
98,160 unlicensed sellers,115 this figure
would need to be reduced by the
estimated subset of this population of
persons who occasionally sell their
firearms without needing to obtain a
license (e.g., as part of their hobby or
enhancement of their personal
collection). Also, based on limited
alltechconsidered/2016/06/17/482483537/semiautomatic-weapons-without-a-background-checkcan-be-just-a-click-away (‘‘Armslist isn’t the only
site of its kind, though it is considered to be the
biggest and most popular.’’).
111 A sample of 379 listings from an estimated
population of 30,806 listings (viewed between Mar.
1 and 2, 2023), using a 95 percent confidence level
and a confidence interval of 5. See Sample Size
Calculator- Confidence Level, Confidence Interval,
Sample Size, Population Size, Relevant Population,
https://www.surveysystem.com/sscalc.htm.
112 12,270 unlicensed individuals = 30,806
‘‘private party’’ unlicensed listings on ArmsList/
2.51 average listings per user.
113 See footnote 110, supra.
114 Similar web profile and market share lists are
available at https://www.similarweb.com/website/
armslist.com/#overview.
115 The online estimate of 24,540 = at least 25
percent of national firearms market. So, 100 percent
of the firearms market would be 4 * 24,540 =
98,160.
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available information, ATF’s best, very
conservative assessment from FIPB
SMEs is that at least 25 percent of the
estimated total number of unlicensed
sellers may be considered engaged in
the business and would subsequently
need to become an FFL in order to
continue making their repetitive sales of
firearms. The actual number may be
higher, but ATF does not have data to
support a higher number. Using the
information gleaned from ArmsList, this
means that 24,540 is the estimated
number of unlicensed persons that may
be considered engaged in the business
and affected by this proposed rule.
Because there is no definitive
information, the actual number of total
unlicensed sellers may be higher.
Therefore, ATF also calculated a second
possible estimate using information
from a published survey by the Russell
Sage Foundation regarding a similar, but
differently sourced estimated
population of private sellers of
firearms.116 Based on the 2020 U.S.
Census, there are 258.3 million adults
(over 18).117 ATF used the U.S. Census
as a basis for the population and also
percentages from ‘‘The Stock and Flow
of U.S. Firearms: Results from the 2015
National Firearms Survey,’’ published
by the Russell Sage Foundation.118 This
survey showed that 22 percent of the
U.S. adult population owns at least one
firearm (56.84 million adults), and of
this, five percent transferred firearms
(2.84 million). Of the five percent that
transferred, 71 percent sold a firearm
(2.02 million). Of those that sold a
firearm, 51 percent (1.03 million) sold
through various mediums (e.g., online,
pawnshop, gun shop) other than
through or to a family member or friend
(which likely would not be affected by
this rulemaking).119 Of the five percent
116 Azrael, D., Hepburn, L., Hemenway, D., &
Miller, M. (2017). The stock and flow of U.S.
firearms: Results from the 2015 National Firearms
Survey. The Russell Sage Foundation Journal of the
Social Sciences, 3(5), pp 38–57 (pp. 39 and 51).
https://www.jstor.org/stable/10.7758/
rsf.2017.3.5.02?seq=1.
117 U.S. Census, Stella U. Ogunwole, et al., U.S.
Adult Population Grew Faster Than Nation’s Total
Population From 2010 to 2020, U.S. Census (Aug.
12, 2021), https://www.census.gov/library/stories/
2021/08/united-states-adult-population-grew-fasterthan-nations-total-population-from-2010-to2020.html.
118 Azrael, D., Hepburn, L., Hemenway, D., &
Miller, M. (2017). The stock and flow of U.S.
firearms: Results from the 2015 National Firearms
Survey. The Russell Sage Foundation Journal of the
Social Sciences, 3(5), pp 38–57 (pp. 39 and 51).
https://www.jstor.org/stable/10.7758/
rsf.2017.3.5.02?seq=1.
119 The Russell Sage Foundation Survey did not
divide those who sold to family or friends on a
recurring basis from those who made an occasional
sale, or between those who did so with intent to
earn a profit and those who did not. As noted
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that transferred a firearm, ten percent
traded or bartered (284,178). Thus,
taking the 51 percent that sold (1.03
million) and the ten percent (284,178)
that transferred by trading or bartering,
the total number of unlicensed persons
that may transfer a firearm, based on
this survey, in any given timeframe is
1.31 million. Of the 1.31 million
unlicensed persons selling, trading, or
bartering firearms, ATF continues to
assume, based on the best, very
conservative assessment from SME
experts, that 25 percent (or 328,296
unlicensed individuals) may be engaged
in the business with an intent to profit.
In sum, based on these limited sources
of information, ATF estimates either
24,540 or 328,296 could represent an
estimate of unlicensed persons that may
be engaged in the business and affected
by this proposed rule.
ATF requests public comments on
what sources ATF should look to for
accurate estimates of the percentage of
the population that would need to
obtain a license because they are
‘‘engaged in the business’’ of dealing in
firearms, compared to those who make
occasional sales of firearms (e.g.,
enhancement of a personal collection or
for a hobby) and would not need to
obtain a license.
3. Costs for Unlicensed Persons
Becoming FFLs
As stated earlier, consistent with the
statutory changes in the BSCA, this
proposed rule implements a new
statutory provision that requires
individuals to become licensed dealers
if they intend predominantly to earn a
profit through the repetitive purchase
and resale of firearms (which includes
benefits from bartering). Costs to
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earlier in the preamble, a person who makes only
occasional firearms transfers, such as gifts, to
immediate family (without the intent to earn a
profit or circumvent requirements placed on
licensees), generally does not qualify as a dealer
engaged in the business. Although it is possible that
some portion of the Russell Sage set of family and
friend transferors might qualify as dealers if they
engage in actions such as recurring transfers,
transfers to others in addition to immediate family,
or transfers with intent to profit, ATF was not in
a position to make that determination from the
Survey. Therefore, ATF erred on the side of
assuming, for the purpose of this analysis, that the
Russell Sage Foundation data on transfers to family
and friends would likely not be affected by this
rulemaking, since, in general, such transfers are less
likely to be recurring or for profit.
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become an FFL include an initial
application on a Form 7, along with
fingerprints and photographs, and a
qualification inspection. This
application would require fingerprints
and photographs, not only from the
person applying, but also, in the case of
a corporation, partnership, or
association, from any other individual
who is a responsible person of that
business entity.
For purposes of this analysis, ATF
assumes that most, if not all unlicensed
persons may be operating alone as sole
proprietors because this new
requirement would likely affect persons
who have other sources of income and
do not currently view licensing as a
requirement. Besides the initial cost of
becoming an FFL, there are recurring
costs to maintain a license. These costs
include renewing the license on a
Federal Firearms License Renewal
Application, ATF Form 8 (5310.11)
(‘‘Form 8’’) every three years,
maintaining acquisition and disposition
(‘‘A&D’’) records, maintaining ATF
Forms 4473, and undergoing periodic
compliance inspections.
The proposed rule, which further
implements the statutory changes in the
BSCA, would affect unlicensed persons
who purchase and resell firearms with
the intent to predominantly earn a profit
(as defined), not those who are already
licensed. Because affected unlicensed
persons would now need a license to
continue to purchase and resell
firearms, ATF estimates that the
opportunity costs of acquiring a license
would be based on their free time or
‘‘leisure time.’’ Based on the Department
of Transportation’s (‘‘DOT’s’’) guidance
on the costs for leisure time, ATF
attempted to update the leisure wage
below based on the methodology
outlined in the guidance.120 The DOT
uses median household income as the
base for income from the U.S. Census.
ATF used the latest median income of
a household from the U.S. Census,
120 Department of Transportation, The Value of
Travel Time Savings: Departmental Guidance for
Conducting Economic Evaluations Revision 2 (2016
Update), https://www.transportation.gov/sites/
dot.gov/files/docs/2016%20
Revised%20Value%20of%20Travel%20Time%20
Guidance.pdf.
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62009
published September 2021.121 Table 1
outlines the leisure wage.
TABLE 1—LEISURE WAGE RATE FOR
INDIVIDUALS
Inputs for leisure wage rate
Median Household Income ......
DOT Travel Time ......................
DOT’s Value of Travel Time
Savings.
Leisure Wage Rate ..................
Rounded Leisure Wage Rate ...
Numerical
inputs
$67,521.
2080.
50 percent.
$16.23.
$16.
Based on DOT’s methodology for
leisure time, ATF attributes a rounded
value of $16 per hour for time spent
buying and reselling (including
bartering) firearms on a repetitive basis.
The same hourly cost applies to persons
who would now become licensed as a
firearms dealer who would not have
become licensed without the
clarifications provided by this proposed
rule. This could include persons who
begin selling firearms after the final
rule’s effective date and understand
from the rule that they qualify as
firearms dealers (as defined by the
statute and regulations), or persons who
were previously selling without a
license and now realize they must
acquire one to continue selling because
their firearms transactions qualify them
as dealers.
In addition to the cost of time, there
are other costs associated with applying
to become an FFL. To become an FFL,
persons need to apply on a Form 7 and
submit payment to ATF for fees
associated with the Form 7 application.
Furthermore, these unlicensed persons
would need to obtain documentation,
including fingerprints and photographs,
undergo a background investigation,
and submit all paperwork via mail.
While not a cost attributed towards their
first-year application to become an FFL,
an FFL will need to reapply to renew
their license every three years on a Form
8 renewal application to ensure that that
they can continue to sell firearms
thereafter. Table 2 outlines the costs to
become an FFL and costs to maintain a
license.
121 U.S. Census, Income and Poverty in the
United States: 2020, https://www.census.gov/
library/publications/2021/demo/p60-273.html.
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TABLE 2—COST INPUTS TO BECOME AN FFL AND MAINTAIN A LICENSE
Item
Cost item
Source
Form 7 Application Accompanying Licensing Fees ...................
$200.00
Fingerprint Cards ........................................................................
0.00
Fingerprint Cards (Commercial) .................................................
Average Cost for Fingerprint Cards ............................................
Postage .......................................................................................
23.70
12
0.63
Photograph ..................................................................................
16.99
FFL Renewal Application Licensing Fees (Form 8) every three
years.
90.00
For purposes of this proposed rule,
ATF assumes that unlicensed persons
applying for a license as a result of this
rulemaking are likely to file for a Type
01 Dealer license.122 This license costs
$200 and uses a Form 7 application (and
every three years thereafter, costs $90 to
renew the license using Form 8).
Applicants also need to obtain and
submit fingerprints in paper format. The
unlicensed person can obtain
fingerprint cards for free from ATF and
travel to select law enforcement offices
that perform fingerprinting services
(usually also for free). Or the unlicensed
Application for Federal Firearms License, ATF, https://
www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download.
Distribution Center Order Form, ATF, https://www.atf.gov/distribution-center-order-form (Apr. 20, 2023).
Various Sources.
See above.
Mailing and Shipping Prices, USPS, https://www.usps.com/
business/prices.htm (last visited Aug. 17, 2023).
Passport Photos, CVS, https://www.cvs.com/photo/passportphotos (last visited Aug. 17, 2023).
Federal Firearms Licensing Center (‘‘FFLC’’).
person may pay a fee to various market
entities that offer fingerprinting services
in paper format. The average cost found
for market services for fingerprinting on
paper cards is $24 (rounded).
Because it is not clear whether an
unlicensed person would choose to
obtain fingerprint cards from ATF and
go to a local law enforcement office that
provides fingerprinting services or use
commercial services both to obtain
cards and fingerprinting services, an
average cost of $12 was used. In
addition to paper fingerprint cards, the
unlicensed person must also submit a
photograph appropriate for obtaining
passports. The cost for a passport photo
is $17 (rounded). Once they complete
the application and gather the
documentation, unlicensed persons
must submit the Form 7 package by
mail. ATF rounds the first-class stamp
rate of $0.63 to $1 for calculating the
estimated mailing cost.
In addition to costs associated with
compiling documentation for a Form 7
application, ATF estimates time
burdens related to obtaining and
maintaining a Federal firearms license.
Table 3 outlines the hourly burdens to
apply, obtain, and maintain a license.
TABLE 3—HOURLY BURDENS TO APPLY, OBTAIN, AND MAINTAIN A LICENSE
Activity type
Hourly burden
Form 7 Application ......................................................................
1
Time to Travel to and Obtain Photograph ..................................
Time to Travel to and Obtain Fingerprints .................................
A&D Records ..............................................................................
Form 4473 ...................................................................................
Inspection Times (Qualification or Compliance) .........................
0.5
1
0.05
0.5
3
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As stated above, hourly burdens
include one hour to complete a Form 7
license application and the time spent
to obtain the required documentation.
For purposes of this analysis, ATF
assumes that places that offer passport
photograph services are more readily
available than places that provide
fingerprinting services; therefore, ATF
estimates that it may take 30 minutes
(0.5 hours) to travel to and obtain a
Source
Application for Federal Firearms License, ATF, https://
www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download.
N/A.
N/A.
OMB 1140–0032.
OMB 1140–0020.
Field Operations and OMB 1140–0032.
passport photograph and estimates up to
one hour to travel to and obtain
fingerprinting services. Other time
burdens may range from 0.05 hours
(three minutes) to enter and maintain
A&D records for each firearm
transaction and 0.5 hours for
maintaining a Form 4473, to three hours
for an inspection (qualification or
compliance).
ATF then multiplied the hourly
burdens by the $16 leisure wage rate to
account for the value of time spent
applying for and obtaining a license
using a Form 7 (including any other
actions related to obtaining a license),
then added the cost per item to
determine a cost per action taken. Table
4 outlines the first-year costs to apply
for an FFL.
122 The cost for a Type 01 Dealer is used because
this license is used to purchase and resell firearms
at wholesale or retail.
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TABLE 4—FIRST-YEAR COSTS TO OBTAIN A TYPE 01 FFL
Hourly
burden
Cost item
Hourly
wage rate
Hourly
cost
Rounded cost
for each
activity
Cost item
Form 7 ..................................................................................
Fingerprints ..........................................................................
Passport Photograph ...........................................................
Postage ................................................................................
Qualification Inspection ........................................................
1
1
0.5
N/A
3
$16
16
16
16
16
$16
16
8
N/A
48
$200
12
17
0.63
N/A
$216
28
25
1
48
Initial Cost .....................................................................
........................
........................
........................
........................
318
Overall, ATF estimates that it would
cost an unlicensed person $318 in terms
of time spent and fees paid to apply
under a Form 7 to become a Type 01
FFL. ATF considers the $318 as an
unlicensed person’s initial cost. In
periodic compliance inspections, and
renew their license every three years
(ATF Form 8 application). Table 5
outlines the cost per recurring activity
to maintain an FFL.
addition to their initial cost, the newly
created FFL would need to maintain a
Form 4473 (for each firearm sale), A&D
records (two entries per firearm: one
entry to purchase and one entry to sell)
for every firearms transaction, undergo
TABLE 5—RECURRING COSTS TO MAINTAIN AN FFL
Item
Number of entries or applications
Form 8 Renewal Application .............
Form 4473 .........................................
A&D Records .....................................
Compliance Inspections .....................
1
3
6
1
Hourly
burden
(every three years) .........................
(firearm sales every year) ..............
(two entries per firearm every year)
(periodically) ...................................
While renewing a license under a
Form 8 application occurs every three
years, there are additional costs
associated with Form 4473 and A&D
records that may occur more often.
There are also costs from compliance
inspections that may occur periodically.
ATF notes that the actual number of
firearms sales may range from zero sales
to more than three per year, but for
purposes of this economic analysis only,
ATF uses three firearms (six A&D
entries) per year to illustrate the
potential costs that a person may incur
based on information gleaned from
ArmsList. Although a person might not
resell a given firearm in the same year
they purchase it, for the purposes of
these estimates, this analysis includes
both ends of the firearm transaction
because they could buy and sell the
Hourly
wage rate
0.5
0.5
0.05
3
$16.00
16.00
16.00
16.00
same firearm or buy one and sell a
different one in a given year.
As for compliance inspections, based
on information gathered from ATF’s
Office of Field Operations, the
frequency of such inspections varies
depending on the size of the area of
operations and the number of FFLs per
area of operations. Overall, ATF
estimates that it inspects approximately
eight percent of all existing FFLs in any
given year. ATF has indicated the cost
of an inspection, which would normally
not occur more than once in a given
year per FFL. ATF performs compliance
inspections annually, so while the FFL
would not necessarily incur a
compliance inspection every year, this
analysis includes an annual cost for
inspections to account for a subset of
the total number of affected FFLs that
would be inspected in any given year.
Hourly
cost per
activity
Cost item
$8.00
24.00
4.80
48.00
$90
N/A
N/A
N/A
Rounded
cost for
each
activity
$98
24
5
48
In summary, ATF estimates that it
would cost an individual $318 in the
first year to become licensed.
Furthermore, this individual would
incur annually recurring costs that
could range from $29 a year to complete
Forms 4473 and maintain A&D records
to $175 to include Form 8 renewal costs
and compliance inspections.123 In
addition, ATF estimates that annual
costs would range from $805,884 to $7.8
million, with the $7.8 million being the
highest annual cost, occurring in the
first year, using the SME estimates.
Using the alternative inputs from the
Russell Sage Foundation Survey results
in annual costs ranging from $10.8
million to $104.4 million. Tables 6 and
7 illustrate the 10-year period of
analysis.
TABLE 6—10-YEAR PRIVATE COSTS TO THE PROPOSED RULE USING SME ESTIMATE
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Year
1
2
3
4
5
6
Undiscounted
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
.......................................................................................................................................
123 ATF notes that the high $175 may be higher
than actual costs since this high cost assumes that
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an FFL would simultaneously renew their license
(which occurs every three years) in the same year
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Discounted at
3 percent
$7,803,720
805,884
805,884
3,210,804
805,884
805,884
$7,576,427
759,623
737,498
2,852,758
695,163
674,915
Discounted at
7 percent
$7,293,196
703,890
657,841
2,449,507
574,584
536,995
that they perform a compliance inspection, which
occurs periodically.
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TABLE 6—10-YEAR PRIVATE COSTS TO THE PROPOSED RULE USING SME ESTIMATE—Continued
Year
Undiscounted
Discounted at
3 percent
Discounted at
7 percent
7 .......................................................................................................................................
8 .......................................................................................................................................
9 .......................................................................................................................................
10 .....................................................................................................................................
3,210,804
805,884
805,884
3,210,804
2,610,677
636,172
617,643
2,389,140
1,999,527
469,032
438,348
1,632,210
Total ..........................................................................................................................
Annualized ................................................................................................................
22,271,436
............................
19,550,016
2,291,858
16,755,130
2,385,554
Overall, the annualized private cost of
this proposed rule using SME estimates
is $2.3 million at three percent and $2.4
million at seven percent.
TABLE 7—10-YEAR PRIVATE COSTS TO THE PROPOSED RULE USING THE RUSSELL SAGE FOUNDATION SURVEY
Year
Discounted at
3 percent
Discounted at
7 percent
1 .......................................................................................................................................
2 .......................................................................................................................................
3 .......................................................................................................................................
4 .......................................................................................................................................
5 .......................................................................................................................................
6 .......................................................................................................................................
7 .......................................................................................................................................
8 .......................................................................................................................................
9 .......................................................................................................................................
10 .....................................................................................................................................
$104,398,128
10,781,256
10,781,256
42,954,264
10,781,256
10,781,256
42,954,264
10,781,256
10,781,256
42,954,264
$101,357,406
10,162,368
9,866,377
38,164,307
9,300,006
9,029,132
34,925,747
8,510,823
8,262,935
31,962,006
$97,568,344
9,416,767
8,800,716
32,769,602
7,686,887
7,184,006
26,749,757
6,274,789
5,864,289
21,835,770
Total ..........................................................................................................................
Annualized ................................................................................................................
297,948,456
............................
261,541,108
30,660,597
224,150,926
31,914,049
Overall, the annualized private cost of
this proposed rule, based on alternate
inputs from the Russell Sage
Foundation Survey, is $30.7 million at
three percent and $31.9 million at seven
percent.
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Undiscounted
4. Costs for FFLs After Termination of
License
The proposed rule is also designed to
enhance compliance by former FFLs
who no longer hold their licenses due
to license revocation, denial of license
renewal, license expiration, or surrender
of license but nonetheless engage in the
business of dealing in firearms. Such
persons sometimes, under existing
standards, transfer their inventory to
their personal collections instead of
selling or otherwise disposing of the
firearms to a licensed importer, licensed
manufacturer, or licensed dealer for
sale, auction, or pawn redemption. The
proposed rule would clarify that such
former licensees must sell to other
licenses or transfer their personal
collection within 30 days, but they may
not treat a business firearm that they
have transferred to their personal
collection as a personal firearm until the
firearm has been in their personal
collection for a period of one year.
Former FFLs who sell any such firearm
within one year of the transfer date as
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a personal firearm may be in violation
of existing statutory and regulatory
restrictions (18 U.S.C. 922(a)(1)(A) and
923(a),(c)) on unlicensed dealers, and
may be deemed to be ‘‘engaged in the
business.’’
ATF license revocation, denial of
license renewal, license expiration, or
surrender of license realistically present
two categories of affected populations.
Group 1, comprising license revocations
and denial of license renewals, could be
described as former FFLs who have
failed to comply with existing
regulations and requirements to a degree
which resulted in the revocation or
denial of their licenses. The proposed
rule is likely to have a qualitative
impact on this group because a
revocation or denial may not provide
ample opportunity for an orderly and
planned liquidation or transfer of
inventory before losing the license,
which may therefore be disruptive.
Based on data from the FFLC, the
number of such FFL license revocations
are rare, with an average of 37 licenses
revoked by ATF over the past 5 years
(with a range between 8 and 79), or a de
minimis percentage of 0.05 percent of
all active FFLs. Furthermore, the
economic impact of transferring
inventory to another FFL instead of the
former FFL holder retaining the
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inventory is unclear, as the underlying
market value of the inventory is
unchanged by this proposed rule’s
requirements. Additional factors
surrounding the potential cost of no
longer being able to transfer one’s
inventory to oneself are also unknown
and presumed to similarly be de
minimis. Therefore, ATF believes there
are no quantitative impacts associated
with this population. However, ATF
welcomes public comments on these
assumptions in general and on the
potential impacts on former FFLs with
revoked licenses.
Group 2, comprising license
expiration or surrender of license,
captures those who no longer have a
license for discretionary or lawful
reasons. This group comprises former
FFLs that choose to close or to sell the
business to another party. They are
similarly excluded from expected
impacts attributable to the proposed
rule because of the likelihood that,
because the closure is planned, the FFL
will include reasonable considerations
for orderly, lawful liquidation or
inventory transfer as part of closing or
selling their enterprise. Such
considerations are also likely to occur
ahead of, rather than subsequent to, the
expiration or surrender of their license.
As a result, ATF assumes that the
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options of transfer to the licensee’s
personal collection or sale to another
FFL that exist under current standards
would similarly be freely available to
Group 2 FFLs over their expected course
of action under the proposed rule. As a
result, we are excluding both groups
from the affected population.
5. Government Costs
In addition to the private costs to
unlicensed persons, ATF would incur
additional work due to the increase in
Form 7 and Form 8 applications for
unlicensed persons who become an FFL
which would be offset by the fees
incurred with FFL applications ($200)
and renewals ($90). Based on
information gathered from FFLC, which
processes and collects the fees for FFL
applications, various contractors and
Federal Government employees process
Form 7 and 8 applications, verify and
correct applications, and further process
them for background checks and
approval.
Based on information provided by
FFLC, the average hourly rate for
contracting staff, to include benefits, is
$13.29.124 To determine the wage rates
for Federal employees, ATF used the
wage rates according to the General
Schedule (‘‘GS’’) level, step 5 as an
average wage rate per activity.
Government processing activities range
from an entry level Federal employee
between a GS–5/7, upwards to a GS–
13.125 To account for fringe benefits
such as insurance, ATF estimated a
Federal load rate. ATF estimated the
Federal load rate using the methodology
outlined in the Congressional Budget
Office’s report comparing Federal
benefits to private sector benefits. It
states that Federal benefits are 17
percent more than private sector
benefits (or a multiplier factor of
1.17).126 ATF calculated private sector
benefits from the Bureau of Labor
Statistics (in 2022) and determined that
the overall private sector benefits are
41.9 percent in addition to an hourly
wage, or a load rate of 1.419. This makes
the Federal load rate 1.66 above the
hourly wage rate (after applying the 1.17
multiplier).127 Table 8 outlines the
government costs to process a Form 7
application to become an FFL.
TABLE 8—HOURLY BURDEN AND COST TO PROCESS A NEW APPLICATION FOR AN FFL
Hourly
burden
Government cost to process new FFL applications
Staffing level
Hourly
wage
Loaded
hourly
wage
Rounded
cost
Average Contracting Time to Prepare and Enter Application .............
Processing Time for New Applications ...............................................
Processing Time for Fingerprint Cards ...............................................
Qualification Inspection Time (Includes Travel) ..................................
0.5
1
2
5
Contracting Staff ....
GS 10 ....................
GS 12 ....................
GS 5/7 to GS 13 ....
$13.29
38.85
51.15
37.65
$13.29
64.49
84.91
62.50
$7
64
170
312
Subtotal ........................................................................................
Fees Incurred from New Application ............................................
..................
..................
................................
................................
..................
..................
..................
..................
553
¥200
Total ......................................................................................
..................
................................
..................
..................
353
Based on the hourly burdens and the
hourly wage rates for various contract
and Federal employees, ATF estimates
that it would take on average 8.5 hours
to process a Form 7 application, at a
cost of $553 per application, offset by
the new application fee (Form 7) of
$200, for an overall net cost to the
government for this rulemaking of $353.
Form 8 application renewals are
estimated to cost $71 every three years
(or $553 less the $312 inspection time
and the $170 fingerprint costs).
However, the cost to review a Form 8
application ($71) is offset by the
renewal fee of $90, making the net cost
or overall savings to government for this
rulemaking ¥$19 per FFL renewal.
In addition to processing Form 7
applications, ATF Industry Operations
Investigators (‘‘IOIs’’) would need to
perform qualification and compliance
inspections. The qualification
inspection occurs once during the
application process and is accounted for
in table 7 above. But, as discussed
above, there is a recurring compliance
inspection after the person becomes a
licensee. For either the qualification or
compliance inspection, ATF notes that
the estimated five-hour inspection time
for the government is more than the
inspection time for the private sector, as
discussed above, because ATF is
including travel time for an IOI to travel
to the person’s location. Table 9 outlines
the recurring government cost to inspect
an FFL.
TABLE 9—RECURRING GOVERNMENT COSTS TO INSPECT AN FFL
Hourly
burden
Activity
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Compliance Inspection (Includes Travel) ............................................
Staffing level
5
GS 5/7 to GS 13 ....
Hourly
wage
$37.65
Loaded
hourly
wage
$62.50
Rounded
cost
$312
Based on the hourly burdens and
wage rates of IOIs, ATF anticipates that
it costs ATF $312 to perform a
compliance inspection. To summarize
the overall government costs, table 10
outlines the government costs to process
124 ATF notes that because the contracting salary
is a loaded wage rate, a base wage rate (not
including benefits) was not included in table 8
below.
125 Office of Personnel Management, Salary Table
2023–DCB, https://www.opm.gov/policy-dataoversight/pay-leave/salaries-wages/salary-tables/
pdf/2023/DCB_h.pdf.
126 Congressional Budget Office, Comparing the
Compensation of Federal and Private-Sector
Employees, 2011 to 2015, https://www.cbo.gov/
system/files/115th-congress-2017-2018/reports/
52637-federalprivatepay.pdf.
127 1.66 Federal load rate = 1.419 private industry
load rate * 1.17 multiplier factor. BLS Series ID
CMU2010000000000D,CMU2010000000000P
(Private Industry Compensation = $39.34)/BLS
Series ID
CMU2020000000000D,CMU2020000000000P
(Private Industry Wages and Salaries = $27.73) =
1.419. BLS average 2022. U.S. Bureau of Labor
Statistics, Database for Employee Compensation,
https://data.bls.gov/cgi-bin/srgate.
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Form 7 applications, process Form 8
renewal applications, and conduct FFL
compliance inspections.
TABLE 10—SUMMARY OF GOVERNMENT COST PER LISTED ACTION
Government cost per unlicensed person
Cost
Per Application Cost (including qualification inspection) .....................................................................................................................
Per Renewal Cost ................................................................................................................................................................................
Per Compliance Inspection Cost .........................................................................................................................................................
ATF estimates that the government
costs of this proposed rule include the
initial application cost that occurs in the
first year (including the qualification
inspection), renewal costs that occur
every three years after the first year, and
the cost for the government to conduct
a compliance inspection of an FFL in a
given year (the government currently
conducts compliance inspections of
$353
¥19
312
approximately eight percent of FFLs per
year). Table 11 illustrates the 10-year
government costs this proposed rule.
TABLE 11—TOTAL GOVERNMENT COSTS OF PROPOSED RULE
Year
Undiscounted
3 Percent
discount rate
7 Percent
discount rate
Year
Undiscounted
3%
7%
1 .......................................................................................................................................
2 .......................................................................................................................................
3 .......................................................................................................................................
4 .......................................................................................................................................
5 .......................................................................................................................................
6 .......................................................................................................................................
7 .......................................................................................................................................
8 .......................................................................................................................................
9 .......................................................................................................................................
10 .....................................................................................................................................
$8,662,620
612,456
612,456
146,196
612,456
612,456
146,196
612,456
612,456
146,196
$8,662,620
612,456
612,456
146,196
612,456
612,456
146,196
612,456
612,456
146,196
$8,662,620
612,456
612,456
146,196
612,456
612,456
146,196
612,456
612,456
146,196
Total ..........................................................................................................................
Annualized ................................................................................................................
12,775,944
............................
12,775,944
1,497,730
12,775,944
1,819,007
Overall, the annualized government
cost of this proposed rule is $1.5 million
at three percent and $1.8 million at
seven percent.
6. Total Cost
The total costs, therefore, take into
account the private and government
costs of the proposed rule, as described
in sections 3 and 5 above. ATF
estimates that the initial application
cost (Form 7 and initial inspection)
occurs in the first year, renewal costs
(Form 8 renewals) occur every three
years after the first year, and completion
and maintenance of Forms 4473 and
A&D records, and compliance
inspection costs (for a subset of FFLs
affected by this rulemaking), occur
annually. Tables 12 and 13 illustrate the
10-year private and government costs of
this proposed rule.
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TABLE 12—TOTAL PRIVATE AND GOVERNMENT COSTS OF PROPOSED RULE BASED ON SME ESTIMATES 128
Year
Undiscounted
1 .......................................................................................................................................
2 .......................................................................................................................................
3 .......................................................................................................................................
4 .......................................................................................................................................
5 .......................................................................................................................................
6 .......................................................................................................................................
7 .......................................................................................................................................
8 .......................................................................................................................................
9 .......................................................................................................................................
10 .....................................................................................................................................
Total ..........................................................................................................................
Annualized ................................................................................................................
$16,466,340
1,418,340
1,418,340
3,357,000
1,418,340
1,418,340
3,357,000
1,418,340
1,418,340
3,357,000
35,047,380
............................
128 The ‘‘Undiscounted’’ column represents totals
from the underlying private and government cost
tables. Consistent with guidance provided by OMB
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in Circular A–4, the ‘‘3 Percent Discount Rate’’ and
‘‘7 Percent Discount Rate’’ columns result from
applying an economic formula to the number in
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3 Percent
discount rate
$15,986,738
1,336,921
1,297,982
2,982,651
1,223,473
1,187,837
2,729,548
1,119,651
1,087,040
2,497,923
31,449,764
3,686,872
7 Percent
discount rate
$15,389,103
1,238,833
1,157,788
2,561,039
1,011,257
945,100
2,090,571
825,487
771,483
1,706,529
27,697,189
3,943,457
each row of this ‘‘Undiscounted’’ column to show
how these future costs over time would be valued
today; they do not contain totals from other tables.
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Overall, the total annualized cost of
this proposed rule is $3.7 million at
three percent and $3.9 million at seven
62015
percent using information based off of
SME estimates.
TABLE 13—TOTAL PRIVATE AND GOVERNMENT COSTS OF PROPOSED RULE BASED ON RUSSELL SAGE FOUNDATION
SURVEY AND SME ESTIMATES 129
Year
Discounted at
3 percent
Discounted at
7 percent
1 .......................................................................................................................................
2 .......................................................................................................................................
3 .......................................................................................................................................
4 .......................................................................................................................................
5 .......................................................................................................................................
6 .......................................................................................................................................
7 .......................................................................................................................................
8 .......................................................................................................................................
9 .......................................................................................................................................
10 .....................................................................................................................................
$113,060,748
11,393,712
11,393,712
43,100,460
11,393,712
11,393,712
43,100,460
11,393,712
11,393,712
43,100,460
$109,767,717
10,739,666
10,426,861
38,294,200
9,828,316
9,542,054
35,044,618
8,994,301
8,732,332
32,070,790
$105,664,250
9,951,709
9,300,663
32,881,135
8,123,559
7,592,111
26,840,800
6,631,244
6,197,424
21,910,088
Total ..........................................................................................................................
Annualized ................................................................................................................
310,724,400
............................
273,440,855
32,055,610
235,092,985
33,471,952
Overall, using the information from
the Russell Sage Foundation Survey and
FIPB SME estimates, table 13 represents
the upper bound estimate in which the
total annualized cost of this proposed
rule is $32 million at three percent and
$33.4 million at seven percent.
7. Benefits
These proposed revisions will have
significant public safety benefits by
ensuring that ATF’s regulatory
definitions conform to the BSCA’s
statutory changes and can be relied
upon by the public, and by clarifying
that persons who intend to
predominantly earn a profit from the
repetitive purchase and resale of
firearms are engaged in the business of
dealing in firearms and must be
licensed, even if they make few or no
sales, or if they are conducting such
transactions on the internet or through
other mediums or forums. As part of the
license application, those dealers will
undergo a background check. This
increases the ability to ensure that
persons purchasing and selling
(including bartering) firearms with the
intent to earn a profit are lawfully able
to do so and reduces the risk that they
could pose a danger to others by
trafficking in illicit firearm sales or
otherwise engaging in criminal
activities. Additionally, these licensed
dealers must take steps to help
determine that they are not selling
lotter on DSK11XQN23PROD with PROPOSALS1
Undiscounted
129 The ‘‘Undiscounted’’ column represents totals
from the underlying private and government cost
tables. Consistent with guidance provided by OMB
in Circular A–4, the ‘‘3 Percent Discount Rate’’ and
‘‘7 Percent Discount Rate’’ columns result from
applying an economic formula to the number in
each row of this ‘‘Undiscounted’’ column to show
how these future costs over time would be valued
today; they do not contain totals from other tables.
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firearms to persons prohibited from
receiving or possessing such firearms
under Federal, State, local, or Tribal
law.
The U.S. Sentencing Commission
reports that ‘‘88.8 percent of firearm
offenders sentenced under § 2K2.1 130
[of the United States Sentencing
Commission Guidelines Manual (Nov.
2021)] were [already] prohibited from
possessing a firearm’’ under 18 U.S.C.
922(g). These individuals would thus
have been flagged in a background
check, would have therefore been
prohibited from buying a firearm from a
licensed dealer after their first offense,
and would not have been able to
commit the subsequent firearms
offense(s) if their seller had been
licensed. In addition, the Commission
reports that such offenders ‘‘have
criminal histories that are more
extensive and more serious than other
offenders’’ 131 and that they are ‘‘more
than twice as likely to have a prior
conviction for a violent offense
compared to all other offenders.’’ 132
In another report, on ‘‘armed career
criminals’’ (those who have three or
more convictions for violent offenses,
serious drug offenses, or both), the
Commission reports that a substantial
share of ‘‘armed career criminals’’ (83
percent in fiscal year 2019) had prior
convictions for at least one violent
130 Section 2K2.1 provides sentencing guidelines
for ‘‘Unlawful Receipt, Possessions, or
Transportation of Firearms or Ammunition;
Prohibited Transactions Involving Firearms or
Ammunition.’’
131 What do Federal Firearms Offenses Really
Look Like?, United States Sentencing Commission
Report at 2 (July 14, 2022), https://www.ussc.gov/
research/research-reports/what-do-federal-firearmsoffenses-really-look.
132 Id.
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offense (as opposed to solely serious
drug offense convictions). This includes
‘‘57.7 percent who had three or more
[prior violent] convictions.’’ 133 In other
words, persons who prohibited by law
from possessing firearms, as well as the
more serious ‘‘armed career criminals’’
who are also prohibited, were able to
obtain guns and continued to commit
more violent offenses after they would
have been flagged by a background
check and denied a firearm if
purchasing from a licensed dealer.
Such violence has a significant
adverse effect on public safety. Because
licensed dealers are required to conduct
background checks on unlicensed
transferees, another benefit of this
rulemaking is to aid in preventing
firearms being sold to felons or other
prohibited persons, who may commit
crimes and acts of violence or
themselves become sources of firearms
trafficking. Furthermore, these licensed
dealers must also maintain firearms
transaction records, which will help
with criminal investigations and tracing
firearms subsequently used in crimes.
In 2016, ATF distributed and
discussed the above-mentioned
‘‘engaged in the business’’ guidance at
gun shows to ensure that unlicensed
dealers operating at gun shows became
licensed, and portions of that previous
guidance are incorporated in this
proposed rule. This guidance was
particularly directed at unlicensed
persons who sell firearms as a
secondary source of income to allow
133 Federal Armed Career Criminals: Prevalence,
Patterns, and Pathways, United States Sentencing
Commission, at 9 (March 2021), https://
www.ussc.gov/sites/default/files/pdf/research-andpublications/research-publications/2021/20210303_
ACCA-Report.pdf.
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them to continue to sell firearms, but as
licensed dealers. Based on the FFLC,
ATF found that there was an increase of
approximately 567 ATF Form 7
applications to account for these
unlicensed persons selling at gun
shows. This prior outcome demonstrates
the market response to clarifying
licensing requirements and that such a
response both increases the likelihood
that persons engaged in the business
comply with Federal licensing
requirements and enhance public safety
by denying persons prohibited from
purchasing firearms through completion
of ATF Forms 4473 and running
background checks on prospective
purchasers.
Finally, providing a clear option for
FFLs to transfer their business inventory
to another FFL when their license is
terminated helps to ensure that these
business inventories of firearms are
traceable and do not become sources of
trafficked firearms.
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8. Alternatives
In addition to the requirements
outlined in this proposed rule, ATF
considered the following alternative
approaches:
Alternative 1. A rulemaking that
focuses on a bright-line numerical
threshold of what constitutes being
engaged in the business as a dealer in
firearms. As discussed above, in the
past, it has been proposed to ATF that
a rulemaking should set a specific
threshold or number of sales per year to
define ‘‘engaged in the business.’’ ATF
considered this alternative in the past
and again as part of developing this
proposed rulemaking.134 However, ATF
chose not to adopt this alternative for a
number of reasons stated in detail
above. In summary: courts have held
even before the passage of the BCSA
that the sale of or attempt to sell even
one firearm is sufficient to show that a
person is ‘‘engaged in the business’’ if
that person represents to others that
they are willing and able to purchase
more firearms for resale; a person could
structure their transactions to avoid the
minimum threshold by spreading out
sales over time; and firearms could be
sold by unlicensed persons below the
threshold number without records,
making those firearms unable to be
traced when they are subsequently used
in a crime. Finally, the Department does
not believe there is a sufficient
evidentiary basis, without consideration
of additional factors, to support a
134 See discussion supra under Section I.A.
‘‘Advance Notice of Proposed Rulemaking (1979)’’
and in more detail in Section II.D. ‘‘Presumptions
that a Person is ‘‘Engaged in the Business.’’
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specific minimum number of firearms
bought or sold for a person to be
considered ‘‘engaged in the business.’’
The costs of implementing a specific
threshold would be lower than in the
primary analysis proposed in this rule.
However, the Department believes it
would not appropriately address the
language regarding the requisite intent
predominantly to earn a profit (which
can include bartering) and would have
unintended effects such as those
summarized in the previous paragraph
that would impact personal firearms
transactions and decrease public safety
and law enforcement’s ability to trace
firearms used in crimes.
Alternative 2. Publishing guidance
instead of revising the regulations.
Under this alternative, rather than
publishing regulations further defining
‘‘engaged in the business,’’ ATF would
publish only guidance documents to
clarify the topics included in this
proposed rule. Although ATF has
determined that in addition to revising
its regulations, it will also update
existing guidance documents to answer
any questions that the firearms industry
may have, the Department has
determined that issuing only guidance
would be insufficient to address the
issues discussed above. ATF did not
select the alternative to publish only
guidance documents in lieu of
regulations because guidance would be
insufficient as a means to inform the
public in general, rather than solely the
currently regulated community;
guidance would not have the same legal
effect and applicability as a regulation;
it would not benefit from the input of
public review and comment to aid in
accounting for possible unintended
impacts or interpretations; and it would
not be able to change existing regulatory
provisions on the subject of ‘‘engaged in
the business’’ or impact intersecting
regulatory provisions. In addition, ATF
can incorporate existing guidance in a
proposed rule based on its experience or
in response to comments. When an
agency establishes or revises legally
binding requirements, it must do so
through a regulation issued under the
Administrative Procedure Act and
Executive order provisions flowing from
it. Guidance does not meet these
requirements. Therefore, although the
Department considered this alternative,
it determined it was not in the best
interest of the public.
Alternative 3. No action. Rather than
promulgating a regulation, ATF could
instead take no action to further clarify
the BSCA’s amendments to the GCA.
However, the Department considered
this alternative and decided against it
for a number of reasons. First, as the
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various enforcement actions and court
decisions cited above demonstrate, ATF
has observed a significant level of
noncompliance with the GCA’s
licensing requirements even prior to the
BSCA. Second, on March 14, 2023,
President Biden issued Executive Order
14092, requiring the Attorney General to
report on agency efforts to implement
the BSCA, develop and implement a
plan to clarify the definition of who is
engaged in the business of dealing in
firearms, ‘‘including by considering a
rulemaking,’’ and prevent former FFLs
whose licenses have been revoked or
surrendered from continuing to engage
in the business of dealing in firearms.135
Third, Congress, through the BSCA,
determined that there was a need to
revise the definition of ‘‘engaged in the
business’’ for the first time in almost 40
years. While that by itself does not
preclude ATF from using its discretion
not to promulgate a formal rule, it
indicates an important change to the
landscape of who must have a license to
deal in firearms and warrants
consideration of what that means to
persons who have been operating under
the previous definition. It has potential
effects on those who have not
considered themselves to fall under the
definition before and now would have
to have a license. The change to the
definition removed any intent to obtain
‘‘livelihood,’’ and it is reasonable to
expect that those who transact in
firearms would have questions about
how to interpret and apply this change.
This would include how it affects other
aspects of existing laws and regulatory
provisions that govern such
transactions, as well as how other BSCA
amendments, such as the new
international trafficking provisions,
might apply to the dealer requirements.
For these reasons, the Department
determined this was not a viable
alternative.
Although the Department considered
this alternative, it does not generate
direct monetary costs because it leaves
the regulatory situation as it is. Because
the costs and benefits of this alternative
arise from the statute itself, ATF did not
include an assessment of them in this
proposed rulemaking.
B. Executive Order 13132
This regulation will not have
substantial direct effects on the States,
the relationship between the Federal
Government and the States, or the
distribution of power and
responsibilities among the various
levels of government. Therefore, in
accordance with section 6 of Executive
135 88
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Order 13132 (‘‘Federalism’’), the
Attorney General has determined that
this regulation does not have sufficient
federalism implications to warrant the
preparation of a federalism summary
impact statement.
C. Executive Order 12988
This regulation meets the applicable
standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988 (‘‘Civil
Justice Reform’’).
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D. Regulatory Flexibility Act (‘‘RFA’’)
ATF performed an initial regulatory
flexibility analysis of the impacts on
small businesses and other entities on
this proposed rule. Based on the
information from this analysis, ATF has
determined that this proposed rule
would impact unlicensed persons who
would now have to become licensed
dealers to lawfully operate as a small
business. Because some of these
unlicensed persons may transact in lowvolume firearms sales to predominantly
earn a profit, the costs to become an FFL
could have an impact on their overall
profit from firearms transactions.
Initial Regulatory Flexibility Analysis
The RFA establishes ‘‘as a principle of
regulatory issuance that agencies shall
endeavor, consistent with the objectives
of the rule and of applicable statutes, to
fit regulatory and informational
requirements to the scale of the
businesses, organizations, and
governmental jurisdictions subject to
regulation. To achieve this principle,
agencies are required to solicit and
consider flexible regulatory proposals
and to explain the rationale for their
actions to assure that such proposals are
given serious consideration.’’ Public
Law 96–354, section 2(b), 94 Stat. 1164,
1165 (1980) (codified at 5 U.S.C. 601, et
seq.).
Under the RFA, the agency is required
to consider whether this rule would
have a significant economic impact on
a substantial number of small entities.
Agencies must perform a review to
determine whether a rule would have
such an impact. If the agency
determines that it would, the agency
must prepare a regulatory flexibility
analysis as described in the RFA.
The RFA covers a wide range of small
entities. The term ‘‘small entities’’
comprises small businesses, not-forprofit organizations that are
independently owned and operated and
are not dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000. 5 U.S.C.
601(3)–(6). ATF determined that the
rulemaking affects a variety of large and
small businesses (see the ‘‘Description
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of the Potential Number of Small
Entities’’ section below). Based on the
requirements above, ATF prepared the
following initial regulatory flexibility
analysis assessing the impact on small
entities from the rulemaking.
1. A description of the reasons why
action by the agency is being
considered.
Congress passed the BSCA, which
amended the definition of engaged in
the business from a person seeking to
transact in firearms for livelihood and
profit to a person intending
predominantly to earn a profit.
Moreover, on March 14, 2023, the
President ordered the Attorney General
to report on efforts to implement the
BSCA and to develop and implement a
plan to clarify the definition of
‘‘engaged in the business’’ of dealing in
firearms and prevent FFLs from
continuing to deal after license
revocation or surrender.
2. A succinct statement of the
objectives of, and legal basis for, the
proposed rule.
The Attorney General is responsible
for enforcing, among other statutes, the
GCA, as amended. The BSCA redefined
who is a regulated dealer under the
GCA. This proposed rule updates the
regulations to ensure the language
conforms with the amended statutory
provisions, and clarifies for the public
how to understand and implement the
statutory change and also implements
Executive Order 14092.
3. A description of and, where
feasible, an estimate of the number of
small entities to which the proposed
rule will apply.
This proposed rule implements a
statutory requirement that affects
unlicensed persons who purchase and
sell firearms, with the intent to profit
(including barter), on a recurring basis.
As persons who engage in higherfrequency firearms transactions meeting
these requirements are typically already
licensed as dealers, the persons
impacted by this proposed rule will
primarily be those who transact in low
volume repetitive firearms sales. These
persons likely either already are, or
would become, small entities.
4. A description of the projected
reporting, recordkeeping and other
compliance requirements of the
proposed rule, including an estimate of
the classes of small entities which will
be subject to the requirement and the
type of professional skills necessary for
preparation of the report or record.
ATF estimates that this proposed rule
would affect at least 24,540 unlicensed
persons who, as a result of changes
enacted in the BSCA, are now required
to obtain a Federal firearms license.
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Such persons would need to file a Form
7 application, pay a licensing fee,
undergo a qualification inspection,
maintain Form 4473 and A&D records
for every firearm transaction, and
undergo periodic compliance
inspections. If they continue in business
after three years, they would need to file
a Form 8 renewal application and pay
a renewal licensing fee. No professional
skills are necessary to prepare or
perform application or recordkeeping
activities.
5. An identification, to the extent
practicable, of all relevant Federal rules
which may duplicate, overlap or
conflict with the proposed rule.
This proposed rule does not duplicate
or conflict with other Federal rules.
6. Descriptions of any significant
alternatives to the proposed rule which
accomplish the stated objectives of
applicable statutes and which minimize
any significant economic impact of the
proposed rule on small entities.
ATF did not find any suitable
alternatives that would meet the
objectives of this proposed rule that
would minimize the economic impact
that this rulemaking would have on
small entities.
E. Small Business Regulatory
Enforcement Fairness Act of 1996
This rulemaking is likely to have a
significant economic impact on a
substantial number of small entities
under the Small Business Regulatory
Enforcement Fairness Act of 1996, 5
U.S.C. 601 et seq. Accordingly, the
Department prepared an initial
regulatory flexibility analysis.
F. Unfunded Mandates Reform Act of
1995
This rulemaking would not result in
the expenditure by State, local, and
Tribal governments, in the aggregate, or
by the private sector, of $100 million or
more in any one year, and it will not
significantly or uniquely affect small
governments. Therefore, no actions were
deemed necessary under the provisions
of the Unfunded Mandates Reform Act
of 1995, Public Law 104–4, 109 Stat. 48.
See 2 U.S.C. 1532(a).
G. Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act
of 1995 (‘‘PRA’’), 44 U.S.C. 3501–21,
and its implementing regulations, 5 CFR
part 1320, agencies are required to
submit to OMB, for review and
approval, any reporting requirements
inherent in a rule. The collections of
information contained in this proposed
rule are collections of information
which have been reviewed and
approved by OMB in accordance with
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the requirements of the PRA and have
been assigned an OMB Control Number.
As defined in 5 CFR 1320.3(c),
‘‘collection of information’’ comprises
reporting, recordkeeping, monitoring,
posting, labeling, and other similar
actions. The collections of information
in this rulemaking are mandatory. The
title and description of the information
collection, a description of those who
must collect the information, and an
estimate of the total annual burden
follow. The estimate covers the time for
reviewing instructions, searching
existing sources of data, gathering, and
maintaining the data needed, and
completing and reviewing the
collection.
Title: Application for a Federal
Firearms License—ATF Form
7(5310.12)/7CR (5310.16)3.
OMB Control Number: OMB 1140–
0018.
Summary of the Collection of
Information: 18 U.S.C. 922 specifies a
number of unlawful activities involving
firearms in interstate and foreign
commerce. Some of these activities
cease to be unlawful when persons are
licensed under the provisions of 18
U.S.C. 923. Some examples of activities
that are no longer unlawful once a
person becomes licensed include:
engaging in the business of selling,
shipping, receiving, and transporting
firearms in interstate or foreign
commerce, including the acquisition of
curio or relic firearms acquired by
collectors from out-of-state for personal
collections. This collection of
information is necessary to ensure that
anyone who wishes to be licensed as
required by 18 U.S.C. 923 meets the
requirements to obtain the desired
license.
Need for Information: Less frequent
collection of this information would
pose a threat to public safety. Without
this information collection, ATF would
not be able to issue licenses to persons
required by law to have a license to
engage in the business of dealing in
firearms or shipping or transporting
firearms in interstate or foreign
commerce in support of that business,
or acquire curio and relic firearms from
out of state.
Proposed Use of Information: ATF
personnel will analyze the submitted
application to determine the applicant’s
eligibility to receive the requested
license.
Description of the Respondents:
Individuals or entities wishing to engage
in the business of selling, shipping,
receiving, and transporting firearms in
interstate or foreign commerce, as well
as acquiring firearms classified as curios
and relics for personal collections.
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Number of Respondents: 13,000
existing. New respondents due to the
rule 24,540.
Frequency of Response: one time.
Burden of Response: one hour.
Estimate of Total Annual Burden:
24,540 hours (incremental change).
Title: Application for a Federal
Firearms License—Renewal Application
ATF Form 8 (5310.11).
OMB Control Number: OMB 1140–
0019.
Summary of the Collection of
Information: 18 U.S.C. Chapter 44
provides that no person may engage in
the business of importing,
manufacturing, or dealing in either
firearms, or ammunition, without first
obtaining a license to do so. These
activities are licensed for a specific
period. The benefit of a collector’s
license is also provided for in the
statute. In order to continue to engage in
the aforementioned firearms activities
without interruption, licensees must
renew their FFL by filing Federal
Firearms License (‘‘FFL’’) RENEWAL
Application-ATF F 8 (5310.11) Part II,
prior to its expiration.
Need for Information: Less frequent
use of this information collection would
pose a threat to public safety, since the
collected information helps ATF to
ensure that the applicants remain
eligible to renew their licenses.
Proposed Use of Information: ATF F
8 (5310.11) Part II, is used to identify
the applicant and determine their
eligibility to retain the license.
Description of the Respondents:
Respondents desiring to update the
responsible person (RP) information on
an existing license must submit a letter
in this regard, along with the completed
FFL renewal application to ATF.
Number of Respondents: 34,000
existing. New respondents due to the
rule 24,540.
Frequency of Response: every three
years and periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden:
12,270 hours (incremental change).
Title: Firearms Transaction Record—
ATF Form 4473 (5300.9) and Firearms
Transaction Record Continuation Sheet.
OMB Control Number: OMB 1140–
0020.
Summary of the Collection of
Information: The subject form is
required under the authority of 18
U.S.C. 922 and 923 and 27 CFR 478.124.
These sections of the GCA prohibit
certain persons from shipping,
transporting, receiving, or possessing
firearms. All persons, including FFLs,
are prohibited from transferring firearms
to such persons. FFLs are also subject to
additional restrictions regarding the
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disposition of a firearm to an unlicensed
person under the GCA. For example, age
and State of residence also determine
whether a person may lawfully receive
a firearm. The information and
certification on the Form 4473 are
designed so that a person licensed
under 18 U.S.C. 923 may determine if
the licensee may lawfully sell or deliver
a firearm to the person identified in
Section B, and to alert the transferee/
buyer of certain restrictions on the
receipt and possession of firearms. The
Form 4473 should only be used for sales
or transfers of firearms where the seller
is licensed under 18 U.S.C. 923. The
seller of a firearm must determine the
lawfulness of the transaction and
maintain proper records of the
transaction.
Need for Information: The
consequences of not conducting this
collection of information, or conducting
it less frequently, are that the licensee
might transfer a firearm to a person who
is prohibited from possessing firearms
under Federal law. The collection of
this information is necessary for
compliance with the statutory
requirements to verify the eligibility of
a person receiving or possessing
firearms under the GCA. There is no
discretionary authority on the part of
ATF to waive these requirements.
Respondents are required to supply this
information as often as necessary to
comply with statutory provisions. The
form is critical to the prevention of
criminal diversion of firearms and
enhances law enforcement’s ability to
trace firearms that are recovered in
crimes.
Proposed Use of Information: A
person purchasing a firearm from an
FFL must complete Section B of the
Form 4473. The buyer’s answers to the
questions determine if the potential
transferee is eligible to receive the
firearm. If those answers indicate that
the buyer is not prohibited from
receiving a firearm, the licensee
completes Section C of the Form 4473
and contacts the FBI’s NICS system or
the State point of contact to determine
if the firearm can legally be transferred
to the purchaser.
Description of the Respondents:
Unlicensed persons wishing to purchase
a firearm.
Number of Respondents: 17,189,101
existing. New respondents due to the
rule 24,540.
Frequency of Response: periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden:
12,270 hours (incremental change).
Title: Records of Acquisition and
Disposition, Dealers of Type 01/02
Firearms, and Collectors of Type 03
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Firearms [Records of Acquisition and
Disposition, Collectors of Firearms].
OMB Control Number: OMB 1140–
0032.
Summary of the Collection of
Information: The recordkeeping
requirements as authorized by the GCA,
18 U.S.C. 923, are for the purpose of
allowing ATF to inquire into the
disposition of any firearm received by a
licensee in the course of a criminal
investigation.
Need for Information: Less frequent
collection of this information would
pose a threat to public safety as the
information is routinely used to assist
law enforcement by allowing them to
trace firearms in criminal investigations.
Proposed Use of Information: This
collection of information grants ATF
Officers the authority to examine a
collector’s records for firearms traces or
compliance inspections, per 27 CFR
478.23(c)(1), (2).
Description of the Respondents:
Federal Firearms Licensees.
Number of Respondents: 60,790
existing. New respondents due to the
rule 24,540.
Frequency of Response: annually
recurring.
Burden of Response: three minutes to
maintain A&D records and one hour to
perform an inspection.
Estimate of Total Annual Burden:
24,540 hours in inspection time
(incremental change) and 3,681 hours
maintaining in A&D records
(incremental change).
ATF asks for public comment on the
proposed collection of information to
help determine how useful the
information is; whether the public can
help perform ATF’s functions better;
whether the information is readily
available elsewhere; how accurate
ATF’s estimate of the burden of
collection is; how valid the methods for
determining burden are; how to improve
the quality, usefulness, and clarity of
the information; and how to minimize
the burden of collection.
If you submit comments on the
collection of information, submit them
following the ‘‘Public Participation’’
section under the SUPPLEMENTARY
INFORMATION heading. You need not
respond to a collection of information
unless it displays a currently valid
control number from OMB. Before the
requirements for this collection of
information become effective, ATF will
publish a notice in the Federal Register
of OMB’s decision to approve, modify,
or disapprove the proposed collection.
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IV. Public Participation
A. Comments Sought
ATF requests comments on the
proposed rule from all interested
persons. ATF specifically requests
comments on:
(1) The clarity of this proposed rule,
and how easy it is to understand;
(2) The various definitions and
rebuttable presumptions relevant to
determining when a person is ‘‘engaged
in the business’’ of dealing in firearms
at wholesale or retail, as described in
Section II.D of this preamble, and when
a person acts with the intent to
‘‘predominantly earn a profit’’ from the
sale or disposition of firearms, as
described in Section II.G of this
preamble.
(3) Whether the rule should use
inferences, factors, or some other
method of determining when a person is
‘‘engaged in the business’’ of dealing in
firearms or acting with the intent to
‘‘predominantly earn a profit’’, instead
of, or in addition to, using presumptions
of any kind, including (a) whether the
criteria should function as rebuttable
presumptions or permissive inferences
in the administrative and civil contexts,
and (b) whether and how the criteria
should function differently in different
types of proceedings;
(4) Whether there is additional
specific conduct that would provide
indicia of whether or when a person is
or is not ‘‘engaged in the business’’ of
dealing in firearms, or acts with the
intent to ‘‘predominantly to earn a
profit’’ from the sale or disposition of
firearms;
(5) When and how any presumptions,
inferences, or factors can or should be
rebutted;
(6) Whether the rule should define
‘‘occasional’’ as that term is used in the
definition of ‘‘engaged in the business’’
under 18 U.S.C. 921(a)(21)(C), and if so,
how the term should be defined; and
(7) The costs or benefits of the
proposed rule, and appropriate
methodology and data for calculating
those costs and benefits, including what
sources ATF should look to, beyond
ATF’s own expertise, for accurate
estimates of the percentage of this
population that would need to obtain a
license because they are ‘‘engaged in the
business’’ of dealing in firearms
compared to those who make occasional
sales of firearms (e.g., enhancement of a
personal collection or for a hobby) and
would not need to obtain a license.
All comments must reference this
document’s docket number, ATF
2022R–17, and be legible. Commenters
must also include the commenter’s
complete first and last name and contact
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information. If submitting a comment
through the Federal eRulemaking portal,
as described in Section IV.C of this
preamble, commenters should carefully
review and follow the website’s
instructions on submitting comments. If
submitting as an individual, any
information provided for city, state, zip
code, and phone will not be publicly
viewable when ATF publishes the
comment on regulations.gov. If
submitting a comment by mail,
commenters should review Section IV.B
of this preamble regarding proper
submission of PII. ATF may not
consider, or respond to, comments that
do not meet these requirements or
comments containing profanity or
threatening or abusive language. ATF
will retain anonymous comments and
those containing excessive profanity as
part of this rulemaking’s administrative
record but will not publish such
documents on www.regulations.gov.
ATF will treat all comments as originals
and will not acknowledge receipt of
comments. In addition, if your comment
cannot be read due to technical
difficulties and ATF cannot contact you
for clarification, ATF may not be able to
consider your comment.
ATF will carefully consider all
comments, as appropriate, received on
or before the closing date, and will give
comments after that date the same
consideration if practical to do so, but
assurance of consideration cannot be
given except as to comments received
on or before the closing date.
B. Confidentiality
ATF will make all comments meeting
the requirements of this section,
whether submitted electronically or on
paper, available for public viewing at
www.ATF.gov, on the internet through
the Federal eRulemaking Portal, and
through the Freedom of Information Act
(5 U.S.C. 552). Commenters who submit
by mail and who do not want their
name or other PII posted on the internet
should submit their comments by mail
along with a separate cover sheet
containing their PII. Both the cover
sheet and comment must reference this
docket number (ATF 2022R–17). For
comments submitted by mail,
information contained on the cover
sheet will not appear when posted on
the internet, but any PII that appears
within the body of a comment will not
be redacted by ATF and it will appear
on the internet. Commenters who
submit through the Federal
eRulemaking portal and who do not
want any of their PII posted on the
internet should omit such PII from the
body of their comment or in any
uploaded attachments.
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A commenter may submit to ATF
information identified as proprietary or
confidential business information. The
commenter must place any portion of a
comment that is proprietary or
confidential business information under
law on pages that are separated from the
balance of the comment, with each page
prominently marked ‘‘PROPRIETARY
OR CONFIDENTIAL BUSINESS
INFORMATION’’ at the top of each
page.
ATF will not make proprietary or
confidential business information
submitted in compliance with these
instructions available when disclosing
the comments that it received, but will
disclose that the commenter provided
proprietary or confidential business
information that ATF is holding in a
separate file to which the public does
not have access. If ATF receives a
request to examine or copy this
information, it will treat it as any other
request under the Freedom of
Information Act (5 U.S.C. 552). In
addition, ATF will disclose such
proprietary or confidential business
information to the extent required by
other legal process.
C. Submitting Comments
Submit comments using either of the
two methods described below (but do
not submit the same comment multiple
times or by more than one method).
Hand-delivered comments will not be
accepted.
• Federal eRulemaking Portal: ATF
recommends that you submit your
comments to ATF via the Federal
eRulemaking portal at
www.regulations.gov and follow the
instructions. Comments will be posted
within a few days of being submitted.
However, if large volumes of comments
are being processed simultaneously,
your comment may not be viewable for
up to several weeks. Please keep the
comment tracking number that is
provided after you have successfully
uploaded your comment.
• Mail: Send written comments to the
address listed in the ADDRESSES section
of this document. Written comments
must appear in minimum 12-point font
size (.17 inches), include the
commenter’s first and last name and full
mailing address, be signed, and may be
of any length. See also Section IV.B of
this preamble.
D. Request for Hearing
In accordance with 18 U.S.C. 926(b),
any interested person who desires an
opportunity to comment orally at a
public hearing should submit a request,
in writing, to the Director of ATF within
the notice period. The Director,
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however, reserves the right to
determine, in light of all circumstances,
whether a public hearing is necessary.
Disclosure
Copies of this proposed rule and the
comments received in response to it will
be available through the Federal
eRulemaking portal, at
www.regulations.gov (search for RIN
1140–58), and for public inspection by
appointment during normal business
hours at: ATF Reading Room, Room 1E–
063, 99 New York Ave. NE, Washington,
DC 20226; telephone: (202) 648–8740.
Severability
Consistent with the Administrative
Procedure Act, the issues raised in this
proposed rule may be finalized, or not,
independently of each other, after
consideration of comments received.
The Department intends separate
aspects of any final rule that results
from this proposed rule to be severable
from each other, as demonstrated by the
rule’s structure. In the event any
provision of this rule as finalized is held
to be invalid or unenforceable by its
terms, the remainder shall not be
affected and shall be construed so as to
give remaining provisions the maximum
effect permitted by law.
List of Subjects in 27 CFR Part 478
Administrative practice and
procedure, Arms and munitions,
Exports, Freight, Imports,
Intergovernmental relations, Law
enforcement officers, Military
personnel, Penalties, Reporting and
recordkeeping requirements, Research,
Seizures and forfeitures, Transportation.
Authority and Issuance
For the reasons discussed in the
preamble, the Department proposes to
amend 27 CFR part 478 as follows:
PART 478—COMMERCE IN FIREARMS
AND AMMUNITION
1. The authority citation for 27 CFR
part 478 continues to read as follows:
■
Authority: 5 U.S.C. 552(a); 18 U.S.C. 847,
921–931; 44 U.S.C. 3504(h).
2. Amend § 478.11 by:
a. Revising the definition of ‘‘Dealer’’;
b. Revising paragraph (c) of the
definition of ‘‘Engaged in the business’’;
■ c. Adding the definitions of ‘‘Personal
collection, personal collection of
firearms, or personal firearms
collection’’ and ‘‘Predominantly earn a
profit’’ in alphabetical order;
■ d. Revising the definition of
‘‘Principal objective of livelihood and
profit’’; and
■
■
■
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f. Adding the definitions of
‘‘Responsible person’’ and ‘‘Terrorism’’
in alphabetical order.
The revisions and additions read as
follows:
■
§ 478.11
Meaning of terms.
*
*
*
*
*
Dealer. Any person engaged in the
business of selling firearms at wholesale
or retail; any person engaged in the
business of repairing firearms or of
making or fitting special barrels, stocks,
or trigger mechanisms to firearms; or
any person who is a pawnbroker. The
term shall include any person who
engages in such business or occupation
on a part-time basis. The term shall
include such activities wherever, or
through whatever medium, they may be
conducted, such as at a gun show or
event, flea market, auction house, or gun
range or club; at one’s home; by mail
order; over the internet; through the use
of other electronic means (e.g., an online
broker, online auction, text messaging
service, social media raffle, or website);
or at any other domestic or international
public or private marketplace or
premises.
*
*
*
*
*
Engaged in the business—
*
*
*
*
*
(c) Dealer in firearms other than a
gunsmith or a pawnbroker. (1) A person
who devotes time, attention, and labor
to dealing in firearms as a regular course
of trade or business to predominantly
earn a profit through the repetitive
purchase and resale of firearms, but
such term shall not include a person
who makes occasional sales, exchanges,
or purchases of firearms for the
enhancement of a personal collection or
for a hobby, or who sells all or part of
the person’s personal collection of
firearms. The term shall not include an
auctioneer who provides only auction
services on commission by assisting in
liquidating a personal collection of
firearms at an estate-type auction,
provided the auctioneer does not
purchase the firearms, take possession
of the firearms prior to the auction, or
consign the firearms for sale.
(2) For purposes of this definition—
(i) The term ‘‘purchase’’ (and
derivative terms thereof) means the act
of obtaining a firearm in exchange for
something of value;
(ii) The term ‘‘sale’’ (and derivative
terms thereof, including ‘‘resale’’) means
the act of providing a firearm in
exchange for something of value; and
(iii) The term ‘‘something of value’’
includes money, credit, personal
property (e.g., another firearm or
ammunition), a service, a controlled
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substance, or any other medium of
exchange or valuable consideration.
(3) Whether a person is engaged in the
business of dealing in firearms requiring
a license is a fact-specific inquiry.
Selling large numbers of firearms or
engaging or offering to engage in
frequent transactions may be highly
indicative of business activity. However,
there is no minimum threshold number
of firearms purchased or sold that
triggers the licensing requirement.
Similarly, there is no minimum number
of transactions that determines whether
a person is ‘‘engaged in the business’’ of
dealing in firearms. For example, even
a single firearm transaction or offer to
engage in a transaction, when combined
with other evidence (e.g., where a
person represents to others a
willingness to acquire more firearms for
resale or offers more firearms for sale),
may require a license. A person shall be
presumed to be engaged in the business
of dealing in firearms in civil and
administrative proceedings, absent
reliable evidence to the contrary, when
the person—
(i) Sells or offers for sale firearms, and
also represents to potential buyers or
otherwise demonstrates a willingness
and ability to purchase and sell
additional firearms;
(ii) Spends more money or its
equivalent on purchases of firearms for
the purpose of resale than the person’s
reported gross taxable income during
the applicable period of time;
(iii) Repetitively purchases for the
purpose of resale, or sells or offers for
sale, firearms—
(A) Through straw or sham
businesses, or individual straw
purchasers or sellers; or
(B) That cannot lawfully be purchased
or possessed, including:
(1) Stolen firearms (18 U.S.C. 922(j));
(2) Firearms with the licensee’s serial
number removed, obliterated, or altered
(18 U.S.C. 922(k), 26 U.S.C. 5861(i));
(3) Firearms imported in violation of
law (18 U.S.C. 922(l), 22 U.S.C. 2778, or
26 U.S.C. 5844, 5861(k)); or
(4) Machineguns or other weapons
defined as firearms under 26 U.S.C.
5845(b) that were not properly
registered in the National Firearms
Registration and Transfer Record (18
U.S.C. 922(o); 26 U.S.C. 5861(d));
(iv) Repetitively sells or offers for sale
firearms—
(A) Within 30 days after the person
purchased the firearms;
(B) That are new, or like new in their
original packaging; or
(C) Of the same or similar kind (i.e.,
make/manufacturer, model, caliber/
gauge, and action) and type (i.e., rifle,
shotgun, revolver, pistol, frame,
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16:41 Sep 07, 2023
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receiver, machinegun, silencer,
destructive device, or ‘other’ firearm);
(v) Who, as a former licensee (or
responsible person acting on behalf of
the former licensee) sells or offers for
sale firearms that were in the business
inventory of such licensee at the time
the license was terminated (i.e., license
revocation, denial of license renewal,
license expiration, or surrender of
license), and were not transferred to a
personal inventory in accordance with
18 U.S.C. 923(c) and 27 CFR 478.125a;
or
(vi) Who, as a former licensee (or
responsible person acting on behalf of
the former licensee) sells or offers for
sale firearms that were transferred to the
personal inventory of such former
licensee or responsible person prior to
the time the license was terminated,
unless:
(A) The firearms were received and
transferred without any intent to
willfully evade the restrictions placed
on licensees by chapter 44, title 18,
United States Code; and
(B) One year has passed from the date
of transfer to the personal collection.
(4) Where a person’s conduct does not
otherwise demonstrate a predominant
intent to earn a profit, the person shall
not be presumed to be engaged in the
business of dealing in firearms when the
person transfers firearms only as bona
fide gifts, or occasionally sells firearms
only to obtain more valuable, desirable,
or useful firearms for the person’s
personal collection or hobby.
(5) The activities set forth in the
rebuttable presumptions in paragraphs
(c)(3)(i) through (vi) of this definition
are not exhaustive of the conduct that
may show that, or be considered in
determining whether, a person is
engaged in the business of dealing in
firearms.
(6) The rebuttable presumptions in
paragraphs (c)(3)(i) through (vi) of this
definition shall not apply to any
criminal case, although they may be
useful to courts in criminal cases, for
example, when instructing juries
regarding permissible inferences.
*
*
*
*
*
Personal collection, personal
collection of firearms, or personal
firearms collection. (1) Personal firearms
that a person accumulates for study,
comparison, exhibition, or for a hobby
(e.g., noncommercial, recreational
activities for personal enjoyment, such
as hunting, or skeet, target, or
competition shooting). The term shall
not include any firearm purchased for
the purpose of resale or made with the
predominant intent to earn a profit.
(2) In the case of a firearm imported,
manufactured, or otherwise acquired by
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Sfmt 4702
62021
a licensed manufacturer, licensed
importer, or licensed dealer, the term
shall include only a firearm described in
paragraph (1) of this definition that
was—
(i) Acquired or transferred without the
intent to willfully evade the restrictions
placed upon licensees under chapter 44,
title 18, United States Code;
(ii) Recorded by the licensee as an
acquisition in the licensee’s acquisition
and disposition record in accordance
with § 478.122(a), 478.123(a), or
478.125(e) (unless acquired prior to
licensure and not intended for sale);
(iii) Recorded as a disposition from
the licensee’s business inventory to the
individual’s personal collection in
accordance with § 478.122(a),
478.123(a), or 478.125(e);
(iv) Stored separately from, and not
commingled with the business
inventory, and appropriately identified
as ‘‘not for sale’’ (e.g., by attaching a
tag), if on the business premises; and
(v) Maintained in such personal
collection (whether on or off the
business premises) for at least one year
from the date the firearm was so
transferred, in accordance with 18
U.S.C. 923(c) and 27 CFR 478.125a.
*
*
*
*
*
Predominantly earn a profit. (1) The
intent underlying the sale or disposition
of firearms is predominantly one of
obtaining pecuniary gain, as opposed to
other intents, such as improving or
liquidating a personal firearms
collection: Provided, that proof of profit,
including the intent to profit, shall not
be required as to a person who engages
in the regular and repetitive purchase
and disposition of firearms for criminal
purposes or terrorism. For purposes of
this definition, a person may have the
intent to profit even if the person does
not actually obtain pecuniary gain from
the sale or disposition of firearms.
(2) The intent to predominantly earn
a profit is a fact-specific inquiry. A
person shall be presumed to have the
intent to predominantly earn a profit
from the sale or disposition of firearms
in civil and administrative proceedings,
absent reliable evidence to the contrary,
when the person—
(i) Advertises, markets, or otherwise
promotes a firearms business (e.g.,
advertises or posts firearms for sale,
including on any website, establishes a
website for offering their firearms for
sale, makes available business cards, or
tags firearms with sales prices),
regardless of whether the person incurs
expenses or only promotes the business
informally;
(ii) Purchases, rents, or otherwise
secures or sets aside permanent or
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temporary physical space to display or
store firearms they offer for sale,
including part or all of a business
premises, table or space at a gun show,
or display case;
(iii) Makes or maintains records, in
any form, to document, track, or
calculate profits and losses from
firearms purchases and sales;
(iv) Purchases or otherwise secures
merchant services as a business (e.g.,
credit card transaction services, digital
wallet for business) through which the
person makes or offers to make
payments for firearms transactions;
(v) Formally or informally purchases,
hires, or otherwise secures business
security services (e.g., a central stationmonitored security system registered to
a business, or guards for security) to
protect business assets or transactions
that include firearms;
(vi) Formally or informally establishes
a business entity, trade name, or online
business account, including an account
using a business name on a social media
or other website, through which the
person makes or offers to make firearms
transactions;
(vii) Secures or applies for a State or
local business license to purchase for
resale or to sell merchandise that
includes firearms; or
(viii) Purchases a business insurance
policy, including any riders that cover
firearms inventory.
(3) The activities set forth in the
rebuttable presumptions in paragraphs
(2)(i) through (viii) of this definition are
not exhaustive of the conduct that may
show that, or be considered in
determining whether, a person has the
intent to predominantly earn a profit
from the sale or disposition of firearms.
(4) The rebuttable presumptions in
paragraphs (2)(i) through (viii) of this
definition shall not apply to any
criminal case, although they may be
useful to courts in criminal cases, for
example, when instructing juries
regarding permissible inferences.
*
*
*
*
*
Responsible person. Any individual
possessing, directly or indirectly, the
power to direct or cause the direction of
the management, policies, and business
practices of a corporation, partnership,
or association, insofar as they pertain to
firearms.
*
*
*
*
*
Terrorism. For purposes of the
definitions ‘‘predominantly earn a
profit,’’ and ‘‘principal objective of
livelihood and profit,’’ the term
‘‘terrorism’’ means activity, directed
against United States persons, which—
(1) Is committed by an individual who
is not a national or permanent resident
alien of the United States;
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16:41 Sep 07, 2023
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(2) Involves violent acts or acts
dangerous to human life which would
be a criminal violation if committed
within the jurisdiction of the United
States; and
(3) Is intended—
(i) To intimidate or coerce a civilian
population;
(ii) To influence the policy of a
government by intimidation or coercion;
or
(iii) To affect the conduct of a
government by assassination or
kidnapping.
■ 3. In § 478.57, designate the
introductory text as paragraph (a) and
add paragraph (b) to read as follows:
§ 478.57
Discontinuance of business.
*
*
*
*
*
(b) Upon termination of a license (i.e.,
license revocation, denial of license
renewal, license expiration, or surrender
of license), the former licensee shall
within 30 days, or such additional
period designated by the Director for
good cause:
(1) Liquidate the remaining business
inventory by selling or otherwise
disposing of the firearms to a licensed
importer, licensed manufacturer, or
licensed dealer for sale, auction, or
pawn redemption in accordance with
this part; or
(2) Transfer the remaining business
inventory to a personal inventory of the
former licensee, or a responsible person
of the former licensee, provided the
recipient is not prohibited by law from
receiving or possessing firearms. Except
for the sale of remaining inventory to a
licensee within the 30-day period (or
designated additional period), a former
licensee or responsible person of such
licensee who resells any such inventory,
including business inventory transferred
to a personal inventory, is subject to the
presumptions in § 478.11 (definition of
‘‘engaged in the business’’ as a dealer in
firearms other than a gunsmith or
pawnbroker) that apply to a person who
repetitively purchased those firearms for
the purpose of resale. In addition, the
former licensee shall not continue to
engage in the business of importing,
manufacturing, or dealing in firearms by
importing or manufacturing additional
firearms for purposes of sale or
distribution, or purchasing additional
firearms for resale (i.e., ‘‘restocking’’).
■ 4. In § 478.78, designate the
introductory text as paragraph (a) and
add paragraph (b) to read as follows:
§ 478.78
notice.
Operations by licensee after
*
*
*
*
*
(b) Upon final disposition of license
proceedings to disapprove or terminate
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Sfmt 4702
a license (i.e., by revocation or denial of
renewal), the former licensee shall
within 30 days, or such additional
period designated by the Director for
good cause, either:
(1) Liquidate the remaining business
inventory by selling or otherwise
disposing of the firearms to a licensed
importer, licensed manufacturer, or
licensed dealer for sale, auction, or
pawn redemption in accordance with
this part; or
(2) Transfer the remaining business
inventory to a personal inventory of the
former licensee, or a responsible person
of the former licensee provided the
recipient is not prohibited by law from
receiving or possessing firearms. Except
for the sale of remaining inventory to a
licensee within the 30-day period (or
designated additional period), a former
licensee or responsible person of such
former licensee, who resells any such
inventory, including business inventory
transferred to a personal inventory, is
subject to the presumptions in § 478.11
(definition of ‘‘engaged in the business’’
as a dealer in firearms other than a
gunsmith or pawnbroker) that apply to
a person who repetitively purchased
those firearms for the purpose of resale.
In addition, the former licensee shall
not continue to engage in the business
of importing, manufacturing, or dealing
in firearms by importing or
manufacturing additional firearms for
purposes of sale or distribution, or
purchasing additional firearms for resale
(i.e., ‘‘restocking’’).
■ 5. In § 478.124, revise paragraph (a) to
read as follows:
§ 478.124
Firearms transaction record.
(a) A licensed importer, licensed
manufacturer, or licensed dealer shall
not sell or otherwise dispose,
temporarily or permanently, of any
firearm to any person, other than
another licensee, unless the licensee
records the transaction on a firearm
transaction record, Form 4473:
Provided, that a firearms transaction
record, Form 4473, shall not be required
to record the disposition made of a
firearm delivered to a licensee for the
sole purpose of repair or customizing
when such firearm or a replacement
firearm is returned to the person from
whom received; provided further, that a
firearms transaction record, Form 4473,
shall not be used if the sale or other
disposition is being made to another
licensed importer, licensed
manufacturer, or licensed dealer, or a
curio or relic to a licensed collector,
including a sole proprietor who
transfers a firearm to their personal
collection in accordance with
§ 478.125a. When a licensee transfers a
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firearm to another licensee, the licensee
shall comply with the verification and
recordkeeping requirements in § 478.94
and subpart H of part 478.
*
*
*
*
*
■ 6. In § 478.125a, in paragraphs (a)(2)
and (3), remove the citation
‘‘§ 478.125(e)’’ and add in its place
‘‘§§ 478.122(a), 478.123(a), or
478.125(e)’’.
Dated: August 30, 2023.
Merrick B. Garland,
Attorney General.
[FR Doc. 2023–19177 Filed 9–7–23; 8:45 am]
BILLING CODE 4410–FY–P
POSTAL REGULATORY COMMISSION
39 CFR Part 3050
[Docket No. RM2023–7; Order No. 6659]
Periodic Reporting
Postal Regulatory Commission.
Notice of proposed rulemaking.
AGENCY:
ACTION:
The Commission is
conducting further proceedings and will
be accepting further comments with
respect to a rulemaking proceeding to
consider changes to analytical
principles relating to periodic reports
(Proposal Two). This document invites
further public comment and takes other
administrative steps.
DATES: Comments are due: October 16,
2023.
ADDRESSES: Submit comments
electronically via the Commission’s
Filing Online system at https://
www.prc.gov. Those who cannot submit
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
lotter on DSK11XQN23PROD with PROPOSALS1
Table of Contents
I. Introduction
II. Proposal Two, Order No. 6659, and
Direction for Further Proceedings
III. Notice and Comment
IV. Ordering Paragraphs
I. Introduction
On May 26, 2023, the Postal Service
filed a petition pursuant to 39 CFR
3050.11 requesting that the Commission
initiate a rulemaking proceeding to
consider changes to analytical
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principles relating to periodic reports.1
The Petition identified the proposed
analytical changes as Proposal Two. In
Order No. 6659 the Commission
conditionally approved Proposal Two
but directed the Postal Service to
propose further changes to analytical
principles relating to periodic reports to
address what the Commission found to
be outstanding issues with respect to
cost identification and attribution for
interagency agreements (IAAs).2
II. Proposal Two, Order No. 6659, and
Direction for Further Proceedings
Background. The Postal Service
Reform Act of 2022 3 modified and
expanded the Postal Service’s ability to
enter into IAAs to provide property and
services to, or on behalf of, other
government agencies. Specifically, 39
U.S.C. 3703 for the first time authorizes
the Postal Service to enter into
agreements with agencies of any state
government, local government, or tribal
government to provide property or
nonpostal services to the public on
behalf of such agencies for noncommercial purposes. At the same time,
with respect to the Postal Service’s preexisting authority under 39 U.S.C. 411
to provide property and services to
other Federal agencies, the PSRA
specifies that ‘‘[t]he Postal Service may
establish a program to provide property
and nonpostal services to other
Government [i.e., federal] agencies
within the meaning of section 411 4, but
only if such program provides a net
contribution to the Postal Service,
defined as reimbursement that covers at
least 100 percent of the costs
attributable . . ..’’ 39 U.S.C. 3704.
Under the PSRA, the Postal Service
must submit a report to the Commission
after the close of each fiscal year that
‘‘analyzes costs, revenues, rates, and
quality of service for each agreement or
1 Petition of the United States Postal Service for
the Initiation of a Proceeding to Consider Proposed
Changes in Analytical Principles (Proposal Two),
May 26, 2023 (Petition).
2 Docket No. RM2023–7, Order on Analytical
Principles Used in Periodic Reporting (Proposal
Two), Directing the Postal Service’s Participation in
Further Proceedings, and Providing Notice of Filing
Attachment Under Seal, August 31, 2023 (Order No.
6659).
3 Postal Service Reform Act of 2022 (PSRA),
Public Law. 117–108, 136 Stat. 1127 (2022).
4 Prior to the enactment of the PSRA, the Postal
Service’s authority for these agreements was
governed by 39 U.S.C. 411, which authorizes the
Postal Service to ‘‘furnish property and services’’ to
‘‘Executive agencies within the meaning of [5 U.S.C.
105] and the Government Publishing Office. . . .’’
39 U.S.C. 411. Section 105 of Title 5 of the United
States Code specifies that an ‘‘ ‘Executive agency’
means an Executive department, a Government
corporation, and an independent establishment’’ of
the U.S. Government, as those terms are defined in
5 U.S.C. chapter 1. 5 U.S.C. 105.
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substantially similar set of agreements
for the provision of property or
nonpostal services under section 3703
or the program as a whole under section
3704, . . . using such methodologies as
the Commission may prescribe, and in
sufficient detail to demonstrate
compliance with the requirements of
[Chapter 37 of Title 39 of the United
States Code].’’ 39 U.S.C. 3705(a). Upon
receiving the Postal Service’s report and
providing an opportunity for public
comment, the Commission must make a
written determination of compliance. 39
U.S.C. 3705(e).
In the Commission’s FY 2022 Annual
Compliance Determination,5 the
Commission directed the Postal Service
to develop a proposed methodology (or
methodologies) for calculating and
attributing costs and revenue to IAAs
authorized under 39 U.S.C. 3703 and
3704, and to initiate a rulemaking
proceeding to establish such
methodology (or methodologies) in
accordance with 39 CFR 3050.11 by no
later than May 31, 2023. Id. at 102. As
directed, the Postal Service initiated the
instant proceeding to propose a
categorical approach to identifying costs
and revenue for similar types, or
groupings, of IAAs. Petition, Proposal
Two at 2–3.
Order No. 6659 and direction for
further proceedings. In Order No. 6659
the Commission conditionally approved
Proposal Two, but directed the Postal
Service to propose further changes to
analytical principles relating to periodic
reports to address specific issues that
the Commission found remained
unaddressed. First, the Commission
directed the Postal Service to develop a
proposed change in accepted analytical
principles to develop a separate line
item (or line items) in the Cost and
Revenue Analysis (CRA) and related
workbooks to enable the attribution of
costs and related revenue to IAAs. Order
No. 6659 at 16. Second, for agreements
with government agencies that involve
the provision of both postal services and
property or nonpostal services, the
Commission directed the Postal Service
to develop a proposed change in
analytical principles to separately
account for the costs and revenue for
those respective portions. Id. The
Commission directed the Postal Service
to file proposals related to these issues
by September 29, 2023. Id. The
Commission will then accept comments
on the Postal Service’s proposals until
October 16, 2023. Id. at 18.
5 Docket No. ACR2022, Annual Compliance
Determination Report, FY 2022, March 29, 2023.
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]]>Agencies
[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Proposed Rules]
[Pages 61993-62023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19177]
=======================================================================
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DEPARTMENT OF JUSTICE
Bureau of Alcohol, Tobacco, Firearms, and Explosives
27 CFR Part 478
[Docket No. ATF 2022R-17; AG Order No. 5781-2023]
RIN 1140-AA58
Definition of ``Engaged in the Business'' as a Dealer in Firearms
AGENCY: Bureau of Alcohol, Tobacco, Firearms, and Explosives,
Department of Justice.
ACTION: Notice of proposed rulemaking; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Department of Justice (``Department'') proposes amending
Bureau of Alcohol, Tobacco, Firearms, and Explosives (``ATF'')
regulations to implement the provisions of the Bipartisan Safer
Communities Act (``BSCA''), effective June 25, 2022, that broaden the
definition of when a person is considered ``engaged in the business''
as a dealer in firearms other than a gunsmith or pawnbroker. This
proposed rule incorporates the BSCA's definition of ``predominantly
earn a profit,'' creates a stand-alone definition of ``terrorism,'' and
amends the definitions of ``principal objective of livelihood and
profit'' and ``engaged in the business'' to ensure each conforms with
the BSCA's statutory changes and can be relied upon by the public. The
proposed rule also clarifies what it means for a person to be ``engaged
in the business'' of dealing in firearms, and to have the intent to
``predominantly earn a profit'' from the sale or disposition of
firearms. In addition, it clarifies the term ``dealer,'' including how
that term applies to auctioneers, and defines the term ``responsible
person.'' These proposed changes would assist persons in understanding
when they are required to have a license to deal in firearms.
Consistent with the Gun Control Act (``GCA'') and existing regulations,
the proposed rule also defines the term ``personal collection'' to
clarify when persons are not ``engaged in the business'' because they
make only occasional sales to enhance a personal collection, or for a
hobby, or if the firearms they sell are all or part of a personal
collection. This proposed rule further addresses the lawful ways in
which former licensees, and responsible persons acting on behalf of
such licensees, may liquidate business inventory upon revocation or
other termination of their license. Finally, the proposed rule
clarifies that a licensee transferring a firearm to another licensee
must do so by following the verification and recordkeeping procedures
instead of using a Firearms Transaction Record, ATF Form 4473.
DATES: Written comments must be post-marked and electronic comments
must be submitted on or before December 7, 2023. Commenters should be
aware that the electronic Federal Docket Management System will not
accept comments after midnight Eastern Time on the last day of the
comment period.
ADDRESSES: You may submit comments, identified by docket number ATF
2022R-17, by either of the following methods--
Federal eRulemaking Portal: www.regulations.gov. Follow
the instructions for submitting comments.
Mail: Helen Koppe, Mail Stop 6N-518, Office of Regulatory
Affairs, Enforcement Programs and Services, Bureau of Alcohol, Tobacco,
Firearms, and Explosives, 99 New York Ave. NE, Washington, DC 20226;
ATTN: ATF 2022R-17.
Instructions: All submissions received must include the agency name
and docket number (ATF 2022R-17) for this notice of proposed rulemaking
(``NPRM'' or ``proposed rule''). All properly completed comments
received from either of the methods described above will be posted
without change to the Federal eRulemaking portal, www.regulations.gov.
This includes any personal identifying information (``PII'') submitted
in the body of the comment or as part of a related attachment.
Commenters who submit through the Federal eRulemaking portal and who do
not want any of their PII posted on the internet should omit PII from
the body of their comment or in any uploaded attachments. Commenters
who submit through mail should likewise omit their PII from the body of
the comment and provide any PII on the cover sheet only. For detailed
instructions on submitting comments and additional information on the
rulemaking process, see the ``Public Participation'' heading of the
SUPPLEMENTARY INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: Helen Koppe, Office of Regulatory
Affairs, Enforcement Programs and Services, Bureau of Alcohol, Tobacco,
Firearms, and Explosives, U.S. Department of Justice, 99 New York Ave.
NE, Washington, DC 20226; telephone: (202) 648-7070 (this is not a
toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
The Department is proposing to amend ATF regulations to implement
the provision of the Bipartisan Safer Communities Act, Public Law 117-
159, sec. 12002, 136 Stat. 1313, 1324 (2022) (``BSCA''), that amended
the definition of ``engaged in the business'' in the Gun Control Act of
1968 (``GCA'') at 18 U.S.C. 921(a)(21)(C), and to facilitate compliance
with the statute.
The Attorney General is responsible for enforcing the GCA. This
responsibility includes the authority to promulgate regulations
necessary to enforce the provisions of the GCA. See 18 U.S.C. 926(a).
Congress and the Attorney General have delegated the responsibility for
administering and enforcing the GCA to the Director of ATF
(``Director''), subject to the direction of the Attorney General and
the Deputy Attorney General. See 28 U.S.C. 599A(b)(1)-(2), (c)(1); 28
CFR 0.130(a)(1) and (2); Treasury Department Order No. 221, sec.
(2)(a), (d), 37 FR 11696, 11696-97 (June 10, 1972). Accordingly, the
Department and ATF have promulgated regulations necessary
[[Page 61994]]
to implement the GCA. See 27 CFR part 478.
The GCA, at 18 U.S.C. 922(a)(1)(A), makes it unlawful for any
person, except a licensed dealer, to ``engage in the business'' of
dealing in firearms.\1\ The GCA further provides that no person shall
engage in the business of dealing in firearms until the person has
filed an application with and received a license to do so from the
Attorney General (18 U.S.C. 923(a)), who has delegated that function to
ATF (28 CFR 0.130(a)(1)). The application contains information
necessary to determine eligibility for licensing and must include a
photograph, fingerprints of the applicant, and a license application
fee. The fee for dealers in firearms other than destructive devices is
currently set by the GCA at $200 for the first three-year period and
$90 for a renewal period of three years. 18 U.S.C. 923(a)(3)(B); 27 CFR
478.42(c)(2). The Application for Federal Firearms License, ATF Form
7(5310.12)/7CR (5310.16) (``Form 7''), requires the applicant to
include a completed Federal Bureau of Investigation (``FBI'') Form FD-
258 (``Fingerprint Card'') and a photograph for all responsible
persons, including sole proprietors. See ATF Form 7, Instruction 6.
---------------------------------------------------------------------------
\1\ Persons who engage in the business of manufacturing or
importing firearms, including those that are 3D printed or assembled
from parts, must also be licensed. 18 U.S.C. 922(a)(1)(A), 923(a).
Once licensed, importers and manufacturers may also engage in the
business of dealing but only at their licensed premises and only in
the same type of firearms their license authorizes them to import or
manufacture. See 27 CFR 478.41(b).
---------------------------------------------------------------------------
Significantly, under the GCA, once licensed, firearms dealers are
required to conduct background checks through the FBI's National
Instant Criminal Background Check System (``NICS'') on prospective
firearm recipients to prevent prohibited persons from receiving
firearms, and to maintain firearms transaction records for crime gun
tracing purposes. See 18 U.S.C. 922(t); 923(g)(1)(A). Persons who
willfully engage in the business of dealing in firearms without a
license are subject to a term of imprisonment of up to five years, a
fine of up to $250,000, or both. Id. 922(a)(1)(A); 924(a)(1)(D);
3571(b)(3).
A. Advance Notice of Proposed Rulemaking (1979)
The term ``dealer'' is defined by the GCA, 18 U.S.C. 921(a)(11)(A),
and 27 CFR 478.11, to mean ``any person engaged in the business of
selling firearms at wholesale or retail.'' However, as originally
enacted, the GCA did not define the term ``engaged in the business.''
\2\ Nor did ATF define the term ``engaged in the business'' in the
original GCA implementing regulations.\3\ Although courts had
``continually found that the current situation'' was ``adequate for
enforcement purposes,'' ATF published an Advance Notice of Proposed
Rulemaking (``ANPRM'') in the Federal Register in 1979 in an effort to
``develop a workable, commonly understood definition of [`engaged in
the business'].'' See 44 FR 75186, 75186-87 (Dec. 19, 1979) (``1979
ANPRM''); 45 FR 20930 (Mar. 31, 1980) (extending the comment period for
30 more days). The ANPRM referenced the lack of a common understanding
of that term by the courts and requested comments from the public and
industry on how the phrase should be defined and the feasibility and
desirability of defining it.
---------------------------------------------------------------------------
\2\ See generally Public Law 90-617, 82 Stat. 1213 (1968).
\3\ 33 FR 18555 (Dec. 14, 1968).
---------------------------------------------------------------------------
ATF received 844 comments in response, of which approximately 551,
or 65.3 percent, were in favor of ATF defining that term.\4\ This
included approximately 324 firearms dealers in favor of defining the
term. However, none of the proposed definitions appeared ``to be broad
enough to cover all possible circumstances and still be narrow enough
to be of real benefit in any particular case.'' \5\ One possible
definition ATF considered would have established a threshold number of
firearms sales per year to serve as a baseline for when a person would
qualify as a dealer. The threshold numbers proposed ranged from ``more
than one'' to ``more than 100'' per year. ATF did not adopt that
proposal because it would have potentially interfered with tracing
firearms by persons who avoided obtaining a license (and therefore kept
no records) by selling firearms under the minimum threshold.\6\
Ultimately, ATF decided not to proceed further with rulemaking at that
time. Congress also had not yet acted on then-proposed legislation--the
McClure-Volkmer bill (discussed below)--which, among other provisions,
sought to define ``engaged in the business.'' \7\ For additional
reasons why ATF has not adopted a minimum number of sales, see Section
II.D of this preamble.
---------------------------------------------------------------------------
\4\ Memorandum for Assistant Director, Regulatory Enforcement,
ATF, from Chief, Regulations and Procedures Division, ATF, Re:
Evaluation of Comments Received Concerning a Definition of the
Phrase ``Engaged in the Business,'' Notice No. 331, at 1-2 (June 9,
1980) (``ATF Internal Memorandum''), attach. Summary Sheet on
``Engaged in the Business,'' ANPRM No. 331, Published December 19,
1979, at 1.
\5\ Id.
\6\ See id. at 2.
\7\ ATF Internal Memorandum at 4.
---------------------------------------------------------------------------
B. Firearms Owners' Protection Act of 1986
Approximately six years later, the McClure-Volkmer bill was enacted
as part of the Firearms Owners' Protection Act (``FOPA''), Public Law
99-308, 100 Stat. 449 (1986). With its passage, FOPA added a statutory
definition of ``engaged in the business'' to the GCA. As applied to a
person selling firearms at wholesale or retail, it defined the term
``engaged in the business'' in 18 U.S.C. 921(a)(21)(C) as ``a person
who devotes time, attention, and labor to dealing in firearms as a
regular course of trade or business with the principal objective of
livelihood and profit through the repetitive purchase and resale of
firearms.'' \8\ The term excluded ``a person who makes occasional
sales, exchanges, or purchases of firearms for the enhancement of a
personal collection or for a hobby, or who sells all or part of his
personal collection of firearms.'' \9\ FOPA further defined the term
``with the principal objective of livelihood and profit'' to mean
``that the intent underlying the sale or disposition of firearms is
predominantly one of obtaining livelihood and pecuniary gain, as
opposed to other intents, such as improving or liquidating a personal
firearms collection.'' \10\ Congress amended FOPA a few months later,
clarifying that ``proof of profit'' was not required ``as to a person
who engages in the regular and repetitive purchase and disposition of
firearms for criminal purposes or terrorism.'' \11\
---------------------------------------------------------------------------
\8\ Public Law 99-308, sec. 101, 100 Stat. at 450.
\9\ Id.
\10\ Id.
\11\ Public Law 99-360, sec. 1(b), 100 Stat. 766, 766 (1986).
---------------------------------------------------------------------------
Consistent with their text, the definitions' purposes were to
clarify that individuals not otherwise engaged in the business of
dealing firearms who make only occasional firearms sales for a hobby
are not required to obtain a license, and to benefit law enforcement
``by establishing clearer standards for investigative officers and
assisting in the prosecution of persons truly intending to flout the
law.'' \12\ The legislative history also reveals that Congress did not
intend to limit the license requirement to only persons for whom
selling or disposing of firearms is a principal source of income or a
principal business activity. The Committee Report stated, ``[t]hus,
this provision would not remove the necessity for licensing from part-
time
[[Page 61995]]
businesses or individuals whose principal income comes from sources
other than firearms, but whose main objective with regard to firearm
transfers is profit, rather than hobby.'' \13\
---------------------------------------------------------------------------
\12\ S. Rep. No. 98-583, at 8 (1984).
\13\ Id. The Committee Report further explained that a statutory
reference to pawnbrokers in the definition of ``engaged in the
business'' was deleted because ``all pawnbrokers whose business
includes the taking of any firearm as security for the repayment of
money would automatically be a `dealer.' '' Id. at 9.
---------------------------------------------------------------------------
Two years after enactment, FOPA's definition of ``engaged in the
business'' was incorporated into ATF's implementing regulations at 27
CFR 178.11 (now 478.11) in defining the term ``Dealer in firearms other
than a gunsmith or a pawnbroker.'' \14\ At the same time, consistent
with the statutory text and legislative history, ATF amended the
regulatory term ``dealer'' to clarify that the term includes ``any
person who engages in such business or occupation on a part-time
basis.'' \15\
---------------------------------------------------------------------------
\14\ 53 FR 10480, 10491 (Mar. 31, 1988).
\15\ Id. 10490-91.
---------------------------------------------------------------------------
With respect to ``personal collections,'' FOPA included a
provision, codified at 18 U.S.C. 923(c), that expressly authorized
licensees to maintain and dispose of private firearms collections
separately from their business operations. However, under FOPA, as
amended, the ``personal collection'' provision was and remains subject
to three limitations. 18 U.S.C. 923(c). First, if a licensee records
the disposition (i.e., transfer) of any firearm from their business
inventory into a personal collection, that firearm legally remains part
of the licensee's business inventory until one year has elapsed after
the date of transfer. Should the licensee wish to sell or otherwise
dispose of any such ``personal'' firearm during that one-year period,
the licensee must re-transfer the applicable firearm back into the
business inventory at the licensee's business premises ``with
appropriate recording.'' \16\ A subsequent transfer from the business
inventory would then be subject to the recordkeeping and background-
check requirements of the GCA applicable to all other firearms in the
business inventory. Second, if a licensee acquires or disposes of any
firearm for the purpose of willfully evading the restrictions placed
upon licensees under the GCA, that firearm always legally remains part
of the business inventory. Thus, ``circuitous transfers are not exempt
from otherwise applicable licensee requirements.'' \17\ Third, even
when a licensee has made a bona fide transfer of a firearm from their
personal collection, section 923(c) requires the licensee to record the
description of the firearm in a bound volume along with the name, place
of residence, and date of birth of an individual transferee, or if a
corporation or other business entity, the transferee's identity and
principal and local places of business.\18\ ATF incorporated these
provisions into its FOPA implementing regulations in 1988.\19\
---------------------------------------------------------------------------
\16\ S. Rep. No. 98-583, at 13.
\17\ Id.
\18\ See Public Law 99-360, sec. 1(c), 100 Stat. at 766-67.
\19\ See 53 FR 10480; 27 CFR 178.125a (now 478.125a).
---------------------------------------------------------------------------
Courts interpreting the 1986 FOPA definition of ``engaged in the
business'' found a number of factors relevant to assessing whether a
person met that standard. For example, in one leading case, the U.S.
Court of Appeals for the Third Circuit listed the following
nonexclusive factors for consideration to determine whether the
defendant's principal objective was livelihood and profit (i.e.,
economic): (1) quantity and frequency of sales; (2) location of the
sales; (3) conditions under which the sales occurred; (4) defendant's
behavior before, during, and after the sales; (5) price charged for the
weapons and the characteristics of the firearms sold; and (6) intent of
the seller at the time of the sales. United States v. Tyson, 653 F.3d
192, 200-01 (3d Cir. 2011). The court expanded further that, ``[a]s is
often the case in such analyses, the importance of any one of these
considerations is subject to the idiosyncratic nature of the fact
pattern presented.'' Id. at 201. In a separate case, the Third Circuit
also stated, ``[a]lthough the definition explicitly refers to economic
interests as the principal purpose, and repetitiveness as the modus
operandi, it does not establish a specific quantity or frequency
requirement. In determining whether one is engaged in the business of
dealing in firearms, the finder of fact must examine the intent of the
actor and all circumstances surrounding the acts alleged to constitute
engaging in business. This inquiry is not limited to the number of
weapons sold or the timing of the sales.'' United States v. Palmieri,
21 F.3d 1265, 1268 (3d Cir. 1994), vacated on other grounds, 513 U.S.
957 (1994).\20\
---------------------------------------------------------------------------
\20\ See also United States v. Brenner, 481 F. App'x 124, 127
(5th Cir. 2012) (``Needless to say, in determining the character and
intent of firearms transactions, the jury must examine all
circumstances surrounding the transaction, without the aid of a
`bright-line rule.'''); United States v. Bailey, 123 F.3d 1381, 1392
(11th Cir. 1997) (``In determining whether one is engaged in the
business of dealing in firearms, the finder of fact must examine the
intent of the actor and all circumstances surrounding the acts
alleged to constitute engaging in business.'' (quotation marks and
citation omitted)); United States v. Nadirashvili, 655 F.3d 114, 119
(2d Cir. 2011) (``[T]he government need not prove that dealing in
firearms was the defendant's primary business. Nor is there a `magic
number' of sales that need be specifically proven. Rather, the
statute reaches those who hold themselves out as a source of
firearms. Consequently, the government need only prove that the
defendant has guns on hand or is ready and able to procure them for
the purpose of selling them from [time] to time to such persons as
might be accepted as customers.'' (quoting United States v. Carter,
801 F.2d 78, 81-82 (2d Cir. 1986))).
---------------------------------------------------------------------------
C. Executive Action To Reduce Gun Violence (2016)
On January 4, 2016, President Obama announced several executive
actions to reduce gun violence and to make communities across the
United States safer. Among them was a requirement that ATF clarify, in
a manner consistent with court rulings on the issue: (1) that a person
can be engaged in the business of dealing in firearms regardless of the
location in which firearm transactions are conducted, and (2) that
there is no specific threshold number of firearms purchased or sold
that triggers the licensure requirement.\21\ To provide this
clarification, ATF published a guidance document entitled Do I Need a
License to Buy and Sell Firearms?, ATF Publication 5310.2 (Jan. 2016),
https://www.atf.gov/file/100871/download, which addressed these topics.
The guidance was developed to assist unlicensed persons in
understanding when they will likely need to obtain a license as a
dealer in firearms. ATF is updating this guidance to conform with the
``engaged in the business'' definition as amended by the BSCA. Further,
once a final rule is adopted based on this NPRM, ATF intends to update
the guidance to include additional detail as needed to conform with the
rule.
---------------------------------------------------------------------------
\21\ See The White House, Office of the Press Secretary, FACT
SHEET: New Executive Actions to Reduce Gun Violence and Make Our
Communities Safer (Jan. 4, 2016), https://obamawhitehouse.archives.gov/the-press-office/2016/01/04/fact-sheet-new-executive-actions-reduce-gun-violence-and-make-our.
---------------------------------------------------------------------------
D. Bipartisan Safer Communities Act (2022)
Over 35 years after FOPA's enactment, on June 25, 2022, President
Biden signed into law the Bipartisan Safer Communities Act, Public Law
117-159, 136 Stat. 1313. Section 12002 of the BSCA broadened the
definition of ``engaged in the business'' under 18 U.S.C. 921(a)(21)(C)
to all persons who intend to ``predominantly earn a profit'' from
wholesale or retail dealing in firearms by eliminating the requirement
that a person's ``principal objective'' of purchasing and reselling
firearms must include both ``livelihood and profit.'' The statute now
provides that, as applied to a dealer in firearms, the term
[[Page 61996]]
``engaged in the business'' means ``a person who devotes time,
attention, and labor to dealing in firearms as a regular course of
trade or business to predominantly earn a profit through the repetitive
purchase and resale of firearms.'' However, the BSCA definition does
not include ``a person who makes occasional sales, exchanges, or
purchases of firearms for the enhancement of a personal collection or
for a hobby, or who sells all or part of his personal collection of
firearms.'' 18 U.S.C. 921(a)(21)(C).
As now defined by the BSCA, the term ``to predominantly earn a
profit'' means that the person who engages in selling or disposing of
firearms has a predominant intent of obtaining pecuniary gain, as
opposed to other intents, such as improving or liquidating a personal
firearms collection. The statutory definition further provides that
proof of profit is not required as to a person who engages in the
regular and repetitive purchase and disposition of firearms for
criminal purposes or terrorism. 18 U.S.C. 921(a)(22). According to the
BSCA's sponsors, the BSCA's change to the definition was driven by
``confusion about the GCA's definition of `engaged in the business,' as
it pertained to individuals who bought and resold firearms repetitively
for profit, but possibly not as the principal source of their
livelihood.'' \22\ The sponsors ``maintain[ed] that these changes
clarify who should be licensed, eliminating a `gray' area in the law,
ensuring that one aspect of firearms commerce is more adequately
regulated.'' \23\ Congress did not make the same amendment to the
various definitions of ``engaged in the business'' in 18 U.S.C.
921(a)(21) with respect to licensed gunsmiths, manufacturers, or
importers.\24\
---------------------------------------------------------------------------
\22\ William J. Krouse, Cong. Research Serv., IF12197, Firearms
Dealers ``Engaged in the Business'' at 2 (Aug. 19, 2022).
\23\ Id.; 168 Cong. Rec. H5906 (daily ed. June 24, 2022)
(Statement of Rep. Jackson Lee) (``[O]ur bill would . . . further
strengthen the background check process by clarifying who is engaged
in the business of selling firearms and, as a result, is required to
run background checks.''); 168 Cong. Rec. S3055 (daily ed. June 22,
2022) (Statement of Sen. Murphy) (``We clarify in this bill the
definition of a federally licensed gun dealer to make sure that
everybody who should be licensed as a gun owner is. In one of the
mass shootings in Texas, the individual who carried out the crime
was mentally ill. He was a prohibited purchaser. He shouldn't have
been able to buy a gun. He was actually denied a sale when he went
to a bricks-and-mortar gun store, but he found a way around the
background check system because he went online and found a seller
there who would transfer a gun to him without a background check. It
turned out that seller was, in fact, engaged in the business, but
didn't believe the definition applied to him because the definition
is admittedly confusing. So we simplified that definition and hope
that will result--and I believe it will result--in more of these
frequent online gun sellers registering, as they should, as
federally licensed gun dealers which then requires them to perform
background checks.''); see also Letter for Director, ATF, et al.,
from Sens. John Cornyn and Thom Tillis at 2-3 (Nov. 1, 2022)
(``Cornyn/Tillis Letter'') (``The BSCA provides more clarity to the
industry for when someone must obtain a federal firearms dealers
license. In Midland and Odessa, Texas, for example, the shooter--who
at the time was prohibited form possessing or owning a firearm under
federal law--purchased a firearm from an unlicensed firearms
dealer.'').
\24\ The BSCA retained the existing term ``with the principal
objective of livelihood and profit,'' which still applies to persons
engaged in the business as manufacturers, gunsmiths, and importers.
That definition became 18 U.S.C. 921(a)(23), and Congress renumbered
other definitions in section 921 accordingly.
---------------------------------------------------------------------------
E. Executive Order 14092 (2023)
On March 14, 2023, President Biden issued Executive Order 14092,
``Reducing Gun Violence and Making Our Communities Safer.'' That order
requires the Attorney General to report actions taken to implement the
BSCA and to develop and implement a plan to: (1) clarify the definition
of who is engaged in the business of dealing in firearms, and thus
required to become Federal firearms licensees (``FFLs''), in order to
increase compliance with the Federal background check requirement for
firearm sales, including by considering a rulemaking, as appropriate
and consistent with applicable law; and (2) prevent former FFLs whose
licenses have been revoked or surrendered from continuing to engage in
the business of dealing in firearms.\25\
---------------------------------------------------------------------------
\25\ Reducing Gun Violence and Making Our Communities Safer,
E.O. 14092, secs. 2, 3(a)(i)-(ii), 88 FR 16527, 16527-28 (Mar. 14,
2023).
---------------------------------------------------------------------------
This NPRM proposes to implement the ``engaged in the business''
provisions of the BSCA \26\ and the Department's plan in response to
Executive Order 14092 by making conforming changes to the new or
amended definitions, by clarifying the updated BSCA definition of
``engaged in the business,'' and by preventing former FFLs whose
licenses have been revoked or surrendered from continuing to engage in
the business of dealing in firearms. The rule proposes to accomplish
this clarity and deterrence by setting forth specific activities
demonstrating when an unlicensed person's buying and selling of
firearms presumptively rises to the level of being ``engaged in the
business,'' thus requiring that person to obtain a dealer's license,
conduct background checks, and abide by the other requirements set
forth in the GCA. At the same time, it recognizes that individuals who
purchase firearms for the enhancement of a personal collection or a
legitimate hobby are permitted by the GCA to occasionally buy and sell
firearms for those purposes without the need to obtain a license.
---------------------------------------------------------------------------
\26\ The Department is also issuing a separate rulemaking to
amend ATF's regulations to conform with other provisions in the
BSCA.
---------------------------------------------------------------------------
II. Proposed Rule
As stated previously, the BSCA revised 18 U.S.C. 921(a)(21)(C) to
change part of the definition of persons ``engaged in the business'' of
dealing in firearms. This amendment broadened the definition to reflect
that it applies to persons who engage in the business of purchasing and
selling firearms at wholesale or retail with the predominant purpose of
earning a profit, rather than just to persons whose primary purpose is
both livelihood and profit. This means ``that the intent underlying the
sale or disposition of firearms is predominantly one of obtaining
pecuniary gain, as opposed to other intents, such as improving or
liquidating a personal firearms collection.'' 18 U.S.C. 921(a)(22).
``As a result, the BSCA definitional changes could make some, but not
all, intrastate, private firearm transfers subject to GCA recordkeeping
and background check requirements'' that previously were not subject to
those requirements, ``if those transfers are made by profit-oriented,
repetitive firearms buyers and sellers.'' \27\
---------------------------------------------------------------------------
\27\ Krouse, Cong. Research Serv., Firearms Dealers ``Engaged in
the Business'' at 2.
---------------------------------------------------------------------------
To implement the new statutory language, this proposed rule amends
paragraph (c) of the regulatory definition of ``engaged in the
business,'' in Sec. 478.11, pertaining to a ``dealer in firearms other
than a gunsmith or pawnbroker,'' to conform with 18 U.S.C.
921(a)(21)(C) by removing the phrase ``with the principal objective of
livelihood and profit'' and replacing it with the phrase ``to
predominantly earn a profit.'' This proposed rule also amends Sec.
478.11 to conform with new 18 U.S.C. 921(a)(22) by adding the statutory
definition of ``predominantly earn a profit'' as a new regulatory
definition. Additionally, this rule proposes to move the regulatory
definition of ``terrorism,'' which currently exists in the regulations
under
[[Page 61997]]
the definition of ``principal objective of livelihood and profit,'' to
a new stand-alone definition. This is because the BSCA definitions of
``to predominantly earn a profit'' (18 U.S.C. 921(a)(22)) and ``with
the principal objective of livelihood and profit'' (18 U.S.C.
921(a)(23)) both include the same exception to the requirement to prove
intent to profit when a licensee engages in the firearms business for
the purpose of terrorism.
To further implement these statutory changes, this rule then
proposes to clarify when a person is ``engaged in the business'' as a
dealer in firearms at wholesale or retail by: (a) clarifying the
definition of ``dealer''; (b) defining the terms ``purchase'' and
``sale'' as they apply to dealers; (c) clarifying when a person would
not be engaged in the business of dealing in firearms as an auctioneer,
or when purchasing firearms for, and selling firearms from, a personal
collection; (d) setting forth conduct that is, in civil and
administrative proceedings, presumed to constitute ``engaging in the
business'' of dealing in firearms and presumed to demonstrate the
intent to ``predominantly earn a profit'' from the sale or disposition
of firearms, absent reliable evidence to the contrary; (e) adding a
single definition for the terms ``personal collection,'' ``personal
firearms collection,'' and ``personal collection of firearms''; (f)
adding a definition for the term ``responsible person''; (g) clarifying
that the intent to ``predominantly earn a profit'' does not require the
person to have received pecuniary gain, and that intent does not have
to be shown when a person purchases or sells a firearm for criminal or
terrorism purposes; (h) addressing how former licensees, and
responsible persons acting on behalf of former licensees, may lawfully
liquidate business inventory upon revocation or other termination of
their license; and (i) clarifying that licensees must follow the
verification and recordkeeping procedures in 27 CFR 478.94 and subpart
H of title 27, part 478, rather than using a Firearms Transaction
Record, ATF Form 4473 (``Form 4473'') when firearms are transferred to
other licensees, including transfers by a licensed sole proprietor to
that person's personal collection.
A. Definition of ``Dealer''
In enacting the BSCA, Congress expanded the definition of ``engaged
in the business'' ``as applied to a dealer in firearms,'' as noted
above. 18 U.S.C. 921(a)(21)(C). Consistent with the text and purpose of
the GCA, ATF regulations have long defined the term ``dealer'' to
include persons engaged in the business of selling firearms at
wholesale or retail, or as a gunsmith or pawnbroker, on a part-time
basis. 27 CFR 478.11 (definition of ``Dealer'').\28\ Due to the BSCA
amendments, the Department has further considered what it means to be a
``dealer'' engaged in the firearms business in light of new
technologies, mediums of exchange, and forums in which firearms are
bought and sold with the predominant intent of obtaining pecuniary
gain.
---------------------------------------------------------------------------
\28\ 53 FR at 10481 (``The final rule retains the sentence
[including part-time dealers] since it comports with legislative
intent as expressed in committee reports.''); see also United States
v. McGowan, 746 F. App'x 679, 680 (9th Cir. 2018) (``Selling
firearms need not have been McGowan's primary source of income.'');
United States v. Focia, 869 F.3d 1269, 1281 (11th Cir. 2017)
(``[N]othing in the [FOPA] amendments or the rest of the statutory
language indicates that a person violates Sec. 922(a)(1)(A) only by
selling firearms as his primary means of income.''); United States
v. Valdes, 681 F. App'x 874, 877 (11th Cir. 2017) (``The government
must prove the defendant's activity rose above `the occasional sale
of a hobbyist,' but does not need to show `the defendant's primary
business was dealing in firearms or that [she] necessarily made a
profit from dealing.' ''); United States v. Ibarra, 581 F. App'x
687, 690 (9th Cir. 2014) (``The statute requires that the defendant
have a `principal objective of livelihood and profit,' . . . but
nowhere requires a principal objective that that profit be one's
primary source of income.''); United States v. Shipley, 546 F. App'x
450, 454 (5th Cir. 2013) (upholding conviction for dealing in
firearms as a regular side business to supplement lawful income);
United States v. Gray, 470 F. App'x 468, 472 (6th Cir. 2012) (``[A]
defendant need not deal in firearms as his primary business for
conviction.''); Nadirashvili, 655 F.3d at 119 (quoting Carter, 801
F.2d at 81-81, as holding that ``[t]he government need not prove
that dealing in firearms was the defendant's primary business'');
United States v. Manthey, 92 F. App'x 291, 297 (6th Cir. 2004)
(``[A] defendant need not deal in firearms as his primary business
for conviction.''); United States v. Allah, 130 F.3d 33, 43-44 (2d
Cir. 1997) (``[I]t is not a necessary element of the crime [of
dealing without a license] that a defendants' only business be that
of selling firearms''); United States v. Beecham, Nos. 92-5147, 92-
5399, 1993 WL 188295, at *3 (4th Cir. June 2, 1993) (``The
government need not prove that a defendant's primary business was
dealing in firearms or that he necessarily made a profit from it.''
(internal quotation marks omitted)).
---------------------------------------------------------------------------
Since 1968, advancements in manufacturing (e.g., 3D printing) and
distribution technology (e.g., internet sales) and changes in the
marketplace for firearms and related products (e.g., large-scale gun
shows) have increased the ways in which individuals shop for firearms,
and therefore have created a need for further clarity in the regulatory
definition of ``dealer.'' \29\ The proliferation of new communications
technologies and e-commerce has made it simple for persons to advertise
and sell firearms to a large potential market at minimal cost and with
minimal effort, using a variety of means, and often as a part-time
activity. The proliferation of sales at larger-scale gun shows, flea
markets, other similar events, and online has also altered the
marketplace since the GCA was enacted in 1968.
---------------------------------------------------------------------------
\29\ See Cornyn/Tillis Letter at 3 (``Our legislation aims at
preventing someone who is disqualified from owning or possessing a
firearm from shopping around for an unlicensed firearm dealer.'').
---------------------------------------------------------------------------
Therefore, to provide additional guidance on what it means to be
engaged in the business as a ``dealer'' within the diverse modern
marketplace, this rule first proposes to amend the regulatory
definition of ``dealer'' in 27 CFR 478.11 to clarify that firearms
dealing may occur wherever, or through whatever medium, qualifying
activities may be conducted. This includes at any domestic or
international public or private marketplace or premises. The revised
definition provides nonexclusive examples of such marketplaces: a gun
show \30\ or event,\31\ flea market,\32\ auction house,\33\ or gun
range or club; at one's home; by mail order; \34\ over the internet;
\35\ through the use of other electronic means (e.g., an
[[Page 61998]]
online broker,\36\ online auction,\37\ text messaging service,\38\
social media raffle,\39\ or website \40\); or at any other domestic or
international public or private marketplace or premises. These examples
are provided to clarify for unlicensed persons that firearms dealing
requires a license in whatever place or through whatever medium the
firearms are purchased and sold, including the internet and locations
other than a traditional brick and mortar store.\41\ However,
regardless of the medium or location at which a dealer buys and sells
firearms, to obtain a license under the GCA, the dealer must still have
a fixed premises in a State from which to conduct business subject to
the license, and comply with all applicable State and local laws
regarding the conduct of such business.\42\ 18 U.S.C. 923(d)(1)(E)-(F).
---------------------------------------------------------------------------
\30\ See ATF FFL Newsletter, July 2017, at 9 (gun show
guidelines); Important Notice to Dealers and Other Participants at
This Gun Show, ATF Information 5300.23A (Sept. 2010); ATF Ruling 69-
59.
\31\ See ATF Q&A, How may a licensee participate in the raffling
of firearms by an unlicensed organization?, https://www.atf.gov/firearms/qa/how-may-licensee-participate-raffling-firearms-unlicensed-organization (May 22, 2020); ATF FFL Newsletter, June
2021, at 8-9 (addressing conduct of business at firearm raffles);
Letter to Pheasants Forever, from Acting Chief, Firearms Programs
Division, ATF at 1-2 (July 9, 1999) (addressing nonprofit
fundraising banquets); 1 ATF FFL Newsletter, Feb. 1999, at 4-5
(addressing dinner banquets).
\32\ See ATF FFL Newsletter, June 2010, at 5-6 (flea market
guidelines).
\33\ See Selling firearms--legally: A Q&A with the ATF,
Auctioneer, at 22-27 (June 2010).
\34\ See, e.g., United States v. Buss, 461 F. Supp. 1016 (W.D.
Pa. 1978) (holding that mail order sales by unlicensed defendant
violated statute proscribing illegally engaging in business of
dealing in firearms, even though defendant acted in concert with
licensed firearms dealers who recorded the transfers).
\35\ See ATF FFL Newsletter, June 2021, at 8 (addressing
internet sales of firearms); ATF Intelligence Assessment, Firearms
and Internet Transactions (Feb. 9, 2016); Felon Seeks Firearm, No
Strings Attached: How Dangerous People Evade Background Checks and
Buy Illegal Guns Online, City of New York (Sept. 2013), https://www.nyc.gov/html/om/pdf/2013/felon_seeks_firearm.pdf; Point, Click,
Fire: An Investigation of Illegal Online Gun Sales, City of New York
(Dec. 2011); Focia, 869 F.3d at 1274 (affirming defendant's
conviction for engaging in the business without a license by dealing
firearms through the ``Dark Web'').
\36\ See, e.g., Fulkerson v. Lynch, 261 F. Supp. 3d 779, 783-86,
788-89 (W.D. Ky. 2017) (denying summary judgment to applicant whose
license was denied by ATF for previously willfully engaging in the
business of dealing without a license through an online broker and
granting summary judgement to the government). Although some dealers
may sell firearms through online services sometimes called
``brokers,'' like a magazine or catalog company that only advertises
firearms listed by known sellers and processes orders for them for
direct shipment from the distributor to their buyers, these
``brokers'' are not themselves considered ``dealers.'' This is
because these online ``brokers'' do not purchase the firearms for
valuable consideration (i.e., take or transfer title to them).
Rather, they typically only collect a commission or fee for
providing contracted services to market and process the transaction
for the seller. This is distinguished from a broker who, for
example, purchases the firearms from a manufacturer, importer, or
other distributor, sells the firearms to the buyer, and has them
shipped directly to the buyer from the distributor. Such persons
must be licensed as dealers since they are purchasing and selling
the firearms with the predominant intent to earn a profit. See,
e.g., ATF FFL Newsletter, Sept. 2016, at 3; 2 ATF FFL Newsletter,
Mar. 2023, at 6-7.
\37\ See, e.g., Press Release, Department of Justice Office of
Public Affairs (``OPA''), Minnesota Man Indicted for Dealing
Firearms without a License (Feb. 18, 2016), https://www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-without-license
(defendant dealt in firearms through websites such as gunbroker.com,
an online auction website).
\38\ See, e.g., Press Release, OPA, Odenton, Maryland Man Exiled
to 8 Years in Prison for Firearms Trafficking Conspiracy, DOJ/OPA
(Apr. 27, 2017), https://www.justice.gov/usao-md/pr/odenton-maryland-man-exiled-8-years-prison-firearms-trafficking-conspiracy
(defendant texted photos of firearms for sale to his customer and
discussed prices).
\39\ See ATF FFL Newsletter, June 2021, at 9 (``Social media gun
raffles are gaining popularity on the internet. In most instances,
the sponsor of the event is not a Federal firearms licensee, but
will enlist the aid of a licensee to facilitate the transfer of the
firearm to the raffle winner. Often, the sponsoring organization
arranges to have the firearm shipped from a distributor to a
licensed third party and never takes physical possession of the
firearm. If the organization's practice of raffling firearms rises
to the level of being engaged in the business of dealing in
firearms, the organization must obtain a Federal firearms
license.'').
\40\ See, e.g., Press Release, Department of Justice United
States Attorney's Office (``USAO''), Snapchat Gun Dealer Convicted
of Unlawfully Manufacturing and Selling Firearms (Oct. 4, 2022),
https://www.justice.gov/usao-edca/pr/snapchat-gun-dealer-convicted-unlawfully-manufacturing-and-selling-firearms; Press Release, USAO,
Sebring Resident Sentenced to Prison for Unlawfully Dealing Firearms
on Facebook (Nov. 7, 2016), https://www.justice.gov/usao-sdfl/pr/sebring-resident-sentenced-prison-unlawfully-dealing-firearms-facebook.
\41\ See Letter for Outside Counsel to National Association of
Arms Shows, from Chief, Firearms and Explosives Division, ATF, Re:
Request for Advisory Opinion on Licensing for Certain Gun Show
Sellers at 1 (Feb. 17, 2017) (``Anyone who is engaged in the
business of buying and selling firearms, regardless of the
location(s) at which those transactions occur is required to have a
Federal firearms license. ATF will issue a license to persons who
intend to conduct their business primarily at gun shows, over the
internet, or by mail order, so long as they otherwise meet the
eligibility criteria established by law. This includes the
requirement that they maintain a business premises at which ATF can
inspect their records and inventory, and that otherwise complies
with local zoning restrictions''); ATF FFL Newsletter, June 2010, at
5 (Unless there is a permanent business premises from which to
conduct firearms business (e.g., an identified rented space that can
securely hold required records), ``[t]he GCA prohibits any person
from engaging in the business of selling, dealing, or trading in
firearms at flea markets. The only exceptions would be an unlicensed
individual making an occasional firearm sale or for a Federal
firearms licensee to display firearms and take orders of
firearms.''); Letter for Sen. Dan Coats, from Deputy Director, ATF
(Aug. 22, 1990) (an FFL cannot be issued at a table or booth at a
temporary flea market); ATF Internal Memorandum #23264 (June 15,
1983) (same); United States v. Allman, 119 Fed. App'x. 751, 754 (6th
Cir. 2005) (``Illegal gun transactions at flea markets are not
atypical.''); United States v. Orum, 106 F. App'x 972 (6th Cir.
2004) (defendant illegally displayed and sold firearms at flea
markets and gun shows).
\42\ See Abramski v. United States, 573 U.S. 169, 172, 181
(2014) (``The statute establishes a detailed scheme to enable the
dealer to verify, at the point of sale, whether a potential buyer
may lawfully own a gun. Section 922(c) brings the would-be purchaser
onto the dealer's `business premises' by prohibiting, except in
limited circumstances, the sale of a firearm `to a person who does
not appear in person' at that location.''); National Rifle Ass'n v.
Brady, 914 F. 2d 475, 480 (4th Cir. 1990) (holding that FOPA did not
eliminate the requirement that a licensee have a business premises
from which to conduct business ``so that regulatory authorities will
know where the inventory and records of a licensee can be found'');
Meester v. Bowers, No. 12CV86, 2013 WL 3872946 (D. Neb. July 25,
2013) (upholding ATF's denial of license in part because the
applicant lacked a means of accessing the premises).
---------------------------------------------------------------------------
Even though an applicant must have a business premises in a
particular State to obtain a license, under the GCA, firearms purchases
or sales requiring a license in the United States may involve conduct
outside of the United States. Specifically, 18 U.S.C. 922(a)(1)(A) has
long prohibited any person without a license from shipping,
transporting, or receiving any firearm in foreign commerce while in the
course of being engaged in the business of dealing in firearms,\43\ and
18 U.S.C. 924(n) prohibits travelling from a foreign country to a State
in furtherance of conduct that constitutes a violation of section
922(a)(1)(A).
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\43\ See, e.g., United States v. Baptiste, 607 F. App'x 950, 953
(11th Cir. 2015) (upholding section 922(a)(1) conviction where
firearms purchased in the United States were to be resold in Haiti);
United States v. Murphy, 852 F.2d 1, 8 (1st Cir. 1988) (same with
firearms to be resold in Ireland); United States v. Hernandez, 662
F.2d 289, 291 (5th Cir. 1981) (same with firearms to be resold in
Mexico). But see United States v. Mowad, 641 F.2d 1067 (2d Cir.
1981) (reversing conviction for purchasing firearms for resale in
Lebanon on the basis that there was no mention of exporting firearms
in the GCA or any suggestion of Congressional concern about firearm
violence in other countries).
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Further, as recently amended by the BSCA, the GCA now expressly
prohibits a person from smuggling or knowingly taking a firearm out of
the United States with intent to engage in conduct that would
constitute a felony for which the person may be prosecuted in a court
in the United States if the conduct had occurred within the United
States. 18 U.S.C. 924(k)(2). Willfully engaging in the business of
dealing in firearms without a license is an offense punishable by more
than one year in prison, see 18 U.S.C. 924(a)(1)(D), and constitutes a
felony. Therefore, unlicensed persons who purchase firearms in the
United States and smuggle or take them out of the United States (or
conspire or attempt to do so) for resale in another country would still
be engaging in unlawful dealing in firearms without a license, among
other violations of United States law. Accordingly, this rule proposes
to clarify in the definition of ``dealer'' that purchases or sales of
firearms as a wholesale or retail dealer may occur either domestically
or internationally.
B. Definition of ``Engaged in the Business''--``Purchase'' and ``Sale''
To further clarify the regulatory definition of a dealer ``engaged
in the business'' with the predominant intent of earning a profit
through the repetitive purchase and resale of firearms in 27 CFR
478.11, this rule also proposes to define, based on common dictionary
definitions and relevant case law, the terms ``purchase'' and ``sale''
(and derivative terms thereof, such as ``purchases,'' ``purchasing,''
``purchased,'' and ``sells,'' ``selling,'' or ``sold''). This should
help clarify, through examples, how those terms apply to dealing in
firearms. Specifically, this rule proposes to define ``purchase'' (and
derivative terms thereof) as ``the act of obtaining a firearm in
exchange for something of
[[Page 61999]]
value,'' \44\ and the term ``sale'' (and derivative terms thereof,
including ``resale'') as ``the act of providing a firearm in exchange
for something of value.'' \45\ The term ``something of value'' includes
money, credit, personal property (e.g., another firearm \46\ or
ammunition \47\), a service,\48\ a controlled substance,\49\ or any
other medium of exchange \50\ or valuable consideration.'' \51\
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\44\ This definition is consistent with the common meaning of
``purchase,'' which is ``to obtain (as merchandise) by paying money
or its equivalent.'' Webster's Third New International Dictionary
1844 (1971); see also Black's Law Dictionary 1491 (11th Ed. 2019)
(The term ``purchase'' means ``[t]he acquisition of an interest in
real or personal property by sale, discount, negotiation, mortgage,
pledge, lien, issue, reissue, gift, or any other voluntary
transaction.'').
\45\ This definition is consistent with the common meaning of
``sale,'' which is ``a contract transferring the absolute or general
ownership of property from one person or corporate body to another
for a price (as a sum of money or any other consideration).''
Webster's Third New International Dictionary 2003 (1971). The
related term ``resale'' is ``the act of selling again.'' Id. at
1929.
\46\ See, e.g., United States v. Gross, 451 F.2d 1355, 1360 (7th
Cir. 1971) (defendant ``had traded firearms [for other firearms]
with the object of profit in mind'').
\47\ See, e.g., United States v. Huffman, 518 F.2d 80 (4th Cir.
1975) (defendant traded large quantities of ammunition in exchange
for firearms).
\48\ See, e.g., United States v. 57 Miscellaneous Firearms, 422
F. Supp. 1066, 1070-71 (W.D. Mo. 1976) (defendant obtained the
firearms he sold or offered for sale in exchange for carpentry work
he performed).
\49\ See, e.g., Johnson v. Johns, No. 10-CV-904(SJF), 2013 WL
504446 (E.D.N.Y. Feb. 5, 2013) (on at least one occasion,
petitioner, who was engaged in the unlicensed dealing in firearms
through straw purchasers, compensated a straw purchaser with cocaine
base).
\50\ See, e.g., Focia, 869 F.3d at 1274 (defendant sold pistol
online to undercover ATF agent for 15 bitcoins).
\51\ The term ``medium of exchange'' generally means ``something
commonly accepted in exchange for goods and services and recognized
as representing a standard of value,'' and ``valuable
consideration'' is ``an equivalent or compensation having value that
is given for something (as money, marriage, services) acquired or
promised and that may consist either in some right, interest,
profit, or benefit accruing to one party or some responsibility,
forbearance, detriment, or loss exercised by or falling upon the
other party.'' Webster's Third New International Dictionary 1403,
2530 (1971). See, e.g., United States v. Berry, 644 F.2d 1034, 1036
(5th Cir. 1981) (defendant sold firearms in exchange for large
industrial batteries to operate his demolition business); United
States v. Reminga, 493 F. Supp. 1351, 1357 (W.D. Mich. 1980)
(defendant traded his car for three guns that he later sold or
traded).
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Defining these terms to include any method of payment for a firearm
would clarify that persons cannot avoid licensing by, for instance,
bartering or providing or receiving services in exchange for firearms
with the predominant intent to earn pecuniary gain even where no money
is exchanged. It would also clarify that a person requires a license to
engage in the business of dealing in firearms even when the medium of
payment or consideration is unlawful, such as exchanging illicit drugs
or performing illegal acts for firearms, and that it is a distinct
crime to do so without a license.
C. Definition of ``Engaged in the Business'' as Applied to Auctioneers
Because the definitions of ``purchase'' and ``sale'' broadly
include services provided in exchange for firearms, both as defined by
common dictionaries and as proposed in this rule, the Department
further proposes to make clear that certain persons who provide
auctioneer services are not required to be licensed as dealers. ATF has
long interpreted the statutory definition of ``engaged in the
business'' as excluding auctioneers who provide only auction services
on commission by assisting in liquidating a personal collection of
firearms at an ``estate-type'' auction.\52\ The new definition in the
BSCA does not affect that determination. The Department is proposing to
incorporate this longstanding interpretation into the regulations while
otherwise clarifying the regulatory definition.
---------------------------------------------------------------------------
\52\ See ATF Q&A, Does an auctioneer who is involved in firearms
sales need a dealer's license?, https://www.atf.gov/firearms/qa/does-auctioneer-who-involved-firearms-sales-need-dealer-license
(July 10, 2020); ATF Federal Firearms Regulations Reference Guide, P
5300.4, Q&A L1, at 207 (2014); ATF FFL Newsletter, May 2001, at 3;
ATF Ruling 96-2, Engaging in the Business of Dealing in Firearms
(Auctioneers); 1 ATF FFL Newsletter, 1990, at 7; Letter for Editor,
CarPac Publishing Company, from Acting Assistant Director
(Regulatory Enforcement), ATF, CC-28,953 (July 26, 1979).
---------------------------------------------------------------------------
In this context, the auctioneer is generally providing services
only as an agent of the owner or executor of an estate who is
liquidating a personal collection. The firearms are within the estate's
control and the sales made on the estate's behalf. This limited
exclusion from the definition of ``dealer'' is conditioned on the
auctioneer not purchasing the firearms, taking possession of the
firearms prior to the auction, or consigning the firearms for sale. If
the auctioneer were to engage in any of that conduct, the auctioneer
would need to have a dealer's license because that person would be
engaged in the business of purchasing and reselling firearms to earn a
profit. An ``estate-type'' auction as described above differs from
liquidating a personal collection of firearms by means of a
``consignment-type'' auction, in which the auctioneer is paid to accept
firearms into a business inventory and then resells them in lots, or
over a period of time. In this ``consignment-type'' auction, the
auctioneer generally inventories, evaluates, and tags the firearms for
identification.\53\ Therefore, under ``consignment-type'' auctions, an
auctioneer would generally need to be licensed.
---------------------------------------------------------------------------
\53\ Id.
---------------------------------------------------------------------------
D. Presumptions That a Person Is ``Engaged in the Business''
The Department has observed through its enforcement efforts and
subject-matter expertise that persons who are engaged in certain
firearms purchase-and-sale activities are highly likely to be ``engaged
in the business'' of dealing in firearms at wholesale or retail. These
activities have been observed through a variety of criminal, civil, and
administrative enforcement actions and proceedings brought by the
Department, to include: (1) ATF inspections of prospective and existing
wholesale and retail dealers of firearms who are engaged, or intend to
engage in the business; \54\ (2) criminal investigations and
prosecutions of persons who engaged in the business of dealing in
firearms without a license; \55\ (3) civil and administrative actions
under 18 U.S.C. 924(d) to seize and forfeit firearms intended to be
sold by persons engaged in the business without a license; \56\ (4) ATF
cease and desist letters issued to prevent section 922(a)(1)(A)
violations; \57\ and (5) ATF administrative proceedings under 18 U.S.C.
923 to deny licenses to persons who willfully engaged in the business
of dealing in firearms without a license, or to revoke or deny renewal
of existing
[[Page 62000]]
licenses held by licensees who aided and abetted that misconduct.\58\
In addition, numerous courts have identified certain activities or
factors they deemed relevant to determining whether a person is
``engaged in the business'' even prior to Congress's decision to expand
the definition in the BSCA.\59\ This rule, therefore, proposes to
establish rebuttable presumptions in certain contexts to help
unlicensed persons, industry operations personnel, and others determine
when a person is presumed to be ``engaged in the business'' requiring a
dealer's license.
---------------------------------------------------------------------------
\54\ In Fiscal Year 2022, for example, ATF conducted 11,156
qualification inspections of new applicants for a license, and 6,979
compliance inspections of active licensees. See ATF, Fact Sheet--
Facts and Figures for Fiscal Year 2022 (Jan. 2023), https://www.atf.gov/resource-center/fact-sheet/fact-sheet-facts-and-figures-fiscal-year-2022.
\55\ See footnotes 62 through 72, infra.
\56\ See, e.g., United States v. Four Hundred Seventy Seven
(477) Firearms, 698 F. Supp. 2d 890 (E.D. Mich. 2010) (civil
forfeiture of firearms intended to be sold from an unlicensed gun
store); United States v. One Bushmaster, Model XM15-E2 Rifle, No.
5:06-CV-156 (WDO), 2006 WL 3497899 (M.D. Ga. Dec. 5, 2006) (civil
forfeiture of firearms intended to be sold by an unlicensed person
who acquired an unusually large amount of firearms quickly for the
purpose of selling or trading them); United States v. Twenty Seven
(27) Assorted Firearms, No. SA-05-CA-407-XR, 2005 WL 2645010 (W.D.
Tex. Oct. 13, 2005) (civil forfeiture of firearms intended to be
sold at gun shows without a license).
\57\ Over the years, ATF has issued numerous letters warning
unlicensed persons not to continue to engage in the business of
dealing in firearms without a license, also called a ``cease and
desist'' letter. See, e.g., United States v. Kubowski, 85 F. App'x
686, 687 (10th Cir. 2003) (defendant served cease and desist letter
after selling five handguns and one rifle to undercover ATF agents).
\58\ See, e.g., In the Matter of Scott, Application Nos. 9-93-
019-01-PA-05780 and 05781 (Seattle Field Division, Apr. 3, 2018)
(denied applicant for license to person who purchased and sold
numerous handguns within one month; In the Matter of S.E.L.L.
Antiques, Application No. 9-87-035-01-PA-00725 (Phoenix Field
Division, Feb. 21, 2006) (denied applicant who repetitively sold
modern firearms from unlicensed storefront).
\59\ See footnote 20, supra, and accompanying text.
---------------------------------------------------------------------------
These rebuttable presumptions would apply in civil and
administrative proceedings. While the criteria set forth in the
proposed rule may be useful to a court in a criminal case--for example,
to inform appropriate jury instructions regarding permissible
inferences \60\--the regulatory text makes clear that the presumptions
shall not apply to criminal cases.\61\
---------------------------------------------------------------------------
\60\ While rebuttable presumptions may not be presented to a
jury in a criminal case, jury instructions may include, for example,
reasonable permissive inferences. See Francis v. Franklin, 471 U.S.
307, 314 (1985) (``A permissive inference suggests to the jury a
possible conclusion to be drawn if the [government] proves predicate
facts, but does not require the jury to draw that conclusion.'');
County Court of Ulster County v. Allen, 442 U.S. 140 (1979)
(upholding jury instruction that gave rise to a permissive inference
available only in certain circumstances, rather than a mandatory
conclusion); Baghdad v. Att'y Gen. of the U. S., 50 F.4th 386, 390
(3d Cir. 2022) (``Unlike mandatory presumptions, permissive
inferences . . . do not shift the burden of proof or require any
outcome. They are just an `evidentiary device . . . [that] allows--
but does not require--the trier of fact to infer' that an element of
a crime is met once basic facts have been proven beyond a reasonable
doubt.''); Patton v. Mullin, 425 F.3d 788 (10th Cir. 2005)
(upholding jury instruction that created a permissive inference
rather than a rebuttable presumption); United States v. Warren, 25
F.3d 890, 897 (9th Cir. 1994) (same); United States v. Washington,
819 F.2d 221 (9th Cir. 1987) (same); Lannon v. Hogan, 719 F.2d 518
(1st Cir. 1983) (same); United States v. Gaines, 690 F.2d 849 (11th
Cir. 1982) (same); cf., e.g., United States v. Antonoff, 424 F.
App'x 846, 848 (11th Cir. 2011) (district court relied on permissive
inference of current drug use in ATF's definition of ``unlawful
user'' in 27 CFR 478.11 to conclude that the defendant's drug use
was ``contemporaneous and ongoing'' sufficient to apply the 2K2.1
sentencing guideline); United States v. McCowan, 469 F.3d 386, 392
(5th Cir. 2006) (upholding application of a sentencing enhancement
based on the permissive inference of current drug use in 27 CFR
478.11); United States v. Stanford, No. 11-10211-01-EFM, 2012 WL
1313503 (D. Kan. Apr. 16, 2012) (upholding arrest under 18 U.S.C.
922(g)(3) relying, in part, on ATF's regulatory definition of
``unlawful user'').
\61\ See generally 2 Handbook of Fed. Evid. Sec. 303:4 (9th ed.
2020) (explaining Federal Rule of Evidence Standard 303(c), which
``provides that whenever the existence of a presumed fact against
the accused is submitted to the jury, the court should instruct the
jury that it may regard the basic facts as sufficient evidence of
the presumed fact but is not required to do so. In addition, if the
presumed fact establishes guilt, is an element of the offense, or
negatives a defense, the court should instruct the jury that its
existence on all the evidence must be proved beyond a reasonable
doubt. . . . The applicability and constitutionality of Standard
303(b) must be evaluated in light of the Supreme Court decisions in
County Court of Ulster v. Allen, Sandstrom v. Montana, and Francis
v. Franklin. As a result of these decisions it is clear, if it
wasn't before, that it is never permissible to shift to the
defendant the burden of persuasion to disprove an element of a crime
charged by means of a presumption, and of course, that a conclusive
or irrebuttable presumption operating against the criminal defendant
is also unconstitutional.'').
---------------------------------------------------------------------------
The Department has considered, but not proposed in the NPRM, an
alternative that would have set a minimum numerical threshold of
firearms sold by a person within a certain period of time. That
approach has not been proposed for several reasons. First, while
selling large numbers of firearms or engaging or offering to engage in
frequent transactions may be highly indicative of business activity,
neither the courts nor the Department has recognized a set minimum
number of firearms purchased or resold that triggers the licensing
requirement. Similarly, there is no minimum number of transactions that
determines whether a person is ``engaged in the business'' of dealing
in firearms. Instead, the established approach for determining whether
an individual is ``engaged in the business'' is to look at the totality
of circumstances. Thus, even a single firearm transaction, or offer to
engage in a transaction, when combined with other evidence, may be
sufficient to require a license. For example, even under the previous
statutory definition, courts have upheld convictions for dealing
without a license when few firearms, if any, were actually sold,
provided other factors were also present, such as the person
representing to others a willingness and ability to repetitively
purchase firearms for resale. See, e.g., United States v. King, 735
F.3d 1098, 1107 n.8 (9th Cir. 2013) (upholding conviction where
defendant attempted to sell one firearm and represented that he could
purchase more for resale and noting that ``Section 922(a)(1)(A) does
not require an actual sale of firearms'').\62\ Second, in addition to
the tracing concerns expressed by ATF in response to comments on the
1979 ANPRM, a person could structure their transactions to avoid a
minimum threshold by spreading out their sales over time. Finally, the
Department does not believe there is a sufficient evidentiary basis,
without consideration of additional factors, to support a specific
minimum number of firearms bought or sold for a person to be considered
``engaged in the business.''
---------------------------------------------------------------------------
\62\ See Do I Need a License to Buy and Sell Firearms?, ATF
Publication 5310.2 (Jan. 2016). See also Nadirashvili, 655 F.3d at
120-21 (despite defendants' knowledge of only a single firearms
transaction, there was sufficient evidence to prove they had
``engaged in the business'' because they knew co-defendant held
himself out generally as a source of firearms, and was ready to
procure them for customers); United States v. Shan, 361 F. App'x 182
(2d Cir. 2010) (defendant sold two firearms within roughly a month
and acknowledged he had a source of supply for other weapons);
United States v. Shan, 80 F. App'x 31 (9th Cir. 2003) (sale of
weapons in one transaction where the defendant was willing and able
to find more weapons for resale); Murphy, 852 F.2d at 8 (``[T]his
single transaction was sufficiently large in quantity, price and
length of negotiation to constitute dealing in firearms.''); United
States v. Swinton, 521 F.2d 1255, 1259 (10th Cir. 1975) (``Swinton's
sale [of one firearm] to Agent Knopp, standing alone, without more,
would not have been sufficient to establish a violation of section
922(a)(1). That sale, however, when considered in conjunction with
other facts and circumstances related herein, established that
Swinton was engaged in the business of dealing in firearms. The
unrebutted evidence of the Government established not only that
Swinton considered himself to be and held himself out as a dealer,
but that, most importantly, he was actively engaged in the business
of dealing in guns.'' (internal citation omitted)).
---------------------------------------------------------------------------
Rather than establishing a minimum threshold number of firearms
purchased or sold, this rule proposes to clarify that, absent reliable
evidence to the contrary, a person will be presumed to be engaged in
the business of dealing in firearms when the person:
(1) sells or offers for sale firearms, and also represents to
potential buyers or otherwise demonstrates a willingness and ability to
purchase and sell additional firearms; \63\
---------------------------------------------------------------------------
\63\ See King, 735 F.3d at 1107 (defendant attempted to sell one
of the 19 firearms he had ordered, and represented to the buyer that
he was buying, selling, and trading in firearms and could procure
any item in a gun publication at a cheaper price).
---------------------------------------------------------------------------
(2) spends more money or its equivalent on purchases of firearms
for the purpose of resale than the person's reported taxable gross
inome during the applicable period of time; \64\
---------------------------------------------------------------------------
\64\ See, e.g., Focia, 869 F.3d at 1282 (``And finally, despite
efforts to obtain Focia's tax returns and Social Security
information, agents found no evidence that Focia enjoyed any source
of income other than his firearms sales. This evidence
overwhelmingly demonstrates that Focia's sales of firearms were no
more a hobby than working at Burger King for a living could be
described that way.'').
---------------------------------------------------------------------------
(3) repetitively purchases for the purpose of resale, or sells or
offers for sale firearms--
[[Page 62001]]
(A) through straw or sham businesses,\65\ or individual straw
purchasers or sellers; \66\ or
---------------------------------------------------------------------------
\65\ See, e.g., MEW Sporting Goods, LLC. v. Johansen, 992 F.
Supp. 2d 665, 674-75 (N.D.W.V. 2014), aff'd, 594 F. App'x 143 (4th
Cir. 2015) (corporate entity disregarded where it was formed to
circumvent firearms licensing requirement); King, 735 F.3d at 1106
(defendant felon could not ``immunize himself from prosecution'' for
dealing without a license by ``hiding behind a corporate
charter.''); United States v. Fleischli, 305 F.3d 643, 652 (7th Cir.
2002) (``In short, a convicted felon who could not have legitimately
obtained a manufacturer's or dealer's license may not obtain access
to machine guns by setting up a sham corporation.''); National
Lending Group, L.L.C. v. Mukasey, No. CV 07-0024, 2008 WL 5329888
(D. Ariz. Dec. 19, 2008), aff'd, 365 F. App'x 747 (9th Cir. 2010)
(straw ownership of corporate pawn shops); Casanova Guns, Inc. v.
Connally, 454 F.2d 1320, 1322 (7th Cir. 1972) (``[I]t is well
settled that the fiction of a corporate entity must be disregarded
whenever it has been adopted or used to circumvent the provisions of
a statute.''); XVP Sports, LLC v. Bangs, No. 2:11CV379, 2012 WL
4329258, at *5 (E.D. Va. Sept. 17, 2012) (``unity of interest''
existed between firearm companies controlled by the same person);
Virlow LLC v. Bureau of Alcohol, Tobacco, Firearms & Explosives, No.
1:06-CV-375, 2008 WL 835828 (W.D. Mich. Mar. 28, 2008) (corporate
form disregarded where a substantial purpose for the formation of
the company was to circumvent the statute restricting issuance of
firearms licenses to convicted felons); Press Release, OPA, Utah
Business Owner Convicted of Dealing in Firearms without a License
and Filing False Tax Returns (Sept. 23, 2016), https://www.justice.gov/opa/pr/utah-business-owner-convicted-dealing-firearms-without-license-and-filing-false-tax-returns (defendant
illegally sold firearms under the auspices of a company owned by
another Utah resident).
\66\ See, e.g., Bryan v. United States, 524 U.S. 184, 189 (1998)
(defendant used straw purchasers to buy pistols in Ohio for resale
in New York); United States v. Ochoa, 726 F. App'x 651, 652 (9th
Cir. 2018) (``[W]hile the evidence demonstrated that Ochoa did not
purchase and sell the firearms himself, it was sufficient to
demonstrate that he had the princip[al] objective of making a profit
through the repetitive purchase and sale of firearms, even if those
purchases and sales were carried out by others.''); United States v.
Hosford, 843 F.3d 161, 163 (4th Cir. 2016) (defendant purchased
firearms through a straw purchaser who bought them at gun shows);
United States v. Paye, 129 F. App'x 567, 570 (11th Cir. 2005)
(defendant paid straw purchaser to buy firearms for him to sell);
United States v. Bryan, 122 F.3d 90, 92 (2d Cir. 1997) (defendant
enlisted the aid of two straw purchasers to buy guns for resale in
another state).
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(B) that cannot lawfully be purchased or possessed, including:
(i) stolen firearms (18 U.S.C. 922(j)); \67\
---------------------------------------------------------------------------
\67\ See, e.g., United States v. Simmons, 485 F.3d 951 (7th Cir.
2007); United States v. Perkins, 633 F.2d 856 (8th Cir. 1981).
---------------------------------------------------------------------------
(ii) firearms with the licensee's serial number removed,
obliterated, or altered (18 U.S.C. 922(k); 26 U.S.C. 5861(i)); \68\
---------------------------------------------------------------------------
\68\ See, e.g., United States v. Ilarraza, 963 F.3d 1 (1st Cir.
2020); United States v. Fields, 608 F. App'x 806 (11th Cir. 2015);
United States v. Barrero, 578 F. App'x 884 (11th Cir. 2014); United
States v. Teleguz, 492 F.3d 80 (1st Cir. 2007); United States v.
Bostic, 371 F.3d 865 (6th Cir. 2004); United States v. Kitchen, 87
F. App'x 244 (3d Cir. 2004); United States v. Ortiz, 318 F.3d 1030
(11th Cir. 2003); United States v. Jackson, No. 97-6756, 1997 WL
618902 (4th Cir. Oct. 8, 1997); United States v. Rosa, 123 F.3d 94
(2d Cir. 1997); United States v. Twitty, 72 F.3d 228 (1st Cir.
1995); United States v. Collins, 957 F.2d 72 (2d Cir. 1992).
---------------------------------------------------------------------------
(iii) firearms imported in violation of law (18 U.S.C. 922(l), 22
U.S.C. 2778, or 26 U.S.C. 5844, 5861(k)); or
(iv) machineguns or other weapons defined as firearms under 26
U.S.C. 5845(a) that were not properly registered in the National
Firearms Registration and Transfer Record (18 U.S.C. 922(o); 26 U.S.C.
5861(d)); \69\
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\69\ See, e.g., United States v. Fridley, 43 F. App'x 830 (6th
Cir. 2002) (defendant purchased and sold unregistered machineguns);
United States v. Idarecis, No. 97-1629, 1998 WL 716568 (2d Cir. Oct.
9, 1998) (defendant converted rifles to automatic weapons and
obliterated the serial numbers on the firearms he sold).
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(4) repetitively sells or offers for sale firearms--
(A) within 30 days after they were purchased; \70\
---------------------------------------------------------------------------
\70\ See, e.g., Press Release, OPA, Minnesota Man Indicted for
Dealing Firearms without a License (Feb. 18, 2016), https://
www.justice.gov/opa/pr/minnesota-man-indicted-dealing-firearms-
without-
license#:~:text=U.S.%20Attorney%20Andrew%20M.,least%20nine%20firearms
%20transaction%20records (defendant sold firearms he purchased
through online websites, and the average time he actually possessed
a gun before offering it for sale was only nine days); Press
Release, USAO, Ex-Pasadena Police Lieutenant Sentenced to One Year
in Federal Prison for Unlicensed Selling of Firearms and Lying on
ATF Form (Feb. 25, 2019), https://www.justice.gov/usao-cdca/pr/ex-pasadena-police-lieutenant-sentenced-one-year-federal-prison-unlicensed-selling (defendant resold 79 firearms within six days
after he purchased them); United States v. D'Agostino, No. 10-20449,
2011 WL 219008 (E.D. Mich. Jan. 20, 2011) (some of the weapons
defendant sold at gun shows were purchased ``a short time
earlier'').
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(B) that are new, or like new in their original packaging; \71\ or
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\71\ See, e.g., United States v. Carter, 203 F.3d 187, 189 n.1
(2d Cir. 2000) (defendant admitted to willfully shipping and
transporting interstate eleven handguns in the course of engaging in
the business of dealing in firearms without a license that were
contained in their original boxes); United States v. Van Buren, 593
F.2d 125, 126 (9th Cir. 1979) (defendant's ``gun displays were
atypical of those of a collector because he exhibited many new
weapons, some in the manufacturers' boxes''); United States v.
Powell, 513 F.2d 1249 (8th Cir. 1975) (defendant acquired and sold
six ``new'' or ``like new'' shotguns over several months); United
States v. Posey, 501 F.2d 998, 1002 (6th Cir. 1974) (defendant
offered firearms for sale, some of them in their original boxes);
United States v. Day, 476 F.2d 562, 564, 567 (6th Cir. 1973) (60 of
the 96 guns to be sold by defendant were new handguns still in the
manufacturer's original packages).
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(C) that are of the same or similar kind (i.e., make/manufacturer,
model, caliber/gauge, and action) and type (i.e., the classification of
a firearm as a rifle, shotgun, revolver, pistol, frame, receiver,
machinegun, silencer, destructive device, or other firearm); \72\
---------------------------------------------------------------------------
\72\ See, e.g., Press Release, USAO, FFL Sentenced for Selling
Guns to Unlicensed Dealers (May 27, 2022), https://www.justice.gov/usao-ndtx/pr/ffl-sentenced-selling-guns-unlicensed-dealers
(defendant regularly sold large quantities of identical firearms to
unlicensed associates who sold them without a license); Shipley, 546
F. App'x at 453 (defendant sold mass-produced firearms of similar
make and model that were not likely to be part of a personal
collection).
---------------------------------------------------------------------------
(5) who, as a former licensee (or responsible person acting on
behalf of the former licensee) sells or offers for sale firearms that
were in the business inventory of such licensee at the time the license
was terminated (i.e., license revocation, denial of license renewal,
license expiration, or surrender of license), and were not transferred
to a personal collection in accordance with 18 U.S.C. 923(c) and 27 CFR
478.125a; or
(6) who, as a former licensee (or responsible person acting on
behalf of a former licensee) sells or offers for sale firearms that
were transferred to a personal collection of such former licensee or
responsible person prior to the time the license was terminated,
unless: (A) the firearms were received and transferred without any
intent to willfully evade the restrictions placed on licensees by
chapter 44, title 18, of the United States Code; and (B) one year has
passed from the date of transfer to the personal collection.
Any one or a combination of the circumstances above gives rise to a
presumption in civil and administrative proceedings that the person is
engaged in the business of dealing in firearms and must be licensed
under the GCA. The activities set forth in these rebuttable
presumptions are not exhaustive of the conduct that may show that, or
be considered in determining whether, a person is engaged in the
business of dealing in firearms. Further, as noted above, while the
criteria may be useful to courts in criminal cases when instructing
juries regarding permissible inferences, the presumptions outlined
above shall not apply to criminal cases.
At the same time, the Department recognizes that certain
transactions are not likely to be sufficient to support a presumption
that a person is engaging in the business of dealing in firearms. For
this reason, the proposed rule also includes examples of when a person
is not presumed to be engaged in the business of dealing in firearms.
Specifically, under this proposed rule, a person would not be presumed
to be engaged in the business requiring a license as a dealer when the
person transfers firearms only as bona fide
[[Page 62002]]
gifts,\73\ or occasionally \74\ sells firearms only to obtain more
valuable, desirable, or useful firearms for their personal collection
or hobby, unless their conduct also demonstrates a predominant intent
to earn a profit.
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\73\ The Department interprets the term ``bona fide gift'' to
mean a firearm given in good faith to another person without
expecting any item, service, or anything of value in return. See
Form 4473, at 4, Instructions to Question 21.a. (Actual Transferee/
Buyer) (``A gift is not bona fide if another person offered or gave
the person . . . money, service(s), or item(s) of value to acquire
the firearm for him/her, or if the other person is prohibited by law
from receiving or possessing the firearm.''); ATF FFL Newsletter,
June 2021, at 2 (same).
\74\ While the GCA does not define the term ``occasional,'' that
term is commonly understood to mean ``of irregular occurrence;
happening now and then, infrequent.'' Letter for Borderview LLC,
from Chief, Firearms Industry Programs Branch, ATF (Oct. 14, 2015)
(citing Collins American English Dictionary (2015)) (addressing
persons engaged in the business of importing firearms).
---------------------------------------------------------------------------
The rebuttable presumptions set forth above are supported by the
Department's investigative and regulatory enforcement experience,\75\
as well as conduct that the courts have found to require a license even
before the BSCA expanded the definition of ``engaged in the business.''
Moreover, these presumptions are consistent with the case-by-case
analytical framework long applied by the courts in determining whether
a person has violated 18 U.S.C. 922(a)(1)(A) and 923(a) by engaging in
the business of dealing in firearms without a license even under the
pre-BSCA definition. The fundamental purpose of the GCA would be
severely undermined if persons were allowed to repetitively purchase
and resell firearms to predominantly earn a profit without conducting
background checks, keeping records, and otherwise complying with the
license requirements of the GCA simply because the effort needed to
conduct commerce in general has dramatically diminished. The Department
is therefore providing objectively reasonable standards for when a
person is presumed to be ``engaged in the business'' to strike an
appropriate balance that captures persons who should be licensed,
without limiting or regulating activity truly for the purposes of a
hobby or enhancing a personal collection.
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\75\ See the discussion at the beginning of Section II.D of this
preamble. ``Presumptions that a Person is `Engaged in the Business.'
''
---------------------------------------------------------------------------
The first presumption stated above--that a person will be presumed
to be engaged in the business when the person sells or offers for sale
firearms, and also represents to potential buyers or otherwise
demonstrates a willingness and ability to purchase and sell additional
firearms--reflects that the definition of ``engaged in the business''
in 18 U.S.C. 921(a)(21)(C) does not require that a firearm actually to
be sold by a person so long as the person is holding themself out as a
dealer. This is because, under the definition of ``engaged in the
business'' in 18 U.S.C. 921(a)(21)(C), the ``repetitive purchase and
resale of firearms'' is the means through which the person intends to
engage in the business even if those firearms are not actually
repetitively purchased and resold.
The second presumption above--that a person is engaged in the
business when spending more money or its equivalent on purchases of
firearms for the purpose of resale than the person's reported taxable
gross income during the applicable period of time--reflects that
persons who spend more money or its equivalent on purchases of firearms
for resale than their reported gross income are likely to be earning
livelihood from those sales, which is even stronger evidence of an
intent to profit than merely supplementing one's income.\76\
Alternatively, the funds the person used to purchase the firearms may
have been derived from criminal activities, for example, if they were
provided by a co-conspirator to repetitively purchase and resell the
firearms without a license or for other criminal purposes, or the funds
were laundered from past illicit firearms transactions. Such illicit
and repetitive firearm purchase and sale activities do not require
proof of profit to prove the requisite intent under 18 U.S.C.
921(a)(22), which states that proof of profit is not required as to a
person who engages in the regular and repetitive purchase and
disposition of firearms for criminal purposes or terrorism.
---------------------------------------------------------------------------
\76\ Webster's Online Dictionary defines the term ``livelihood''
as ``means of support or subsistence.'' Livelihood, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/livelihood
(last visited Aug. 25, 2023).
---------------------------------------------------------------------------
The first presumption underlying the third category listed above--
that a person is engaged in the business when repetitively purchasing,
reselling, or offering to sell firearms through straw or sham
businesses or individual straw purchasers or sellers--reflects that
persons who willfully engage in the business of dealing without a
license often do so to conceal their transactions by setting up straw
or sham businesses or hiring ``middlemen'' to conduct transactions on
their behalf.\77\ The second presumption under that category--that a
person is engaged in the business when repetitively purchasing,
reselling, or offering to sell firearms that cannot lawfully be
possessed--reflects that such firearms are actively sought by criminals
and earn higher profits for the illicit dealer. Such dealers will often
buy and sell stolen firearms and firearms with obliterated serial
numbers because such firearms are preferred by both sellers and buyers
to avoid background checks and crime gun tracing.\78\ They sometimes
sell unregistered National Firearms Act (``NFA'') weapons \79\ and
unlawfully imported firearms because those firearms are more difficult
to obtain, cannot be traced through the National Firearms Registration
and Transfer Record, and may sell for a substantial profit. Although
these presumptions do not directly address an individual's intent to
profit, they are supported by 18 U.S.C. 921(a)(22), which does not
require the government to prove an intent to profit where a person
repetitively purchases and disposes of firearms for criminal purposes.
This includes willfully engaging in the business of dealing in
contraband firearms. These presumptions are also implicitly supported
by 18 U.S.C. 923(c), which deems any firearm acquired or disposed of
with the purpose of willfully evading the restrictions placed on
licensed dealers under the GCA to be business inventory, not part of a
personal collection. Indeed, concealing the identity of the seller or
buyer of a firearm, or the identification of the firearm, undermines
the requirements imposed on legitimate dealers to conduct background
checks on actual purchasers (18 U.S.C. 922(t)) and maintain transaction
records (18 U.S.C.
[[Page 62003]]
923(g)(1)-(2)) through which firearms involved in crime can be traced.
---------------------------------------------------------------------------
\77\ See footnotes 65 and 6666, supra; Abramski, 573 U.S. at 180
(``[C]onsider what happens in a typical straw purchase. A felon or
other person who cannot buy or own a gun still wants to obtain one.
(Or, alternatively, a person who could legally buy a firearm wants
to conceal his purchase, maybe so he can use the gun for criminal
purposes without fear that police officers will later trace it to
him.)'').
\78\ See footnote 68, supra; Twitty, 72 F.3d at 234 n.2
(defendant resold firearms with obliterated serial numbers, which
was ``probably designed in part to increase the selling price of the
weapons''); United States v. Hannah, No. CRIM.A.05-86, 2005 WL
1532534, at *3 (E.D. Pa. 2005) (defendant told buyers to obliterate
the serial numbers on the firearms so he would not ``get in
trouble'').
\79\ The National Firearms Act of 1934, 26 U.S.C. 7801 et seq.,
restricts certain firearms that Congress determined were
particularly dangerous ``gangster-type'' weapons, to include short-
barreled rifles and shotguns, machineguns, silencers, and
destructive devices. NFA provisions still refer to the ``Secretary
of the Treasury.'' See generally 26 U.S.C. ch. 53. However, the
Homeland Security Act of 2002, Public Law 107-296, 116 Stat. 2135,
transferred the functions of ATF from the Department of the Treasury
to the Department of Justice, under the general authority of the
Attorney General. 26 U.S.C. 7801(a)(2); 28 U.S.C. 599A(c)(1). Thus,
for ease of reference, this final rule refers to the Attorney
General throughout.
---------------------------------------------------------------------------
The first presumption under the fourth category listed above--
repetitive sales or offers for sale of firearms within 30 days from
purchase--reflect that firearms for a personal collection are not
likely to be repetitively sold within such a short period of time from
purchase.\80\ Likewise, under the second and third presumptions under
this category, persons who repetitively sell firearms in new condition
or in like-new condition in their original packaging, or firearms of
the same kind and type, are not likely to be selling such firearms from
a personal collection. Individuals who are bona fide collectors are
less likely to amass firearms of the same kind and type than amass
older, unique, or less common firearms that hold special interest. In
contrast, persons engaged in the business can earn the greatest profit
by selling firearms in the best (i.e., in a new) condition, or by
selling the particular makes and models of firearms (i.e., of the same
kind and type) that their customers want the most and would generate
the greatest profit.
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\80\ Further support for this 30-day presumption comes from the
fact that, while many retailers do not allow firearm returns, some
retailers and manufacturers do allow a 30-day period within which a
customer who is dissatisfied with a firearm purchased for a personal
collection or hobby can return or exchange the firearm. Dissatisfied
personal collectors and hobbyists--persons not intending to engage
in the business--are more likely to return new firearms rather than
incurring the time, effort, and expense to resell them within that
period of time. See, e.g., Cabela's Return Policy: Here's How it
Actually Works, rather-be-shopping.com, https://www.rather-be-shopping.com/blog/cabelas-return-policy/ (Jan. 31, 2023) (``[I]f
they sell you a fully functioning gun, and you take it to the range,
and it will not eject a shell or casing or will not perform basic
functions, THEY TYPICALLY WILL exchange it. . . . Make sure you
fully test the firearm within 30 days of purchase as it will be MUCH
more difficult to exchange the gun after 30 days.''); LEARN ABOUT
THE 30 DAY MONEY BACK GUARANTEE! HOW TO RETURN YOUR FIREARM!,
Waltherarms.com, https://waltherarms.com/
guarantee#:~:text=Walther%20understands%20this%20and%20that,it%20is%2
0right%20for%20you/(last visited Aug. 10, 2023); Retail Policies,
centertargetsports.com, https://centertargetsports.com/retail-range/
(last visited Aug. 10, 2023) (``When you purchase any gun from
Center Target Sports, we guarantee your satisfaction. Use your gun
for up to 30 days and if for any reason you're not happy with your
purchase, return it to us within 30 days and receive a store credit
for the FULL purchase price.''); Warranty & Return Policy, Century
Arms (Mar. 6, 2019), https://www.centuryarms.com/media/wysiwyg/Warranty_and_Return_v02162021.pdf (``Customer has 30 days to return
surplus firearms, ammunition, parts, and accessories for repair/
replacement if the firearm does not meet the advertised
condition.''); I Love You PEW 30 Day Firearm Guarantee, Alphadog
Firearms, https://alphadogfirearms.com/i-love-you-pew/ (last visited
Aug. 10. 2023) (``Original purchaser has 30 calendar days to return
any new firearm purchased for store credit.''); Return Exceptions
Policy, Big 5 Sporting Goods, https://www.big5sportinggoods.com/static/big5/pdfs/Customer-Service-RETURN-EXCEPTIONS-POLICY-d.pdf
(last visited Aug. 10, 2023) (``Firearm purchases must be returned
to the same store at which they were purchased. No refunds or
exchanges unless returned in the original condition within thirty
(30) days from the date of release.'').
---------------------------------------------------------------------------
The presumption under the fifth category listed above--that a
former licensee, or responsible person acting on behalf of such former
licensee, is engaged in the business when they sell or offer for sale
firearms that were in the business inventory upon license termination--
recognizes the fact that the licensee likely intended to predominantly
earn a profit from the repetitive purchase and resale of those
firearms, not to acquire the firearms as a ``personal collection.''
Consistent with the GCA's plain language under section 921(a)(21)(C),
this presumption recognizes that former licensees who thereafter intend
to predominantly earn a profit from selling firearms that they had
previously purchased for resale can still be considered to be
``engaging in the business'' after termination of their license. The
GCA does not provide exceptions to the definition of ``engaged in the
business'' based on one's prior license status, even if the firearms
were purchased while the person had that license.\81\
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\81\ The Department is aware of non-binding dicta in United
States v. Shumann, 861 F.2d 1234, 1238 (11th Cir. 1988), in which
the court expressed its view that had the FOPA definition of
``engaged in the business'' been applicable (which the court ruled
it was not) it would have absolved the petitioner of liability in a
forfeiture action if, as he claimed, he was merely closing out his
gun business and liquidating his inventory, saying ``[w]hile the
government presented evidence of firearms sales by Schumann to
undercover BATF agents . . . there was no proof of firearms
purchases, much less a proven pattern of `repetitive purchase and
resale.' '' However, none of the amendments to the GCA made by FOPA
defined the terms ``collection'' or ``personal collection.'' The
fact remains that the firearms to be liquidated were repetitively
purchased for resale by the same person while licensed. And whether
a person is ``engaged in the business'' under post-BSCA section
921(a)(21)(C) is not dependent on the license status of the person
so engaged.
---------------------------------------------------------------------------
The final presumption above--that the personal inventory of a
former licensee (or responsible person acting on behalf of the former
licensee) remains business inventory until one year has passed from
license termination or transfer to their personal collection--is
consistent with 18 U.S.C. 923(c) of the GCA, which deems firearms
transferred from a licensee's business inventory to their personal
collection as business inventory until one year after the transfer.\82\
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\82\ Even if one year has passed from the date of transfer,
business inventory transferred to a personal collection of a former
licensee (or responsible person acting on behalf of that licensee)
prior to termination of the license cannot be treated as part of a
personal collection if the licensee received or transferred those
firearms with the intent to willfully evade the restrictions placed
upon licensees by the GCA (e.g., willful violations as cited in a
notice of license revocation or denial of renewal). This is because,
under section 923(c), any firearm acquired or disposed of with
intent to willfully evade the restrictions placed upon licensees by
the GCA is automatically business inventory. Therefore, because the
firearms are statutorily deemed to be business inventory under
either of these circumstances, a former licensee (or responsible
person acting on behalf of such licensee) who sells such firearms is
presumed to be engaged in the business, requiring a license.
---------------------------------------------------------------------------
The Department notes that these presumptions may be rebutted in an
administrative or civil proceeding with reliable evidence demonstrating
that a person is not ``engaged in the business'' of dealing in
firearms.\83\ If, for example, where there is reliable evidence that a
few collectible firearms were purchased from a licensed dealer where
``all sales are final'' and resold back to the licensee within 30 days
because the purchaser was not satisfied, the presumption that the
unlicensed reseller is engaged in the business may be rebutted.
Similarly, the presumption may be rebutted based on evidence that a
collector occasionally sells one specific kind and type of curio or
relic firearm to buy another one of the same kind and type that is in
better condition to ``trade-up'' or enhance the seller's personal
collection. Another example in which evidence may rebut the presumption
would be the occasional sale, loan, or trade of an almost-new firearm
in its original packaging to an immediate family member, such as for
their use in hunting, without the intent to earn a profit or to
circumvent the requirements placed on licensees.\84\
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\83\ An example of an administrative proceeding where rebuttable
evidence might be introduced would be where ATF denied a firearms
license application, pursuant to 18 U.S.C. 923(d)(1)(C) and (f)(2),
on the basis that the applicant was presumed under this rulemaking
to have willfully engaged in the business of dealing in firearms
without a license. An example of a civil case would be an asset
forfeiture proceeding, pursuant to 18 U.S.C. 924(d)(1), on the basis
that the seized firearms were intended to be involved in willful
conduct presumed to be engaging the business without a license under
this rulemaking.
\84\ See, e.g., Clark v. Scouffas, No. 99-C-4863, 2000 WL 91411
(N.D. Ill. 2000) (license applicant was not a ``dealer'' who was
``engaged in the business'' as defined under section 921(a)(21)(C)
where he only sold a total of three .38 Special pistols--two to
himself, and one to his wife, without any intent to profit).
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E. Definition of ``Personal Collection,'' ``Personal Collection of
Firearms,'' and ``Personal Firearms Collection''
The statutory definition of ``engaged in the business'' excludes
``a person who makes occasional sales, exchanges, or purchases of
firearms for the enhancement of a personal collection or
[[Page 62004]]
for a hobby, or who sells all or part of his personal collection of
firearms.'' 18 U.S.C. 921(a)(21)(C). To clarify this definitional
exclusion, this proposed rule would: (1) add a single definition for
the terms ``personal collection,'' ``personal collection of firearms,''
and ``personal firearms collection''; (2) explain how those terms apply
to licensees; and (3) make clear that licensees must follow the
verification and recordkeeping procedures in 27 CFR 478.94 and subpart
H, rather than using ATF Form 4473, when they acquire firearms from
other licensees, including a sole proprietor who transfers a firearm to
their personal collection in accordance with 27 CFR 478.125a.
Specifically, this rule proposes to define ``personal collection,''
``personal collection of firearms,'' and ``personal firearms
collection'' as ``personal firearms that a person accumulates for
study, comparison, exhibition, or for a hobby (e.g., noncommercial,
recreational activities for personal enjoyment such as hunting, or
skeet, target, or competition shooting).'' This reflects a common
definition of the terms ``collection'' and ``hobby.'' \85\ The phrase
``or for a hobby'' was adopted from 18 U.S.C. 921(a)(21)(C), which
excludes from the definition of ``engaged in the business'' firearms
acquired ``for'' a hobby. Also expressly excluded from the definition
of ``personal collection'' is ``any firearm purchased for resale or
made with the predominant intent to earn a profit'' because of their
inherently commercial nature. 18 U.S.C. 921(a)(21)(C).
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\85\ See Webster's Third New International Dictionary 444, 1075,
1686 (1971) (defining the term ``personal'' to include ``of or
relating to a particular person,'' ``collection'' to include ``an
assembly of objects or specimens for the purposes of education,
research, or interest'' and ``hobby'' as ``a specialized pursuit . .
. that is outside one's regular occupation and that one finds
particularly interesting and enjoys doing''); Webster's Online
Dictionary (2023) (defining the term ``personal'' to include ``of,
relating to, or affecting a particular person,'' ``collection'' to
include ``an accumulation of objects gathered for study, comparison,
or exhibition or as a hobby'', and ``hobby'' as a ``pursuit outside
one's regular occupation engaged in especially for relaxation'');
see also United States v. Idarecis, 164 F.3d 620 (2d Cir. 1998)
(Table) (``There is no case authority to suggest that there is a
distinction between the definition of a collector and of a
[personal] collection in the statute.'').
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Under the GCA, 18 U.S.C. 923(c), and implementing regulations, 27
CFR 478.125(e) and 478.125a, a licensee who acquires firearms for a
personal collection is subject to certain additional requirements
before the firearms can become part of such a ``personal collection.''
\86\ Accordingly, the proposed rule further explains how that term
would apply to firearms acquired by a licensee (i.e., a person engaged
in the business as a licensed manufacturer, licensed importer, or
licensed dealer under the GCA), by defining ``personal collection,''
``personal collection of firearms,'' or ``personal firearms
collection,'' when applied to licensees, to include only firearms that
were: (1) acquired or transferred without the intent to willfully evade
the restrictions placed upon licensees by chapter 44, title 18, United
States Code; \87\ (2) recorded by the licensee as an acquisition in the
licensee's acquisition and disposition record in accordance with 27 CFR
478.122(a), 478.123(a), or 478.125(e) (unless acquired prior to
licensure and not intended for sale); \88\ (3) recorded as a
disposition from the licensee's business inventory to the person's
personal collection in accordance with 27 CFR 478.122(a), 478.123(a),
or 478.125(e); (4) stored separately from, and not commingled with the
business inventory, and appropriately identified as ``not for sale''
(e.g., by attaching a tag), if on the business premises; \89\ and (5)
maintained in such personal collection (whether on or off the business
premises) for at least one year from the date the firearm was so
transferred, in accordance with 18 U.S.C. 923(c) and 27 CFR
478.125a.\90\ These proposed parameters to define the term ``personal
collection'' as applied to licensees reflect the statutory and
regulatory requirements for personal collections in 18 U.S.C. 923(c)
and 27 CFR 478.122(a), 478.123(a), 478.125(e), and 478.125a.\91\ To
implement these changes, the rule also would make conforming changes by
adding references in 27 CFR 478.125a to the provisions that relate to
the acquisition and disposition recordkeeping requirements for
importers and manufacturers.
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\86\ The GCA, 18 U.S.C. 923(c), and implementing regulations,
also require that all firearms disposed of from a licensee's
personal collection, including firearms acquired before the licensee
became licensed, that are held for at least one year and that are
sold or otherwise disposed of, must be recorded as a disposition in
a personal bound book. See 18 U.S.C. 923(c); 27 CFR 478.125a(a)(4).
\87\ See ATF Q&A, May a licensee create a personal collection to
avoid the recordkeeping and NICS background check requirements of
the GCA?, https://www.atf.gov/firearms/qa/may-licensee-create-personal-collection-avoid-recordkeeping-and-nics-background-check
(July 15, 2020).
\88\ See ATF Q&A, Does a licensee have to record firearms
acquired prior to obtaining the license in their acquisition and
disposition record?, https://www.atf.gov/firearms/qa/does-licensee-have-record-firearms-acquired-prior-obtaining-license-their-acquisition (July 15, 2020); ATF Federal Firearms Regulations
Reference Guide, ATF P 5300.4, Q&A (F2) at 201 (2014) (``All
firearms acquired after obtaining a firearms license must be
recorded as an acquisition in the acquisition and disposition record
as business inventory.''); ATF FFL Newsletter, Feb. 2011, at 7
(``There may be occasions where a firearms dealer utilizes his
license to acquire firearms for his personal collection. Such
firearms must be entered in his permanent acquisition records and
subsequently be recorded as a disposition to himself in his private
capacity.''); ATF FFL Newsletter, Mar. 2006, at 7 (``[E]ven if a
dealer acquires a firearm from a licensee by completing an ATF Form
4473, the firearm must be entered in the transferee dealer's records
as an acquisition.'').
\89\ See ATF Q&A, May a licensee store personal firearms at the
business premises?, https://www.atf.gov/firearms/qa/may-licensee-store-personal-firearms-business-premises (July 15, 2020); ATF FFL
Newsletter, Feb. 2011, at 7; ATF FFL Newsletter, Mar. 2006, at 6;
ATF Industry Circular 72-30, Identification of Personal Firearms on
Licensed Premises Not Offered for Sale (Oct. 10, 1972).
\90\ See ATF Q&A, May a licensee maintain a personal collection
of firearms? How can they do so?, https://www.atf.gov/firearms/qa/may-licensee-maintain-personal-collection-firearms-how-can-they-do-so (July 15, 2020).
\91\ The existing regulations, 27 CFR 478.125(e) and 478.125a,
which require licensees to record the purchase of all firearms in
their business bound books, record the transfer of firearms to their
personal collection, and demonstrate that personal firearms obtained
before licensing have been held at least one year prior to their
disposition as personal firearms were upheld by the Fourth Circuit
in National Rifle Ass'n v. Brady, 914 F.2d 475, 482-83 (4th Cir.
1990) (``The regulations ensure that firearms kept in the personal
collection are bona fide personal firearms, and they minimize the
opportunity for licensees to evade the statute's recordkeeping
requirements for business firearms by simply designating those
firearms `personal firearms' immediately prior to their disposition.
. . . In addition, the record-keeping requirements contained in the
regulations provide a means for the [Attorney General] to verify
that personal firearms were actually held for a year by a licensee
prior to sale. Thus, we think the regulations at issue here are both
`rational and consistent with the statute.' ''). See also United
States v. Twelve Firearms, 16 F. Supp. 2d 738, 742 n.4 (S.D. Tex.
1998) (``[T]he United States appears to be correct that Claimant was
required to keep records of the firearms no matter whether they were
part of his business inventory, under Sec. 923(g)(1)(A), or whether
they were his own personal property, under Sec. 923(c).).''
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F. Definition of ``Responsible Person''
To accompany these changes, this rule also proposes to add a
regulatory definition of the term ``responsible person'' in 27 CFR
478.11, to mean ``[a]ny individual possessing, directly or indirectly,
the power to direct or cause the direction of the management, policies,
and business practices of a corporation, partnership, or association,
insofar as they pertain to firearms.'' This definition comes from 18
U.S.C. 923(d)(1)(B), and has long been reflected on the application for
license (Form 7) and other ATF publications since enactment of a
similar definition in the Safe Explosives Act in 2002.\92\ As
[[Page 62005]]
examples, this definition would not include store clerks or cashiers
who cannot make management or policy decisions with respect to firearms
(e.g., what company or store-wide policies and controls to adopt, which
firearms are bought and sold by the business, and who is hired to buy
and sell the firearms), even if their clerical duties include buying or
selling firearms for the business.
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\92\ See 18 U.S.C. 841(s); Application for Federal Firearms
License, ATF Form 7, Instructions at 6 (5300.12); Gilbert v. ATF,
306 F. Supp. 3d 776, 781 (D. Md. 2018); Gossard v. Fronczak, 206 F.
Supp. 3d 1053, 1065 (D. Md. 2016), aff'd, 701 F. App'x 266 (4th Cir.
2017); ATF FFL Newsletter, Sept. 2011, at 6; ATF Letter to Dunham's
Sports (May 30, 2003).
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G. Definition of ``Predominantly Earn a Profit''
The BSCA broadened the definition of ``engaged in the business'' as
a dealer by substituting ``to predominantly earn a profit'' for ``with
the principal objective of livelihood or profit.'' 18 U.S.C.
921(a)(21)(C). It also defined the term ``to predominantly earn a
profit.'' 18 U.S.C. 921(a)(22). This rule is proposing to incorporate
those statutory changes, as discussed above.
This rule proposes to further implement these amendments by: (1)
clarifying that the ``proof of profit'' proviso also excludes ``the
intent to profit,'' thus making clear that it is not necessary for the
Federal Government to prove that a person intended to make a profit if
the person was dealing in firearms for criminal purposes or terrorism;
(2) clarifying that a person may have the predominant intent to profit
even if the person does not actually obtain pecuniary gain from selling
or disposing of firearms; and (3) establishing a presumption in civil
and administrative proceedings that certain conduct demonstrates the
requisite intent to ``predominantly earn a profit,'' absent reliable
evidence to the contrary.
These proposed regulatory amendments are consistent with the plain
language of the GCA. Neither the pre-BSCA definition of ``with the
principal objective of livelihood and profit'' nor the post-BSCA
definition of ``to predominantly earn a profit'' require the government
to prove that the defendant actually profited from firearms
transactions. See 18 U.S.C. 921(a)(22), (a)(23) (referring to ``the
intent underlying the sale or disposition of firearms''); Focia, 869
F.3d at 1282 (``The exact percentage of income obtained through the
sales is not the test; rather, . . . the statute focuses on the
defendant's motivation in engaging in the sales.'').\93\
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\93\ See also Valdes, 681 F. App'x at 877 (the government does
not need to show that the defendant ``necessarily made a profit from
dealing'') (citing United States v. Wilmoth, 636 F.2d 123, 125 (5th
Cir. 1981)); King, 735 F.3d at 1107 n.8 (Section 922(a)(1)(A) does
not require an actual sale of firearms); Allah, 130 F.3d at 43-44
(upholding jury instruction that selling firearms need not ``be a
significant source of income''); United States v. Mastro, 570
F.Supp. 1388 (E.D. Pa. 1983) (the government need not show that
defendant made or expected to make a profit) (citing cases); United
States v. Shirling, 572 F.2d 532, 534 (5th Cir. 1978) (``The statute
is not aimed narrowly at those who profit from the sale of firearms,
but rather broadly at those who hold themselves out as a source of
firearms.'').
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ATF's experience also establishes that certain conduct related to
the sale or disposition of firearms presumptively demonstrates that
primary motivation. In addition to conducting criminal investigations
of unlicensed firearms businesses under 18 U.S.C. 922(a)(1)(A), ATF has
for many decades observed through qualification and compliance
inspections how dealers who sell or dispose of firearms demonstrate a
predominant intent to obtain pecuniary gain, as opposed to other
intents, such as improving or liquidating a personal collection.
Based on this decades-long body of experience, the proposed rule
provides that, absent reliable evidence to the contrary, a person is
presumed to have the intent to ``predominantly earn a profit'' when the
person: (1) advertises, markets, or otherwise promotes a firearms
business (e.g., advertises or posts firearms for sale, including on any
website, establishes a website for selling or offering for sale their
firearms, makes available business cards, or tags firearms with sales
prices), regardless of whether the person incurs expenses or only
promotes the business informally; \94\ (2) purchases, rents, or
otherwise secures or sets aside permanent or temporary physical space
to display or store firearms they offer for sale, including part or all
of a business premises, table or space at a gun show, or display case;
\95\ (3) makes or maintains records, in any form, to document, track,
or calculate profits and losses from firearms purchases and sales; \96\
(4) purchases or otherwise secures merchant services as a business
(e.g., credit card transaction services, digital wallet for business)
through which the person makes or offers to make payments for firearms
transactions; \97\ (5) formally or informally purchases, hires, or
otherwise secures business security services (e.g., a central station-
monitored security system registered to a business,\98\ or guards for
security \99\) to
[[Page 62006]]
protect business assets or transactions that include firearms; (6)
formally or informally establishes a business entity, trade name, or
online business account, including an account using a business name on
a social media or other website, through which the person makes or
offers to make firearms transactions; \100\ (7) secures or applies for
a State or local business license to purchase for resale or to sell
merchandise that includes firearms; or (8) purchases a business
insurance policy, including any riders that cover firearms
inventory.\101\ Any of these nonexclusive, firearms-business-related
activities justifies a rebuttable presumption that the person has the
requisite intent to predominantly earn a profit from reselling or
disposing of firearms.
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\94\ See, e.g., United States v. Caldwell, 790 F. App'x 797, 799
(7th Cir. 2019) (defendant placed 192 advertisements on a website
devoted to gun sales); Valdes, 681 F. App'x at 878 (defendant handed
out business card); United States v. Pegg, 542 F. App'x 328 (5th
Cir. 2013) (defendant sometimes advertised firearms for sale in the
local newspaper); United States v. Crudgington, 469 F. App'x 823,
824 (11th Cir. 2012) (defendant advertised firearms for sale in
local papers, and tagged them with prices); United States v. Dettra,
238 F.3d 424, at *2 (6th Cir. 2000) (Table) (``Dettra's use of
printed business cards and his acceptance of credit payment provide
further reason to infer that he was conducting his firearms activity
as a profitable trade or business, and not merely as a hobby.'');
United States v. Norman, No. 4-10CR00059-JLH, 2011 WL 2678821, at *3
(E.D. Ark. 2011) (defendant placed advertisements in local newspaper
and on a website).
\95\ See, e.g., United States v. Wilkening, 485 F.2d 234, 235
(8th Cir. 1973) (defendant set up a glass display case and displayed
for sale numerous ordinary long guns and handguns that were not
curios or relics); United States v. Jackson, 352 F. Supp. 672, 676
(S.D. Ohio 1972), aff'd, 480 F.2d 927 (6th Cir. 1973) (defendant set
up glass display case, displaying numerous long guns and handguns
for sale which were not curios or relics); Press Release USAO,
Asheville Man Sentenced For Dealing Firearms Without A License,
(Jan. 20, 2017), https://www.justice.gov/usao-wdnc/pr/asheville-man-sentenced-dealing-firearms-without-license-0 (defendant sold
firearms without a license from his military surplus store).
\96\ See, e.g., United States v. White, 175 F. App'x 941, 942
(9th Cir. 2006) (``Appellant also created a list of all the firearms
he remembers selling and the person to whom he sold the firearm.'');
Dettra, 238 F.3d 424, at *2 (``Dettra carefully recorded the cost of
each firearm he acquired, enabling him to later determine the amount
needed to sell the item in a profitable manner.''); United States v.
Angelini, 607 F.2d 1305, 1307 (9th Cir. 1979) (defendant kept sales
slips or invoices).
\97\ See, e.g., King, 735 F.3d at 1106-07 (defendant
incorporated and funded firearms business ``on behalf'' of friend
whose American citizenship enabled business to obtain Federal
firearms license. He then misappropriated company's business
account, using falsified documentation to set up credit accounts);
Dettra, 238 F.3d 424, at *2 (defendant accepted credit card
payments).
\98\ Numerous jurisdictions require all persons with alarms or
security systems designed to seek a police response to be registered
with or obtain a permit from local police and pay the requisite fee.
See, e.g., Albemarle County (Virginia) Code Sec. 12-102(A);
Arlington County (Virginia) Code Sec. 33-10; Cincinnati (Ohio) City
Ord. Ch. 807-1-A4 (2); City of Coronado (California) Code Sec.
40.42.050)(A); Irvine (California) Code Sec. 4-19-105; Kansas City
(Missouri) Code Sec. 50-333(a); Larimer County (Colorado) Ord.
Sec. 3(A); Lincoln (Nebraska) Mun. Code Sec. 5.56.030(a); Los
Angeles (California) Mun. Code Sec. 103.206(b); Loudoun County
(Virginia) Code Sec. 655.03(a); Mobile (Alabama) Code Sec. 39-
62(g)(1); Montgomery County (Maryland) Code Sec. 3A-3; Prince
William County (Virginia) Code Sec. 2.5.25(a); Rio Rancho (New
Mexico) Mun. Code Sec. 97.04(A); Scottsdale (Arizona) Code Sec. 3-
10(a); Tempe (Arizona) Code Sec. 22-76; Washington County (Oregon)
Code Sec. 8.12.040; West Palm Beach (Florida) Code Sec. 46-32(a);
Wilmington (Delaware) Code Sec. 10-38(c); Woburn (Massachusetts)
Code Title 11 Sec. 8-18. Due to the value of the inventory and
assets they protect, for profit businesses are more likely to
maintain, register, and pay for these types of alarms rather than
individuals seeking to protect personal property. See generally What
is a Central Station Alarm Monitoring System?, agmonitoring.com
(July 10, 2019), https://www.agmonitoring.com/blog/industry-news/what-is-a-central-station-monitoring-system; Central Station Service
Certification, UL.com, https://www.ul.com/resources/central-station-
service-certification#:~:text=Station%20Service%20Certification-
,Overview,and%20initiates%20the%20appropriate%20response.
\99\ See, e.g., United States v. De La Paz-Rentas, 613 F.3d 18,
22-23 (1st Cir. 2010) (defendant hired as bodyguard for protection
in an unlawful firearms transaction).
\100\ See, e.g., United States v. Gray, 470 F. App'x at 469
(defendant sold firearms through his sporting goods store,
advertised his business using signs and flyers, and displayed guns
for sale, some with tags).
\101\ See, e.g., United States v. Kish, 424 F. App'x 398, 404
(6th Cir. 2011) (defendant could only have 200 firearms on display
because of insurance policy limitations).
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This set of rebuttable presumptions that establishes an intent ``to
predominantly earn a profit''--one of the elements of the definition of
``engaged in the business''--is separate from the set of presumptions
that establishes a person meets the definition of ``engaged in the
business.'' This second set of presumptions that addresses only intent
``to predominantly earn a profit'' may be used to independently
establish the requisite intent to profit in a particular proceeding. As
with the ``engaged in the business'' presumptions, the activities set
forth in these intent presumptions are not exhaustive of the conduct
that may show that, or be considered in determining whether, a person
actually has the requisite intent ``to predominantly earn a profit.''
There are many other fact patterns that do not fall within the specific
conduct that presumptively requires a license under this proposed rule
(e.g., firearms that were repetitively resold after 30 days from
purchase, or that were not in a like-new condition), but that reveal
one or more preparatory steps that presumptively demonstrate a
predominant intent to earn a profit from firearms transactions. Again,
none of these presumptions apply to criminal cases, but could be useful
to courts in criminal cases, for example, to inform appropriate jury
instructions regarding permissible inferences. These presumptions are
supported by the Department's investigative and regulatory efforts and
experience as well as conduct that the courts have relied upon in
determining whether a person was required to be licensed as a dealer in
firearms even before the BSCA expanded the definition.
H. Disposition of Business Inventory After Termination of License
One public safety issue that ATF has encountered over the years
relates to former licensees who have improperly liquidated their
business inventory of firearms without performing required background
checks or maintaining required records after the license was revoked,
denied renewal, or otherwise terminated (e.g., license expiration or
surrender of license).\102\ Sometimes former licensees even continue to
acquire more firearms for resale (``restocking'') after license
termination, a practice that is clearly inconsistent with the concept
of ``liquidation.'' These activities, in turn, have resulted in
numerous firearms being sold by former licensees (including those whose
licenses have been revoked or denied due to willful GCA violations) to
potentially prohibited persons without any ability to trace those
firearms if later used in crime.\103\
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\102\ The problem of licensees liquidating a former licensee's
business firearms as firearms from their ``personal collections''
without background checks or recordkeeping has been referred to by
some advocacy groups and members of Congress as the ``fire-sale
loophole.'' See Dan McCue, Booker Bill Takes Aim at Gun Fire Sale
Loophole, The Well News (Sept. 9, 2022), https://www.thewellnews.com/guns/booker-bill-takes-aim-at-gun-fire-sale-loophole/; Shira Toeplitz, Ackerman proposes gun-control bill to
close `firesale loophole', Politico (Jan. 12, 2011), https://www.politico.com/blogs/on-congress/2011/01/ackerman-proposes-gun-control-bill-to-close-firesale-loophole-032289; Annie Linskey,
Closed store is a source of guns, The Baltimore Sun (Apr. 15, 2008),
https://www.baltimoresun.com/news/bs-xpm-2008-04-15-0804150118-story.html (after revocation of license, a dealer transferred around
700 guns to his ``personal collection'' and continued to sell them
without recordkeeping).
\103\ See, e.g., Dettra, 238 F.3d 424, at *2 (defendant
continued to deal in firearms after license revocation); Press
Release OPA, Gunsmoke Gun Shop Owner and Former Discovery Channel
Star Indicted and Arrested for Conspiracy, Dealing in Firearms
without a License and Tax Related Charges (Feb. 11, 2016), https://www.justice.gov/opa/pr/gunsmoke-gun-shop-owner-and-former-discovery-channel-star-indicted-and-arrested-conspiracy (defendant continued
to deal in firearms at a different address after he surrendered his
FFL due to his violations of the Federal firearms laws and
regulations); Kish, 424 F. App'x at 405 (defendant continued to sell
firearms after revocation of license); Gilbert v. Bangs, 813 F.
Supp. 2d 669, 672 (D. Md. 2011), aff'd 481 F. App'x 52 (4th Cir.
2012) (license denied to applicant who willfully engaged in the
business after license revocation); ATF Letter to AUSA (Mar. 13,
1998) (advising that seized firearms offered for sale were not
deemed to be part of a ``personal collection'' after surrender of
license).
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For this reason, the proposed rule also would revise the
regulation's sections on discontinuing business, 27 CFR 478.57 and
478.78, to clarify statutory requirements regarding firearms that
remain in the possession of a former licensee (or a responsible person
of the former licensee) at the time the license is terminated. Again,
firearms that were in the business inventory of a former licensee at
the time the license was terminated (i.e., license revocation, denial
of license renewal, license expiration, or surrender of license) and
that remain in the possession of the licensee (or a responsible person
acting on behalf of the former licensee), are not part of a ``personal
collection.'' While 18 U.S.C. 921(a)(21)(C) allows an unlicensed person
to ``sell all or part of his personal collection'' without being
considered ``engaged in the business,'' in this context, these firearms
were purchased by the former licensee as business inventory and were
not accumulated by that person for study, comparison, exhibition, or
for a hobby.
Also, firearms that were transferred by a former licensee to a
personal collection prior to the time the license was terminated cannot
be considered part of a personal collection unless one year has passed
from the date the firearm was transferred into the personal collection
before the license was terminated. This gives effect to 18 U.S.C.
923(c), which requires that all firearms acquired by a licensee be
maintained as part of a personal collection for a period of at least
one year before they lose their status as business firearms.
Under amended 27 CFR 478.57 (discontinuance of business) and 27 CFR
478.78 (operations by licensee after notice), as proposed, once a
license has been terminated (i.e., license revocation, denial of
license renewal, license expiration, or surrender of license), the
former licensee will have 30 days, or such additional period designated
by the Director for good cause, to either: (1) liquidate any remaining
business inventory by selling or otherwise disposing of the firearms to
a licensed importer, licensed manufacturer, or licensed dealer for
sale, auction, or pawn redemption in accordance with this part; or (2)
transfer the remaining business inventory to a personal collection of
the former licensee (or a responsible person of the former licensee),
provided the recipient is not prohibited by law from receiving or
possessing firearms. Except for the sale of remaining inventory to a
licensee within the 30-day period (or designated additional period), a
former licensee (or responsible person of such licensee)
[[Page 62007]]
who resells any such inventory, including business inventory
transferred to a personal collection, would be subject to the same
presumptions in 27 CFR 478.11 (definition of ``engaged in the
business'' as a dealer other than a gunsmith or pawnbroker) that apply
to a person who repetitively purchased those firearms for the purpose
of resale.
The 30-day period from license termination for a former licensee to
transfer the firearms to either another licensee or to a personal
collection is derived from the disposition of records requirement in
the GCA, 18 U.S.C. 923(g)(4), which is a reasonable period for that
person to wind down operations after discontinuance of business without
acquiring new firearms.\104\ That period of liquidation may be extended
by the Director for good cause, such as to allow pawn redemptions if
required by State, local, or Tribal law. However, former licensees (or
responsible persons of such licensees) who choose not to sell the
remaining business inventory to a licensee within the 30-day period (or
designated additional period), and who continue to sell those firearms,
are not permitted under the GCA to engage in the business of dealing in
firearms without a license. Former licensees (or responsible person)
who sell business inventory after that period (or within that period to
unlicensed persons), or within one year from transfer to a personal
collection, have no special legal exemptions that give them greater
privileges to conduct business than a licensee.
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\104\ See also 27 CFR 478.57 (requiring the owner of a
discontinued or succeeded business to notify ATF of such
discontinuance or succession within 30 days), and 478.127 (requiring
discontinued businesses to turn in records within 30 days).
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Moreover, a former licensee is not permitted to continue to engage
in the business of importing, manufacturing, or dealing in firearms by
importing or manufacturing additional firearms for purposes of sale or
distribution, or purchasing additional firearms for resale (i.e.,
``restocking'') without a license. Therefore, a former licensee (or
responsible person) is subject to the same presumptions in 27 CFR
478.11 (definition of ``engaged in the business'' as a dealer other
than a gunsmith or pawnbroker) that apply to persons who sell firearms
that were repetitively purchased with the predominant intent to earn a
profit and any sales by such a person will be closely scrutinized by
ATF on a case-by-case basis.
I. Transfer of Firearms Between FFLs and Form 4473
Finally, to ensure the traceability of all firearms acquired by
licensees from other licensees, the proposed rule would make clear that
licensees cannot satisfy their obligations under 18 U.S.C. 923(g)(1)(A)
by completing a Form 4473 when selling or otherwise disposing of
firearms to another licensed importer, licensed manufacturer, or
licensed dealer, or a curio or relic to a licensed collector, including
a sole proprietor licensee who transfers the firearm to their personal
collection in accordance with 27 CFR 478.125a.\105\ Form 4473 was not
intended for use by licensees when transferring firearms to other
licensees or by a sole proprietor transferring to their personal
collection.
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\105\ See ATF FFL Newsletter, Mar. 2006, at 7 (``A dealer who
purchases a firearm from another licensee should advise the
transferor licensee of his or her licensed status so the transferor
licensee's records may accurately reflect that this is a transaction
between licensees. An ATF Form 4473 should not be completed for such
a transaction, because this form is used only for a disposition to a
nonlicensee.'').
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Pursuant to 18 U.S.C. 926(a)(1) and 27 CFR 478.94, when a licensee
transfers a firearm to another licensee, the transferor must first
verify the recipient's identity and license status by examining a
certified copy of the recipient's license and recording the transfer as
a disposition to that licensee in the bound book record. In turn, the
recipient licensee must record the receipt as an acquisition in their
bound book record. See 27 CFR 478, subpart H. If a recipient licensee
were to complete a Form 4473 for the purchase of a firearm, but not
record that receipt in their bound book record asserting it is a
``personal firearm,'' then tracing efforts pursuant to the GCA could be
hampered if the firearm was later used in a crime.
However, this clarification that FFLs may not satisfy their
obligations by completing a Form 4473 to transfer firearms between
themselves would not include dispositions by a licensed legal entity
such as a corporation, LLC, or partnership, to the personal collection
of a responsible person of such an entity. This is because when an
individual responsible person does not acquire a firearm as an employee
on behalf of the business entity, it results in a change in dominion or
control, or ``transfer,'' subject to all GCA requirements.\106\ Such an
entity, including a corporation or partnership, must therefore use a
Form 4473, NICS check, and disposition record entry when transferring a
firearm to one of its individual officers (or partners, in the case of
a partnership) for their personal use.\107\
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\106\ See ATF Ruling 2010-1 (permanently assigning a firearm to
a specific employee for personal use is considered a ``transfer''
that would trigger the recordkeeping and NICS background check
requirements).
\107\ See ATF Q&A, Does an officer or employee of an entity that
holds a federal firearms license, such as a corporation, have to
undergo a NICS check when acquiring a firearm for their own personal
collection?, https://ww.atf.gov/firearms/qa/does-officer-or-employee-entity-holds-federal-firearms-license-such-cororation-have
(May 22, 2020); 2 ATF FFL Newsletter, Sept. 2013, at 4.
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III. Statutory and Executive Order Review
A. Executive Orders 12866, 13563, and 14094
Executive Order 12866 (``Regulatory Planning and Review'') directs
agencies to assess the costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health and safety effects, distributive impacts,
and equity). Executive Order 13563 (``Improving Regulation and
Regulatory Review'') emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. Executive Order 14094 (``Modernizing Regulatory
Review'') amends section 3(f) of Executive Order 12866.
The Office of Management and Budget (``OMB'') has determined that
this proposed rule is a ``significant regulatory action'' under
Executive Order 12866, as amended by Executive Order 14094, though it
is not a section 3(f)(1) significant action. Accordingly, the proposed
rule has been reviewed by OMB. While portions of this proposed rule
merely incorporate the BSCA's statutory definitions into ATF's
regulations, this rulemaking, if finalized, may result in additional
unlicensed persons becoming FFLs if the unlicensed persons intend to
regularly purchase and resell firearms to predominantly earn a profit.
1. Need for Federal Regulation
This proposed rule would implement the BSCA by incorporating
statutory definitions into ATF's regulations and clarifying the
criteria for determining when a person is ``engaged in the business''
requiring a license to deal in firearms. The rulemaking is necessary to
implement a new statutory provision on being engaged in the business as
a wholesale or retail dealer; to clarify prior regulatory provisions
that relate to that topic; and to codify practices and policies on that
issue. In addition to establishing specific, easy-to-follow standards
regarding when buying and selling firearms presumptively crosses the
threshold into being ``engaged in the
[[Page 62008]]
business,'' the rule also would recognize that individuals are allowed
by law to occasionally buy and sell firearms for the enhancement of a
personal collection or a legitimate hobby without the need to obtain a
license.
2. Population
This proposed rule implements a statutory requirement that affects
persons who repetitively purchase and resell (including bartering)
firearms and are required to be, but are not currently, licensed. As
described in the preamble of this NPRM, these may be persons who
purchase, sell, or transfer firearms from places other than traditional
brick-and-mortar stores, such as at a gun show or event, flea market,
auction house, or gun range or club; at one's home; by mail order, or
over the internet; through the use of other electronic means (e.g., an
online broker, online auction, text messaging service, social media
raffle, or website); or at any other domestic or international public
or private marketplace or premises. A person may be required to have a
license to deal in firearms regardless of where, or the medium through
which, they purchase or sell (or barter) firearms, including locations
other than a traditional brick and mortar store.
The GCA prohibits ATF from prescribing regulations that establish
any ``system of registration'' of firearms, firearms owners, or
firearms transactions or dispositions.\108\ Furthermore, because those
willfully engaged in the business of dealing in firearms without a
license are violating Federal law, these individuals often take steps
to avoid detection by law enforcement, making it additionally difficult
for ATF to precisely estimate the population. Therefore, for purposes
of this analysis, ATF used information gleaned from ArmsList, an online
broker website that facilitates the sales or bartering of firearms, as
a means of estimating a population of unlicensed persons selling
firearms using online resources.\109\ ATF focused its efforts on
estimating an affected population using ArmsList since that website is
considered to be the largest source for unlicensed persons to sell
firearms on the internet.\110\ Out of a total listing of 30,806 entries
in the ``private party'' category (unlicensed users) on ArmsList, ATF
viewed a sample of 379 listings, and found that a given seller on
ArmsList had an average of three listings per seller.\111\ Based on
approximately 30,806 ``private party'' (unlicensed) sales listings on
ArmsList, ATF estimates that there are approximately 12,270 unlicensed
persons who sell on that website alone, selling an average of three
firearms per user.\112\ ATF estimates that ArmsList may hold
approximately 50 percent of the market share among websites that
unlicensed sellers may frequent. This means the 12,270 estimated
unlicensed persons on ArmsList would be about half, and the estimated
number of unlicensed sellers on all such websites would be
approximately 24,540 nationwide. The estimate of ArmsList's market
share is based on ATF Firearms Industry Programs Branch (``FIPB'')
subject matter expert (``SME'') opinion, news reports,\113\ and public
web traffic lists.\114\
---------------------------------------------------------------------------
\108\ 18 U.S.C. 926(a).
\109\ See www.Armslist.com.
\110\ Colin Lecher & Sean Campbell, The Craigslist of Guns:
Inside Armslist, the online `gun show that never ends', The Verge
(Jan. 16, 2020), https://www.theverge.com/2020/1/16/21067793/guns-online-armslist-marketplace-craigslist-sales-buy-crime-investigation
(``Over the years, [Armslist] has become a major destination for
firearm buyers and sellers.''); Tasneem Raja, Semi-Automatics
Without A Background Check Can Be A Click Away, NPR (June 17, 2016),
https://www.npr.org/sections/alltechconsidered/2016/06/17/482483537/semi-automatic-weapons-without-a-background-check-can-be-just-a-click-away (``Armslist isn't the only site of its kind, though it is
considered to be the biggest and most popular.'').
\111\ A sample of 379 listings from an estimated population of
30,806 listings (viewed between Mar. 1 and 2, 2023), using a 95
percent confidence level and a confidence interval of 5. See Sample
Size Calculator- Confidence Level, Confidence Interval, Sample Size,
Population Size, Relevant Population, https://www.surveysystem.com/sscalc.htm.
\112\ 12,270 unlicensed individuals = 30,806 ``private party''
unlicensed listings on ArmsList/2.51 average listings per user.
\113\ See footnote 110, supra.
\114\ Similar web profile and market share lists are available
at https://www.similarweb.com/website/armslist.com/#overview.
---------------------------------------------------------------------------
To better estimate both online and offline sales, ATF assumed,
based on best professional judgment of FIPB SMEs and with limited
available information, that the national online marketplace estimate
above may represent 25 percent of the total national firearms market,
which would also include in-person, local, or other offline
transactions like flea markets, State-wide exchanges, or websites
within each of the 50 States.
While this would bring the total estimated market to approximately
98,160 unlicensed sellers,\115\ this figure would need to be reduced by
the estimated subset of this population of persons who occasionally
sell their firearms without needing to obtain a license (e.g., as part
of their hobby or enhancement of their personal collection). Also,
based on limited available information, ATF's best, very conservative
assessment from FIPB SMEs is that at least 25 percent of the estimated
total number of unlicensed sellers may be considered engaged in the
business and would subsequently need to become an FFL in order to
continue making their repetitive sales of firearms. The actual number
may be higher, but ATF does not have data to support a higher number.
Using the information gleaned from ArmsList, this means that 24,540 is
the estimated number of unlicensed persons that may be considered
engaged in the business and affected by this proposed rule.
---------------------------------------------------------------------------
\115\ The online estimate of 24,540 = at least 25 percent of
national firearms market. So, 100 percent of the firearms market
would be 4 * 24,540 = 98,160.
---------------------------------------------------------------------------
Because there is no definitive information, the actual number of
total unlicensed sellers may be higher. Therefore, ATF also calculated
a second possible estimate using information from a published survey by
the Russell Sage Foundation regarding a similar, but differently
sourced estimated population of private sellers of firearms.\116\ Based
on the 2020 U.S. Census, there are 258.3 million adults (over 18).\117\
ATF used the U.S. Census as a basis for the population and also
percentages from ``The Stock and Flow of U.S. Firearms: Results from
the 2015 National Firearms Survey,'' published by the Russell Sage
Foundation.\118\ This survey showed that 22 percent of the U.S. adult
population owns at least one firearm (56.84 million adults), and of
this, five percent transferred firearms (2.84 million). Of the five
percent that transferred, 71 percent sold a firearm (2.02 million). Of
those that sold a firearm, 51 percent (1.03 million) sold through
various mediums (e.g., online, pawnshop, gun shop) other than through
or to a family member or friend (which likely would not be affected by
this rulemaking).\119\ Of the five percent
[[Page 62009]]
that transferred a firearm, ten percent traded or bartered (284,178).
Thus, taking the 51 percent that sold (1.03 million) and the ten
percent (284,178) that transferred by trading or bartering, the total
number of unlicensed persons that may transfer a firearm, based on this
survey, in any given timeframe is 1.31 million. Of the 1.31 million
unlicensed persons selling, trading, or bartering firearms, ATF
continues to assume, based on the best, very conservative assessment
from SME experts, that 25 percent (or 328,296 unlicensed individuals)
may be engaged in the business with an intent to profit. In sum, based
on these limited sources of information, ATF estimates either 24,540 or
328,296 could represent an estimate of unlicensed persons that may be
engaged in the business and affected by this proposed rule.
---------------------------------------------------------------------------
\116\ Azrael, D., Hepburn, L., Hemenway, D., & Miller, M.
(2017). The stock and flow of U.S. firearms: Results from the 2015
National Firearms Survey. The Russell Sage Foundation Journal of the
Social Sciences, 3(5), pp 38-57 (pp. 39 and 51). https://www.jstor.org/stable/10.7758/rsf.2017.3.5.02?seq=1.
\117\ U.S. Census, Stella U. Ogunwole, et al., U.S. Adult
Population Grew Faster Than Nation's Total Population From 2010 to
2020, U.S. Census (Aug. 12, 2021), https://www.census.gov/library/stories/2021/08/united-states-adult-population-grew-faster-than-nations-total-population-from-2010-to-2020.html.
\118\ Azrael, D., Hepburn, L., Hemenway, D., & Miller, M.
(2017). The stock and flow of U.S. firearms: Results from the 2015
National Firearms Survey. The Russell Sage Foundation Journal of the
Social Sciences, 3(5), pp 38-57 (pp. 39 and 51). https://www.jstor.org/stable/10.7758/rsf.2017.3.5.02?seq=1.
\119\ The Russell Sage Foundation Survey did not divide those
who sold to family or friends on a recurring basis from those who
made an occasional sale, or between those who did so with intent to
earn a profit and those who did not. As noted earlier in the
preamble, a person who makes only occasional firearms transfers,
such as gifts, to immediate family (without the intent to earn a
profit or circumvent requirements placed on licensees), generally
does not qualify as a dealer engaged in the business. Although it is
possible that some portion of the Russell Sage set of family and
friend transferors might qualify as dealers if they engage in
actions such as recurring transfers, transfers to others in addition
to immediate family, or transfers with intent to profit, ATF was not
in a position to make that determination from the Survey. Therefore,
ATF erred on the side of assuming, for the purpose of this analysis,
that the Russell Sage Foundation data on transfers to family and
friends would likely not be affected by this rulemaking, since, in
general, such transfers are less likely to be recurring or for
profit.
---------------------------------------------------------------------------
ATF requests public comments on what sources ATF should look to for
accurate estimates of the percentage of the population that would need
to obtain a license because they are ``engaged in the business'' of
dealing in firearms, compared to those who make occasional sales of
firearms (e.g., enhancement of a personal collection or for a hobby)
and would not need to obtain a license.
3. Costs for Unlicensed Persons Becoming FFLs
As stated earlier, consistent with the statutory changes in the
BSCA, this proposed rule implements a new statutory provision that
requires individuals to become licensed dealers if they intend
predominantly to earn a profit through the repetitive purchase and
resale of firearms (which includes benefits from bartering). Costs to
become an FFL include an initial application on a Form 7, along with
fingerprints and photographs, and a qualification inspection. This
application would require fingerprints and photographs, not only from
the person applying, but also, in the case of a corporation,
partnership, or association, from any other individual who is a
responsible person of that business entity.
For purposes of this analysis, ATF assumes that most, if not all
unlicensed persons may be operating alone as sole proprietors because
this new requirement would likely affect persons who have other sources
of income and do not currently view licensing as a requirement. Besides
the initial cost of becoming an FFL, there are recurring costs to
maintain a license. These costs include renewing the license on a
Federal Firearms License Renewal Application, ATF Form 8 (5310.11)
(``Form 8'') every three years, maintaining acquisition and disposition
(``A&D'') records, maintaining ATF Forms 4473, and undergoing periodic
compliance inspections.
The proposed rule, which further implements the statutory changes
in the BSCA, would affect unlicensed persons who purchase and resell
firearms with the intent to predominantly earn a profit (as defined),
not those who are already licensed. Because affected unlicensed persons
would now need a license to continue to purchase and resell firearms,
ATF estimates that the opportunity costs of acquiring a license would
be based on their free time or ``leisure time.'' Based on the
Department of Transportation's (``DOT's'') guidance on the costs for
leisure time, ATF attempted to update the leisure wage below based on
the methodology outlined in the guidance.\120\ The DOT uses median
household income as the base for income from the U.S. Census. ATF used
the latest median income of a household from the U.S. Census, published
September 2021.\121\ Table 1 outlines the leisure wage.
---------------------------------------------------------------------------
\120\ Department of Transportation, The Value of Travel Time
Savings: Departmental Guidance for Conducting Economic Evaluations
Revision 2 (2016 Update), https://www.transportation.gov/sites/dot.gov/files/docs/2016%20Revised%20Value%20of%20Travel%20Time%20Guidance.pdf.
\121\ U.S. Census, Income and Poverty in the United States:
2020, https://www.census.gov/library/publications/2021/demo/p60-273.html.
Table 1--Leisure Wage Rate for Individuals
------------------------------------------------------------------------
Inputs for leisure wage rate Numerical inputs
------------------------------------------------------------------------
Median Household Income................... $67,521.
DOT Travel Time........................... 2080.
DOT's Value of Travel Time Savings........ 50 percent.
Leisure Wage Rate......................... $16.23.
Rounded Leisure Wage Rate................. $16.
------------------------------------------------------------------------
Based on DOT's methodology for leisure time, ATF attributes a
rounded value of $16 per hour for time spent buying and reselling
(including bartering) firearms on a repetitive basis. The same hourly
cost applies to persons who would now become licensed as a firearms
dealer who would not have become licensed without the clarifications
provided by this proposed rule. This could include persons who begin
selling firearms after the final rule's effective date and understand
from the rule that they qualify as firearms dealers (as defined by the
statute and regulations), or persons who were previously selling
without a license and now realize they must acquire one to continue
selling because their firearms transactions qualify them as dealers.
In addition to the cost of time, there are other costs associated
with applying to become an FFL. To become an FFL, persons need to apply
on a Form 7 and submit payment to ATF for fees associated with the Form
7 application. Furthermore, these unlicensed persons would need to
obtain documentation, including fingerprints and photographs, undergo a
background investigation, and submit all paperwork via mail. While not
a cost attributed towards their first-year application to become an
FFL, an FFL will need to reapply to renew their license every three
years on a Form 8 renewal application to ensure that that they can
continue to sell firearms thereafter. Table 2 outlines the costs to
become an FFL and costs to maintain a license.
[[Page 62010]]
Table 2--Cost Inputs To Become an FFL and Maintain a License
------------------------------------------------------------------------
Item Cost item Source
------------------------------------------------------------------------
Form 7 Application Accompanying $200.00 Application for Federal
Licensing Fees. Firearms License, ATF,
https://www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download download.
Fingerprint Cards.............. 0.00 Distribution Center
Order Form, ATF,
https://www.atf.gov/distribution-center-order-form (Apr. 20,
2023).
Fingerprint Cards (Commercial). 23.70 Various Sources.
Average Cost for Fingerprint 12 See above.
Cards.
Postage........................ 0.63 Mailing and Shipping
Prices, USPS, https://www.usps.com/business/prices.htm (last
visited Aug. 17,
2023).
Photograph..................... 16.99 Passport Photos, CVS,
https://www.cvs.com/photo/passport-photos
(last visited Aug. 17,
2023).
FFL Renewal Application 90.00 Federal Firearms
Licensing Fees (Form 8) every Licensing Center
three years. (``FFLC'').
------------------------------------------------------------------------
For purposes of this proposed rule, ATF assumes that unlicensed
persons applying for a license as a result of this rulemaking are
likely to file for a Type 01 Dealer license.\122\ This license costs
$200 and uses a Form 7 application (and every three years thereafter,
costs $90 to renew the license using Form 8). Applicants also need to
obtain and submit fingerprints in paper format. The unlicensed person
can obtain fingerprint cards for free from ATF and travel to select law
enforcement offices that perform fingerprinting services (usually also
for free). Or the unlicensed person may pay a fee to various market
entities that offer fingerprinting services in paper format. The
average cost found for market services for fingerprinting on paper
cards is $24 (rounded).
---------------------------------------------------------------------------
\122\ The cost for a Type 01 Dealer is used because this license
is used to purchase and resell firearms at wholesale or retail.
---------------------------------------------------------------------------
Because it is not clear whether an unlicensed person would choose
to obtain fingerprint cards from ATF and go to a local law enforcement
office that provides fingerprinting services or use commercial services
both to obtain cards and fingerprinting services, an average cost of
$12 was used. In addition to paper fingerprint cards, the unlicensed
person must also submit a photograph appropriate for obtaining
passports. The cost for a passport photo is $17 (rounded). Once they
complete the application and gather the documentation, unlicensed
persons must submit the Form 7 package by mail. ATF rounds the first-
class stamp rate of $0.63 to $1 for calculating the estimated mailing
cost.
In addition to costs associated with compiling documentation for a
Form 7 application, ATF estimates time burdens related to obtaining and
maintaining a Federal firearms license. Table 3 outlines the hourly
burdens to apply, obtain, and maintain a license.
Table 3--Hourly Burdens To Apply, Obtain, and Maintain a License
------------------------------------------------------------------------
Activity type Hourly burden Source
------------------------------------------------------------------------
Form 7 Application............. 1 Application for Federal
Firearms License, ATF,
https://www.atf.gov/firearms/docs/form/form-7-7-cr-application-federal-firearms-license-atf-form-531012531016/download download.
Time to Travel to and Obtain 0.5 N/A.
Photograph.
Time to Travel to and Obtain 1 N/A.
Fingerprints.
A&D Records.................... 0.05 OMB 1140-0032.
Form 4473...................... 0.5 OMB 1140-0020.
Inspection Times (Qualification 3 Field Operations and
or Compliance). OMB 1140-0032.
------------------------------------------------------------------------
As stated above, hourly burdens include one hour to complete a Form
7 license application and the time spent to obtain the required
documentation. For purposes of this analysis, ATF assumes that places
that offer passport photograph services are more readily available than
places that provide fingerprinting services; therefore, ATF estimates
that it may take 30 minutes (0.5 hours) to travel to and obtain a
passport photograph and estimates up to one hour to travel to and
obtain fingerprinting services. Other time burdens may range from 0.05
hours (three minutes) to enter and maintain A&D records for each
firearm transaction and 0.5 hours for maintaining a Form 4473, to three
hours for an inspection (qualification or compliance).
ATF then multiplied the hourly burdens by the $16 leisure wage rate
to account for the value of time spent applying for and obtaining a
license using a Form 7 (including any other actions related to
obtaining a license), then added the cost per item to determine a cost
per action taken. Table 4 outlines the first-year costs to apply for an
FFL.
[[Page 62011]]
Table 4--First-Year Costs To Obtain a Type 01 FFL
----------------------------------------------------------------------------------------------------------------
Rounded cost
Cost item Hourly burden Hourly wage Hourly cost Cost item for each
rate activity
----------------------------------------------------------------------------------------------------------------
Form 7.......................... 1 $16 $16 $200 $216
Fingerprints.................... 1 16 16 12 28
Passport Photograph............. 0.5 16 8 17 25
Postage......................... N/A 16 N/A 0.63 1
Qualification Inspection........ 3 16 48 N/A 48
-------------------------------------------------------------------------------
Initial Cost................ .............. .............. .............. .............. 318
----------------------------------------------------------------------------------------------------------------
Overall, ATF estimates that it would cost an unlicensed person $318
in terms of time spent and fees paid to apply under a Form 7 to become
a Type 01 FFL. ATF considers the $318 as an unlicensed person's initial
cost. In addition to their initial cost, the newly created FFL would
need to maintain a Form 4473 (for each firearm sale), A&D records (two
entries per firearm: one entry to purchase and one entry to sell) for
every firearms transaction, undergo periodic compliance inspections,
and renew their license every three years (ATF Form 8 application).
Table 5 outlines the cost per recurring activity to maintain an FFL.
Table 5--Recurring Costs To Maintain an FFL
----------------------------------------------------------------------------------------------------------------
Rounded
Number of entries Hourly Hourly Hourly cost for
Item or applications burden wage rate cost per Cost item each
activity activity
----------------------------------------------------------------------------------------------------------------
Form 8 Renewal Application...... 1 (every three 0.5 $16.00 $8.00 $90 $98
years).
Form 4473....................... 3 (firearm sales 0.5 16.00 24.00 N/A 24
every year).
A&D Records..................... 6 (two entries per 0.05 16.00 4.80 N/A 5
firearm every
year).
Compliance Inspections.......... 1 (periodically).. 3 16.00 48.00 N/A 48
----------------------------------------------------------------------------------------------------------------
While renewing a license under a Form 8 application occurs every
three years, there are additional costs associated with Form 4473 and
A&D records that may occur more often. There are also costs from
compliance inspections that may occur periodically. ATF notes that the
actual number of firearms sales may range from zero sales to more than
three per year, but for purposes of this economic analysis only, ATF
uses three firearms (six A&D entries) per year to illustrate the
potential costs that a person may incur based on information gleaned
from ArmsList. Although a person might not resell a given firearm in
the same year they purchase it, for the purposes of these estimates,
this analysis includes both ends of the firearm transaction because
they could buy and sell the same firearm or buy one and sell a
different one in a given year.
As for compliance inspections, based on information gathered from
ATF's Office of Field Operations, the frequency of such inspections
varies depending on the size of the area of operations and the number
of FFLs per area of operations. Overall, ATF estimates that it inspects
approximately eight percent of all existing FFLs in any given year. ATF
has indicated the cost of an inspection, which would normally not occur
more than once in a given year per FFL. ATF performs compliance
inspections annually, so while the FFL would not necessarily incur a
compliance inspection every year, this analysis includes an annual cost
for inspections to account for a subset of the total number of affected
FFLs that would be inspected in any given year.
In summary, ATF estimates that it would cost an individual $318 in
the first year to become licensed. Furthermore, this individual would
incur annually recurring costs that could range from $29 a year to
complete Forms 4473 and maintain A&D records to $175 to include Form 8
renewal costs and compliance inspections.\123\ In addition, ATF
estimates that annual costs would range from $805,884 to $7.8 million,
with the $7.8 million being the highest annual cost, occurring in the
first year, using the SME estimates. Using the alternative inputs from
the Russell Sage Foundation Survey results in annual costs ranging from
$10.8 million to $104.4 million. Tables 6 and 7 illustrate the 10-year
period of analysis.
---------------------------------------------------------------------------
\123\ ATF notes that the high $175 may be higher than actual
costs since this high cost assumes that an FFL would simultaneously
renew their license (which occurs every three years) in the same
year that they perform a compliance inspection, which occurs
periodically.
Table 6--10-Year Private Costs to the Proposed Rule Using SME Estimate
----------------------------------------------------------------------------------------------------------------
Discounted at 3 Discounted at 7
Year Undiscounted percent percent
----------------------------------------------------------------------------------------------------------------
1......................................................... $7,803,720 $7,576,427 $7,293,196
2......................................................... 805,884 759,623 703,890
3......................................................... 805,884 737,498 657,841
4......................................................... 3,210,804 2,852,758 2,449,507
5......................................................... 805,884 695,163 574,584
6......................................................... 805,884 674,915 536,995
[[Page 62012]]
7......................................................... 3,210,804 2,610,677 1,999,527
8......................................................... 805,884 636,172 469,032
9......................................................... 805,884 617,643 438,348
10........................................................ 3,210,804 2,389,140 1,632,210
-----------------------------------------------------
Total................................................. 22,271,436 19,550,016 16,755,130
Annualized............................................ ................ 2,291,858 2,385,554
----------------------------------------------------------------------------------------------------------------
Overall, the annualized private cost of this proposed rule using
SME estimates is $2.3 million at three percent and $2.4 million at
seven percent.
Table 7--10-Year Private Costs to the Proposed Rule Using the Russell Sage Foundation Survey
----------------------------------------------------------------------------------------------------------------
Discounted at 3 Discounted at 7
Year Undiscounted percent percent
----------------------------------------------------------------------------------------------------------------
1......................................................... $104,398,128 $101,357,406 $97,568,344
2......................................................... 10,781,256 10,162,368 9,416,767
3......................................................... 10,781,256 9,866,377 8,800,716
4......................................................... 42,954,264 38,164,307 32,769,602
5......................................................... 10,781,256 9,300,006 7,686,887
6......................................................... 10,781,256 9,029,132 7,184,006
7......................................................... 42,954,264 34,925,747 26,749,757
8......................................................... 10,781,256 8,510,823 6,274,789
9......................................................... 10,781,256 8,262,935 5,864,289
10........................................................ 42,954,264 31,962,006 21,835,770
-----------------------------------------------------
Total................................................. 297,948,456 261,541,108 224,150,926
Annualized............................................ ................ 30,660,597 31,914,049
----------------------------------------------------------------------------------------------------------------
Overall, the annualized private cost of this proposed rule, based
on alternate inputs from the Russell Sage Foundation Survey, is $30.7
million at three percent and $31.9 million at seven percent.
4. Costs for FFLs After Termination of License
The proposed rule is also designed to enhance compliance by former
FFLs who no longer hold their licenses due to license revocation,
denial of license renewal, license expiration, or surrender of license
but nonetheless engage in the business of dealing in firearms. Such
persons sometimes, under existing standards, transfer their inventory
to their personal collections instead of selling or otherwise disposing
of the firearms to a licensed importer, licensed manufacturer, or
licensed dealer for sale, auction, or pawn redemption. The proposed
rule would clarify that such former licensees must sell to other
licenses or transfer their personal collection within 30 days, but they
may not treat a business firearm that they have transferred to their
personal collection as a personal firearm until the firearm has been in
their personal collection for a period of one year. Former FFLs who
sell any such firearm within one year of the transfer date as a
personal firearm may be in violation of existing statutory and
regulatory restrictions (18 U.S.C. 922(a)(1)(A) and 923(a),(c)) on
unlicensed dealers, and may be deemed to be ``engaged in the
business.''
ATF license revocation, denial of license renewal, license
expiration, or surrender of license realistically present two
categories of affected populations. Group 1, comprising license
revocations and denial of license renewals, could be described as
former FFLs who have failed to comply with existing regulations and
requirements to a degree which resulted in the revocation or denial of
their licenses. The proposed rule is likely to have a qualitative
impact on this group because a revocation or denial may not provide
ample opportunity for an orderly and planned liquidation or transfer of
inventory before losing the license, which may therefore be disruptive.
Based on data from the FFLC, the number of such FFL license revocations
are rare, with an average of 37 licenses revoked by ATF over the past 5
years (with a range between 8 and 79), or a de minimis percentage of
0.05 percent of all active FFLs. Furthermore, the economic impact of
transferring inventory to another FFL instead of the former FFL holder
retaining the inventory is unclear, as the underlying market value of
the inventory is unchanged by this proposed rule's requirements.
Additional factors surrounding the potential cost of no longer being
able to transfer one's inventory to oneself are also unknown and
presumed to similarly be de minimis. Therefore, ATF believes there are
no quantitative impacts associated with this population. However, ATF
welcomes public comments on these assumptions in general and on the
potential impacts on former FFLs with revoked licenses.
Group 2, comprising license expiration or surrender of license,
captures those who no longer have a license for discretionary or lawful
reasons. This group comprises former FFLs that choose to close or to
sell the business to another party. They are similarly excluded from
expected impacts attributable to the proposed rule because of the
likelihood that, because the closure is planned, the FFL will include
reasonable considerations for orderly, lawful liquidation or inventory
transfer as part of closing or selling their enterprise. Such
considerations are also likely to occur ahead of, rather than
subsequent to, the expiration or surrender of their license. As a
result, ATF assumes that the
[[Page 62013]]
options of transfer to the licensee's personal collection or sale to
another FFL that exist under current standards would similarly be
freely available to Group 2 FFLs over their expected course of action
under the proposed rule. As a result, we are excluding both groups from
the affected population.
5. Government Costs
In addition to the private costs to unlicensed persons, ATF would
incur additional work due to the increase in Form 7 and Form 8
applications for unlicensed persons who become an FFL which would be
offset by the fees incurred with FFL applications ($200) and renewals
($90). Based on information gathered from FFLC, which processes and
collects the fees for FFL applications, various contractors and Federal
Government employees process Form 7 and 8 applications, verify and
correct applications, and further process them for background checks
and approval.
Based on information provided by FFLC, the average hourly rate for
contracting staff, to include benefits, is $13.29.\124\ To determine
the wage rates for Federal employees, ATF used the wage rates according
to the General Schedule (``GS'') level, step 5 as an average wage rate
per activity. Government processing activities range from an entry
level Federal employee between a GS-5/7, upwards to a GS-13.\125\ To
account for fringe benefits such as insurance, ATF estimated a Federal
load rate. ATF estimated the Federal load rate using the methodology
outlined in the Congressional Budget Office's report comparing Federal
benefits to private sector benefits. It states that Federal benefits
are 17 percent more than private sector benefits (or a multiplier
factor of 1.17).\126\ ATF calculated private sector benefits from the
Bureau of Labor Statistics (in 2022) and determined that the overall
private sector benefits are 41.9 percent in addition to an hourly wage,
or a load rate of 1.419. This makes the Federal load rate 1.66 above
the hourly wage rate (after applying the 1.17 multiplier).\127\ Table 8
outlines the government costs to process a Form 7 application to become
an FFL.
---------------------------------------------------------------------------
\124\ ATF notes that because the contracting salary is a loaded
wage rate, a base wage rate (not including benefits) was not
included in table 8 below.
\125\ Office of Personnel Management, Salary Table 2023-DCB,
https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.
\126\ Congressional Budget Office, Comparing the Compensation of
Federal and Private-Sector Employees, 2011 to 2015, https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52637-federalprivatepay.pdf.
\127\ 1.66 Federal load rate = 1.419 private industry load rate
* 1.17 multiplier factor. BLS Series ID
CMU2010000000000D,CMU2010000000000P (Private Industry Compensation =
$39.34)/BLS Series ID CMU2020000000000D,CMU2020000000000P (Private
Industry Wages and Salaries = $27.73) = 1.419. BLS average 2022.
U.S. Bureau of Labor Statistics, Database for Employee Compensation,
https://data.bls.gov/cgi-bin/srgate.
Table 8--Hourly Burden and Cost To Process a New Application for an FFL
----------------------------------------------------------------------------------------------------------------
Loaded
Government cost to process new Hourly Staffing level Hourly hourly Rounded
FFL applications burden wage wage cost
----------------------------------------------------------------------------------------------------------------
Average Contracting Time to 0.5 Contracting Staff............ $13.29 $13.29 $7
Prepare and Enter Application.
Processing Time for New 1 GS 10........................ 38.85 64.49 64
Applications.
Processing Time for Fingerprint 2 GS 12........................ 51.15 84.91 170
Cards.
Qualification Inspection Time 5 GS 5/7 to GS 13.............. 37.65 62.50 312
(Includes Travel).
------------------------------------------------------------------------------
Subtotal..................... .......... ............................. .......... .......... 553
Fees Incurred from New .......... ............................. .......... .......... -200
Application.
------------------------------------------------------------------------------
Total.................... .......... ............................. .......... .......... 353
----------------------------------------------------------------------------------------------------------------
Based on the hourly burdens and the hourly wage rates for various
contract and Federal employees, ATF estimates that it would take on
average 8.5 hours to process a Form 7 application, at a cost of $553
per application, offset by the new application fee (Form 7) of $200,
for an overall net cost to the government for this rulemaking of $353.
Form 8 application renewals are estimated to cost $71 every three years
(or $553 less the $312 inspection time and the $170 fingerprint costs).
However, the cost to review a Form 8 application ($71) is offset by the
renewal fee of $90, making the net cost or overall savings to
government for this rulemaking -$19 per FFL renewal.
In addition to processing Form 7 applications, ATF Industry
Operations Investigators (``IOIs'') would need to perform qualification
and compliance inspections. The qualification inspection occurs once
during the application process and is accounted for in table 7 above.
But, as discussed above, there is a recurring compliance inspection
after the person becomes a licensee. For either the qualification or
compliance inspection, ATF notes that the estimated five-hour
inspection time for the government is more than the inspection time for
the private sector, as discussed above, because ATF is including travel
time for an IOI to travel to the person's location. Table 9 outlines
the recurring government cost to inspect an FFL.
Table 9--Recurring Government Costs To Inspect an FFL
----------------------------------------------------------------------------------------------------------------
Loaded
Activity Hourly Staffing level Hourly hourly Rounded
burden wage wage cost
----------------------------------------------------------------------------------------------------------------
Compliance Inspection (Includes 5 GS 5/7 to GS 13.............. $37.65 $62.50 $312
Travel).
----------------------------------------------------------------------------------------------------------------
Based on the hourly burdens and wage rates of IOIs, ATF anticipates
that it costs ATF $312 to perform a compliance inspection. To summarize
the overall government costs, table 10 outlines the government costs to
process
[[Page 62014]]
Form 7 applications, process Form 8 renewal applications, and conduct
FFL compliance inspections.
Table 10--Summary of Government Cost per Listed Action
------------------------------------------------------------------------
Government cost per unlicensed person Cost
------------------------------------------------------------------------
Per Application Cost (including qualification $353
inspection)............................................
Per Renewal Cost........................................ -19
Per Compliance Inspection Cost.......................... 312
------------------------------------------------------------------------
ATF estimates that the government costs of this proposed rule
include the initial application cost that occurs in the first year
(including the qualification inspection), renewal costs that occur
every three years after the first year, and the cost for the government
to conduct a compliance inspection of an FFL in a given year (the
government currently conducts compliance inspections of approximately
eight percent of FFLs per year). Table 11 illustrates the 10-year
government costs this proposed rule.
Table 11--Total Government Costs of Proposed Rule
----------------------------------------------------------------------------------------------------------------
Year Undiscounted 3 Percent 7 Percent
----------------------------------------------------------------------------- discount rate discount rate
-----------------------------------
Year Undiscounted 3% 7%
----------------------------------------------------------------------------------------------------------------
1......................................................... $8,662,620 $8,662,620 $8,662,620
2......................................................... 612,456 612,456 612,456
3......................................................... 612,456 612,456 612,456
4......................................................... 146,196 146,196 146,196
5......................................................... 612,456 612,456 612,456
6......................................................... 612,456 612,456 612,456
7......................................................... 146,196 146,196 146,196
8......................................................... 612,456 612,456 612,456
9......................................................... 612,456 612,456 612,456
10........................................................ 146,196 146,196 146,196
-----------------------------------------------------
Total................................................. 12,775,944 12,775,944 12,775,944
Annualized............................................ ................ 1,497,730 1,819,007
----------------------------------------------------------------------------------------------------------------
Overall, the annualized government cost of this proposed rule is
$1.5 million at three percent and $1.8 million at seven percent.
6. Total Cost
The total costs, therefore, take into account the private and
government costs of the proposed rule, as described in sections 3 and 5
above. ATF estimates that the initial application cost (Form 7 and
initial inspection) occurs in the first year, renewal costs (Form 8
renewals) occur every three years after the first year, and completion
and maintenance of Forms 4473 and A&D records, and compliance
inspection costs (for a subset of FFLs affected by this rulemaking),
occur annually. Tables 12 and 13 illustrate the 10-year private and
government costs of this proposed rule.
---------------------------------------------------------------------------
\128\ The ``Undiscounted'' column represents totals from the
underlying private and government cost tables. Consistent with
guidance provided by OMB in Circular A-4, the ``3 Percent Discount
Rate'' and ``7 Percent Discount Rate'' columns result from applying
an economic formula to the number in each row of this
``Undiscounted'' column to show how these future costs over time
would be valued today; they do not contain totals from other tables.
Table 12--Total Private and Government Costs of Proposed Rule Based on SME Estimates \128\
----------------------------------------------------------------------------------------------------------------
3 Percent 7 Percent
Year Undiscounted discount rate discount rate
----------------------------------------------------------------------------------------------------------------
1......................................................... $16,466,340 $15,986,738 $15,389,103
2......................................................... 1,418,340 1,336,921 1,238,833
3......................................................... 1,418,340 1,297,982 1,157,788
4......................................................... 3,357,000 2,982,651 2,561,039
5......................................................... 1,418,340 1,223,473 1,011,257
6......................................................... 1,418,340 1,187,837 945,100
7......................................................... 3,357,000 2,729,548 2,090,571
8......................................................... 1,418,340 1,119,651 825,487
9......................................................... 1,418,340 1,087,040 771,483
10........................................................ 3,357,000 2,497,923 1,706,529
Total................................................. 35,047,380 31,449,764 27,697,189
Annualized............................................ ................ 3,686,872 3,943,457
----------------------------------------------------------------------------------------------------------------
[[Page 62015]]
Overall, the total annualized cost of this proposed rule is $3.7
million at three percent and $3.9 million at seven percent using
information based off of SME estimates.
Table 13--Total Private and Government Costs of Proposed Rule Based on Russell Sage Foundation Survey and SME
Estimates \129\
----------------------------------------------------------------------------------------------------------------
Discounted at 3 Discounted at 7
Year Undiscounted percent percent
----------------------------------------------------------------------------------------------------------------
1......................................................... $113,060,748 $109,767,717 $105,664,250
2......................................................... 11,393,712 10,739,666 9,951,709
3......................................................... 11,393,712 10,426,861 9,300,663
4......................................................... 43,100,460 38,294,200 32,881,135
5......................................................... 11,393,712 9,828,316 8,123,559
6......................................................... 11,393,712 9,542,054 7,592,111
7......................................................... 43,100,460 35,044,618 26,840,800
8......................................................... 11,393,712 8,994,301 6,631,244
9......................................................... 11,393,712 8,732,332 6,197,424
10........................................................ 43,100,460 32,070,790 21,910,088
-----------------------------------------------------
Total................................................. 310,724,400 273,440,855 235,092,985
Annualized............................................ ................ 32,055,610 33,471,952
----------------------------------------------------------------------------------------------------------------
Overall, using the information from the Russell Sage Foundation
Survey and FIPB SME estimates, table 13 represents the upper bound
estimate in which the total annualized cost of this proposed rule is
$32 million at three percent and $33.4 million at seven percent.
---------------------------------------------------------------------------
\129\ The ``Undiscounted'' column represents totals from the
underlying private and government cost tables. Consistent with
guidance provided by OMB in Circular A-4, the ``3 Percent Discount
Rate'' and ``7 Percent Discount Rate'' columns result from applying
an economic formula to the number in each row of this
``Undiscounted'' column to show how these future costs over time
would be valued today; they do not contain totals from other tables.
---------------------------------------------------------------------------
7. Benefits
These proposed revisions will have significant public safety
benefits by ensuring that ATF's regulatory definitions conform to the
BSCA's statutory changes and can be relied upon by the public, and by
clarifying that persons who intend to predominantly earn a profit from
the repetitive purchase and resale of firearms are engaged in the
business of dealing in firearms and must be licensed, even if they make
few or no sales, or if they are conducting such transactions on the
internet or through other mediums or forums. As part of the license
application, those dealers will undergo a background check. This
increases the ability to ensure that persons purchasing and selling
(including bartering) firearms with the intent to earn a profit are
lawfully able to do so and reduces the risk that they could pose a
danger to others by trafficking in illicit firearm sales or otherwise
engaging in criminal activities. Additionally, these licensed dealers
must take steps to help determine that they are not selling firearms to
persons prohibited from receiving or possessing such firearms under
Federal, State, local, or Tribal law.
The U.S. Sentencing Commission reports that ``88.8 percent of
firearm offenders sentenced under Sec. 2K2.1 \130\ [of the United
States Sentencing Commission Guidelines Manual (Nov. 2021)] were
[already] prohibited from possessing a firearm'' under 18 U.S.C.
922(g). These individuals would thus have been flagged in a background
check, would have therefore been prohibited from buying a firearm from
a licensed dealer after their first offense, and would not have been
able to commit the subsequent firearms offense(s) if their seller had
been licensed. In addition, the Commission reports that such offenders
``have criminal histories that are more extensive and more serious than
other offenders'' \131\ and that they are ``more than twice as likely
to have a prior conviction for a violent offense compared to all other
offenders.'' \132\
---------------------------------------------------------------------------
\130\ Section 2K2.1 provides sentencing guidelines for
``Unlawful Receipt, Possessions, or Transportation of Firearms or
Ammunition; Prohibited Transactions Involving Firearms or
Ammunition.''
\131\ What do Federal Firearms Offenses Really Look Like?,
United States Sentencing Commission Report at 2 (July 14, 2022),
https://www.ussc.gov/research/research-reports/what-do-federal-firearms-offenses-really-look.
\132\ Id.
---------------------------------------------------------------------------
In another report, on ``armed career criminals'' (those who have
three or more convictions for violent offenses, serious drug offenses,
or both), the Commission reports that a substantial share of ``armed
career criminals'' (83 percent in fiscal year 2019) had prior
convictions for at least one violent offense (as opposed to solely
serious drug offense convictions). This includes ``57.7 percent who had
three or more [prior violent] convictions.'' \133\ In other words,
persons who prohibited by law from possessing firearms, as well as the
more serious ``armed career criminals'' who are also prohibited, were
able to obtain guns and continued to commit more violent offenses after
they would have been flagged by a background check and denied a firearm
if purchasing from a licensed dealer.
---------------------------------------------------------------------------
\133\ Federal Armed Career Criminals: Prevalence, Patterns, and
Pathways, United States Sentencing Commission, at 9 (March 2021),
https://www.ussc.gov/sites/default/files/pdf/research-and-publications/research-publications/2021/20210303_ACCA-Report.pdf.
---------------------------------------------------------------------------
Such violence has a significant adverse effect on public safety.
Because licensed dealers are required to conduct background checks on
unlicensed transferees, another benefit of this rulemaking is to aid in
preventing firearms being sold to felons or other prohibited persons,
who may commit crimes and acts of violence or themselves become sources
of firearms trafficking. Furthermore, these licensed dealers must also
maintain firearms transaction records, which will help with criminal
investigations and tracing firearms subsequently used in crimes.
In 2016, ATF distributed and discussed the above-mentioned
``engaged in the business'' guidance at gun shows to ensure that
unlicensed dealers operating at gun shows became licensed, and portions
of that previous guidance are incorporated in this proposed rule. This
guidance was particularly directed at unlicensed persons who sell
firearms as a secondary source of income to allow
[[Page 62016]]
them to continue to sell firearms, but as licensed dealers. Based on
the FFLC, ATF found that there was an increase of approximately 567 ATF
Form 7 applications to account for these unlicensed persons selling at
gun shows. This prior outcome demonstrates the market response to
clarifying licensing requirements and that such a response both
increases the likelihood that persons engaged in the business comply
with Federal licensing requirements and enhance public safety by
denying persons prohibited from purchasing firearms through completion
of ATF Forms 4473 and running background checks on prospective
purchasers.
Finally, providing a clear option for FFLs to transfer their
business inventory to another FFL when their license is terminated
helps to ensure that these business inventories of firearms are
traceable and do not become sources of trafficked firearms.
8. Alternatives
In addition to the requirements outlined in this proposed rule, ATF
considered the following alternative approaches:
Alternative 1. A rulemaking that focuses on a bright-line numerical
threshold of what constitutes being engaged in the business as a dealer
in firearms. As discussed above, in the past, it has been proposed to
ATF that a rulemaking should set a specific threshold or number of
sales per year to define ``engaged in the business.'' ATF considered
this alternative in the past and again as part of developing this
proposed rulemaking.\134\ However, ATF chose not to adopt this
alternative for a number of reasons stated in detail above. In summary:
courts have held even before the passage of the BCSA that the sale of
or attempt to sell even one firearm is sufficient to show that a person
is ``engaged in the business'' if that person represents to others that
they are willing and able to purchase more firearms for resale; a
person could structure their transactions to avoid the minimum
threshold by spreading out sales over time; and firearms could be sold
by unlicensed persons below the threshold number without records,
making those firearms unable to be traced when they are subsequently
used in a crime. Finally, the Department does not believe there is a
sufficient evidentiary basis, without consideration of additional
factors, to support a specific minimum number of firearms bought or
sold for a person to be considered ``engaged in the business.''
---------------------------------------------------------------------------
\134\ See discussion supra under Section I.A. ``Advance Notice
of Proposed Rulemaking (1979)'' and in more detail in Section II.D.
``Presumptions that a Person is ``Engaged in the Business.''
---------------------------------------------------------------------------
The costs of implementing a specific threshold would be lower than
in the primary analysis proposed in this rule. However, the Department
believes it would not appropriately address the language regarding the
requisite intent predominantly to earn a profit (which can include
bartering) and would have unintended effects such as those summarized
in the previous paragraph that would impact personal firearms
transactions and decrease public safety and law enforcement's ability
to trace firearms used in crimes.
Alternative 2. Publishing guidance instead of revising the
regulations. Under this alternative, rather than publishing regulations
further defining ``engaged in the business,'' ATF would publish only
guidance documents to clarify the topics included in this proposed
rule. Although ATF has determined that in addition to revising its
regulations, it will also update existing guidance documents to answer
any questions that the firearms industry may have, the Department has
determined that issuing only guidance would be insufficient to address
the issues discussed above. ATF did not select the alternative to
publish only guidance documents in lieu of regulations because guidance
would be insufficient as a means to inform the public in general,
rather than solely the currently regulated community; guidance would
not have the same legal effect and applicability as a regulation; it
would not benefit from the input of public review and comment to aid in
accounting for possible unintended impacts or interpretations; and it
would not be able to change existing regulatory provisions on the
subject of ``engaged in the business'' or impact intersecting
regulatory provisions. In addition, ATF can incorporate existing
guidance in a proposed rule based on its experience or in response to
comments. When an agency establishes or revises legally binding
requirements, it must do so through a regulation issued under the
Administrative Procedure Act and Executive order provisions flowing
from it. Guidance does not meet these requirements. Therefore, although
the Department considered this alternative, it determined it was not in
the best interest of the public.
Alternative 3. No action. Rather than promulgating a regulation,
ATF could instead take no action to further clarify the BSCA's
amendments to the GCA. However, the Department considered this
alternative and decided against it for a number of reasons. First, as
the various enforcement actions and court decisions cited above
demonstrate, ATF has observed a significant level of noncompliance with
the GCA's licensing requirements even prior to the BSCA. Second, on
March 14, 2023, President Biden issued Executive Order 14092, requiring
the Attorney General to report on agency efforts to implement the BSCA,
develop and implement a plan to clarify the definition of who is
engaged in the business of dealing in firearms, ``including by
considering a rulemaking,'' and prevent former FFLs whose licenses have
been revoked or surrendered from continuing to engage in the business
of dealing in firearms.\135\ Third, Congress, through the BSCA,
determined that there was a need to revise the definition of ``engaged
in the business'' for the first time in almost 40 years. While that by
itself does not preclude ATF from using its discretion not to
promulgate a formal rule, it indicates an important change to the
landscape of who must have a license to deal in firearms and warrants
consideration of what that means to persons who have been operating
under the previous definition. It has potential effects on those who
have not considered themselves to fall under the definition before and
now would have to have a license. The change to the definition removed
any intent to obtain ``livelihood,'' and it is reasonable to expect
that those who transact in firearms would have questions about how to
interpret and apply this change. This would include how it affects
other aspects of existing laws and regulatory provisions that govern
such transactions, as well as how other BSCA amendments, such as the
new international trafficking provisions, might apply to the dealer
requirements. For these reasons, the Department determined this was not
a viable alternative.
---------------------------------------------------------------------------
\135\ 88 FR at 16528.
---------------------------------------------------------------------------
Although the Department considered this alternative, it does not
generate direct monetary costs because it leaves the regulatory
situation as it is. Because the costs and benefits of this alternative
arise from the statute itself, ATF did not include an assessment of
them in this proposed rulemaking.
B. Executive Order 13132
This regulation will not have substantial direct effects on the
States, the relationship between the Federal Government and the States,
or the distribution of power and responsibilities among the various
levels of government. Therefore, in accordance with section 6 of
Executive
[[Page 62017]]
Order 13132 (``Federalism''), the Attorney General has determined that
this regulation does not have sufficient federalism implications to
warrant the preparation of a federalism summary impact statement.
C. Executive Order 12988
This regulation meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of Executive Order 12988 (``Civil Justice
Reform'').
D. Regulatory Flexibility Act (``RFA'')
ATF performed an initial regulatory flexibility analysis of the
impacts on small businesses and other entities on this proposed rule.
Based on the information from this analysis, ATF has determined that
this proposed rule would impact unlicensed persons who would now have
to become licensed dealers to lawfully operate as a small business.
Because some of these unlicensed persons may transact in low-volume
firearms sales to predominantly earn a profit, the costs to become an
FFL could have an impact on their overall profit from firearms
transactions.
Initial Regulatory Flexibility Analysis
The RFA establishes ``as a principle of regulatory issuance that
agencies shall endeavor, consistent with the objectives of the rule and
of applicable statutes, to fit regulatory and informational
requirements to the scale of the businesses, organizations, and
governmental jurisdictions subject to regulation. To achieve this
principle, agencies are required to solicit and consider flexible
regulatory proposals and to explain the rationale for their actions to
assure that such proposals are given serious consideration.'' Public
Law 96-354, section 2(b), 94 Stat. 1164, 1165 (1980) (codified at 5
U.S.C. 601, et seq.).
Under the RFA, the agency is required to consider whether this rule
would have a significant economic impact on a substantial number of
small entities. Agencies must perform a review to determine whether a
rule would have such an impact. If the agency determines that it would,
the agency must prepare a regulatory flexibility analysis as described
in the RFA.
The RFA covers a wide range of small entities. The term ``small
entities'' comprises small businesses, not-for-profit organizations
that are independently owned and operated and are not dominant in their
fields, and governmental jurisdictions with populations of less than
50,000. 5 U.S.C. 601(3)-(6). ATF determined that the rulemaking affects
a variety of large and small businesses (see the ``Description of the
Potential Number of Small Entities'' section below). Based on the
requirements above, ATF prepared the following initial regulatory
flexibility analysis assessing the impact on small entities from the
rulemaking.
1. A description of the reasons why action by the agency is being
considered.
Congress passed the BSCA, which amended the definition of engaged
in the business from a person seeking to transact in firearms for
livelihood and profit to a person intending predominantly to earn a
profit. Moreover, on March 14, 2023, the President ordered the Attorney
General to report on efforts to implement the BSCA and to develop and
implement a plan to clarify the definition of ``engaged in the
business'' of dealing in firearms and prevent FFLs from continuing to
deal after license revocation or surrender.
2. A succinct statement of the objectives of, and legal basis for,
the proposed rule.
The Attorney General is responsible for enforcing, among other
statutes, the GCA, as amended. The BSCA redefined who is a regulated
dealer under the GCA. This proposed rule updates the regulations to
ensure the language conforms with the amended statutory provisions, and
clarifies for the public how to understand and implement the statutory
change and also implements Executive Order 14092.
3. A description of and, where feasible, an estimate of the number
of small entities to which the proposed rule will apply.
This proposed rule implements a statutory requirement that affects
unlicensed persons who purchase and sell firearms, with the intent to
profit (including barter), on a recurring basis. As persons who engage
in higher-frequency firearms transactions meeting these requirements
are typically already licensed as dealers, the persons impacted by this
proposed rule will primarily be those who transact in low volume
repetitive firearms sales. These persons likely either already are, or
would become, small entities.
4. A description of the projected reporting, recordkeeping and
other compliance requirements of the proposed rule, including an
estimate of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record.
ATF estimates that this proposed rule would affect at least 24,540
unlicensed persons who, as a result of changes enacted in the BSCA, are
now required to obtain a Federal firearms license. Such persons would
need to file a Form 7 application, pay a licensing fee, undergo a
qualification inspection, maintain Form 4473 and A&D records for every
firearm transaction, and undergo periodic compliance inspections. If
they continue in business after three years, they would need to file a
Form 8 renewal application and pay a renewal licensing fee. No
professional skills are necessary to prepare or perform application or
recordkeeping activities.
5. An identification, to the extent practicable, of all relevant
Federal rules which may duplicate, overlap or conflict with the
proposed rule.
This proposed rule does not duplicate or conflict with other
Federal rules.
6. Descriptions of any significant alternatives to the proposed
rule which accomplish the stated objectives of applicable statutes and
which minimize any significant economic impact of the proposed rule on
small entities.
ATF did not find any suitable alternatives that would meet the
objectives of this proposed rule that would minimize the economic
impact that this rulemaking would have on small entities.
E. Small Business Regulatory Enforcement Fairness Act of 1996
This rulemaking is likely to have a significant economic impact on
a substantial number of small entities under the Small Business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. 601 et seq.
Accordingly, the Department prepared an initial regulatory flexibility
analysis.
F. Unfunded Mandates Reform Act of 1995
This rulemaking would not result in the expenditure by State,
local, and Tribal governments, in the aggregate, or by the private
sector, of $100 million or more in any one year, and it will not
significantly or uniquely affect small governments. Therefore, no
actions were deemed necessary under the provisions of the Unfunded
Mandates Reform Act of 1995, Public Law 104-4, 109 Stat. 48. See 2
U.S.C. 1532(a).
G. Paperwork Reduction Act of 1995
Under the Paperwork Reduction Act of 1995 (``PRA''), 44 U.S.C.
3501-21, and its implementing regulations, 5 CFR part 1320, agencies
are required to submit to OMB, for review and approval, any reporting
requirements inherent in a rule. The collections of information
contained in this proposed rule are collections of information which
have been reviewed and approved by OMB in accordance with
[[Page 62018]]
the requirements of the PRA and have been assigned an OMB Control
Number.
As defined in 5 CFR 1320.3(c), ``collection of information''
comprises reporting, recordkeeping, monitoring, posting, labeling, and
other similar actions. The collections of information in this
rulemaking are mandatory. The title and description of the information
collection, a description of those who must collect the information,
and an estimate of the total annual burden follow. The estimate covers
the time for reviewing instructions, searching existing sources of
data, gathering, and maintaining the data needed, and completing and
reviewing the collection.
Title: Application for a Federal Firearms License--ATF Form
7(5310.12)/7CR (5310.16)3.
OMB Control Number: OMB 1140-0018.
Summary of the Collection of Information: 18 U.S.C. 922 specifies a
number of unlawful activities involving firearms in interstate and
foreign commerce. Some of these activities cease to be unlawful when
persons are licensed under the provisions of 18 U.S.C. 923. Some
examples of activities that are no longer unlawful once a person
becomes licensed include: engaging in the business of selling,
shipping, receiving, and transporting firearms in interstate or foreign
commerce, including the acquisition of curio or relic firearms acquired
by collectors from out-of-state for personal collections. This
collection of information is necessary to ensure that anyone who wishes
to be licensed as required by 18 U.S.C. 923 meets the requirements to
obtain the desired license.
Need for Information: Less frequent collection of this information
would pose a threat to public safety. Without this information
collection, ATF would not be able to issue licenses to persons required
by law to have a license to engage in the business of dealing in
firearms or shipping or transporting firearms in interstate or foreign
commerce in support of that business, or acquire curio and relic
firearms from out of state.
Proposed Use of Information: ATF personnel will analyze the
submitted application to determine the applicant's eligibility to
receive the requested license.
Description of the Respondents: Individuals or entities wishing to
engage in the business of selling, shipping, receiving, and
transporting firearms in interstate or foreign commerce, as well as
acquiring firearms classified as curios and relics for personal
collections.
Number of Respondents: 13,000 existing. New respondents due to the
rule 24,540.
Frequency of Response: one time.
Burden of Response: one hour.
Estimate of Total Annual Burden: 24,540 hours (incremental change).
Title: Application for a Federal Firearms License--Renewal
Application ATF Form 8 (5310.11).
OMB Control Number: OMB 1140-0019.
Summary of the Collection of Information: 18 U.S.C. Chapter 44
provides that no person may engage in the business of importing,
manufacturing, or dealing in either firearms, or ammunition, without
first obtaining a license to do so. These activities are licensed for a
specific period. The benefit of a collector's license is also provided
for in the statute. In order to continue to engage in the
aforementioned firearms activities without interruption, licensees must
renew their FFL by filing Federal Firearms License (``FFL'') RENEWAL
Application-ATF F 8 (5310.11) Part II, prior to its expiration.
Need for Information: Less frequent use of this information
collection would pose a threat to public safety, since the collected
information helps ATF to ensure that the applicants remain eligible to
renew their licenses.
Proposed Use of Information: ATF F 8 (5310.11) Part II, is used to
identify the applicant and determine their eligibility to retain the
license.
Description of the Respondents: Respondents desiring to update the
responsible person (RP) information on an existing license must submit
a letter in this regard, along with the completed FFL renewal
application to ATF.
Number of Respondents: 34,000 existing. New respondents due to the
rule 24,540.
Frequency of Response: every three years and periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden: 12,270 hours (incremental change).
Title: Firearms Transaction Record--ATF Form 4473 (5300.9) and
Firearms Transaction Record Continuation Sheet.
OMB Control Number: OMB 1140-0020.
Summary of the Collection of Information: The subject form is
required under the authority of 18 U.S.C. 922 and 923 and 27 CFR
478.124. These sections of the GCA prohibit certain persons from
shipping, transporting, receiving, or possessing firearms. All persons,
including FFLs, are prohibited from transferring firearms to such
persons. FFLs are also subject to additional restrictions regarding the
disposition of a firearm to an unlicensed person under the GCA. For
example, age and State of residence also determine whether a person may
lawfully receive a firearm. The information and certification on the
Form 4473 are designed so that a person licensed under 18 U.S.C. 923
may determine if the licensee may lawfully sell or deliver a firearm to
the person identified in Section B, and to alert the transferee/buyer
of certain restrictions on the receipt and possession of firearms. The
Form 4473 should only be used for sales or transfers of firearms where
the seller is licensed under 18 U.S.C. 923. The seller of a firearm
must determine the lawfulness of the transaction and maintain proper
records of the transaction.
Need for Information: The consequences of not conducting this
collection of information, or conducting it less frequently, are that
the licensee might transfer a firearm to a person who is prohibited
from possessing firearms under Federal law. The collection of this
information is necessary for compliance with the statutory requirements
to verify the eligibility of a person receiving or possessing firearms
under the GCA. There is no discretionary authority on the part of ATF
to waive these requirements. Respondents are required to supply this
information as often as necessary to comply with statutory provisions.
The form is critical to the prevention of criminal diversion of
firearms and enhances law enforcement's ability to trace firearms that
are recovered in crimes.
Proposed Use of Information: A person purchasing a firearm from an
FFL must complete Section B of the Form 4473. The buyer's answers to
the questions determine if the potential transferee is eligible to
receive the firearm. If those answers indicate that the buyer is not
prohibited from receiving a firearm, the licensee completes Section C
of the Form 4473 and contacts the FBI's NICS system or the State point
of contact to determine if the firearm can legally be transferred to
the purchaser.
Description of the Respondents: Unlicensed persons wishing to
purchase a firearm.
Number of Respondents: 17,189,101 existing. New respondents due to
the rule 24,540.
Frequency of Response: periodically.
Burden of Response: 0.5 hours.
Estimate of Total Annual Burden: 12,270 hours (incremental change).
Title: Records of Acquisition and Disposition, Dealers of Type 01/
02 Firearms, and Collectors of Type 03
[[Page 62019]]
Firearms [Records of Acquisition and Disposition, Collectors of
Firearms].
OMB Control Number: OMB 1140-0032.
Summary of the Collection of Information: The recordkeeping
requirements as authorized by the GCA, 18 U.S.C. 923, are for the
purpose of allowing ATF to inquire into the disposition of any firearm
received by a licensee in the course of a criminal investigation.
Need for Information: Less frequent collection of this information
would pose a threat to public safety as the information is routinely
used to assist law enforcement by allowing them to trace firearms in
criminal investigations.
Proposed Use of Information: This collection of information grants
ATF Officers the authority to examine a collector's records for
firearms traces or compliance inspections, per 27 CFR 478.23(c)(1),
(2).
Description of the Respondents: Federal Firearms Licensees.
Number of Respondents: 60,790 existing. New respondents due to the
rule 24,540.
Frequency of Response: annually recurring.
Burden of Response: three minutes to maintain A&D records and one
hour to perform an inspection.
Estimate of Total Annual Burden: 24,540 hours in inspection time
(incremental change) and 3,681 hours maintaining in A&D records
(incremental change).
ATF asks for public comment on the proposed collection of
information to help determine how useful the information is; whether
the public can help perform ATF's functions better; whether the
information is readily available elsewhere; how accurate ATF's estimate
of the burden of collection is; how valid the methods for determining
burden are; how to improve the quality, usefulness, and clarity of the
information; and how to minimize the burden of collection.
If you submit comments on the collection of information, submit
them following the ``Public Participation'' section under the
SUPPLEMENTARY INFORMATION heading. You need not respond to a collection
of information unless it displays a currently valid control number from
OMB. Before the requirements for this collection of information become
effective, ATF will publish a notice in the Federal Register of OMB's
decision to approve, modify, or disapprove the proposed collection.
IV. Public Participation
A. Comments Sought
ATF requests comments on the proposed rule from all interested
persons. ATF specifically requests comments on:
(1) The clarity of this proposed rule, and how easy it is to
understand;
(2) The various definitions and rebuttable presumptions relevant to
determining when a person is ``engaged in the business'' of dealing in
firearms at wholesale or retail, as described in Section II.D of this
preamble, and when a person acts with the intent to ``predominantly
earn a profit'' from the sale or disposition of firearms, as described
in Section II.G of this preamble.
(3) Whether the rule should use inferences, factors, or some other
method of determining when a person is ``engaged in the business'' of
dealing in firearms or acting with the intent to ``predominantly earn a
profit'', instead of, or in addition to, using presumptions of any
kind, including (a) whether the criteria should function as rebuttable
presumptions or permissive inferences in the administrative and civil
contexts, and (b) whether and how the criteria should function
differently in different types of proceedings;
(4) Whether there is additional specific conduct that would provide
indicia of whether or when a person is or is not ``engaged in the
business'' of dealing in firearms, or acts with the intent to
``predominantly to earn a profit'' from the sale or disposition of
firearms;
(5) When and how any presumptions, inferences, or factors can or
should be rebutted;
(6) Whether the rule should define ``occasional'' as that term is
used in the definition of ``engaged in the business'' under 18 U.S.C.
921(a)(21)(C), and if so, how the term should be defined; and
(7) The costs or benefits of the proposed rule, and appropriate
methodology and data for calculating those costs and benefits,
including what sources ATF should look to, beyond ATF's own expertise,
for accurate estimates of the percentage of this population that would
need to obtain a license because they are ``engaged in the business''
of dealing in firearms compared to those who make occasional sales of
firearms (e.g., enhancement of a personal collection or for a hobby)
and would not need to obtain a license.
All comments must reference this document's docket number, ATF
2022R-17, and be legible. Commenters must also include the commenter's
complete first and last name and contact information. If submitting a
comment through the Federal eRulemaking portal, as described in Section
IV.C of this preamble, commenters should carefully review and follow
the website's instructions on submitting comments. If submitting as an
individual, any information provided for city, state, zip code, and
phone will not be publicly viewable when ATF publishes the comment on
regulations.gov. If submitting a comment by mail, commenters should
review Section IV.B of this preamble regarding proper submission of
PII. ATF may not consider, or respond to, comments that do not meet
these requirements or comments containing profanity or threatening or
abusive language. ATF will retain anonymous comments and those
containing excessive profanity as part of this rulemaking's
administrative record but will not publish such documents on
www.regulations.gov. ATF will treat all comments as originals and will
not acknowledge receipt of comments. In addition, if your comment
cannot be read due to technical difficulties and ATF cannot contact you
for clarification, ATF may not be able to consider your comment.
ATF will carefully consider all comments, as appropriate, received
on or before the closing date, and will give comments after that date
the same consideration if practical to do so, but assurance of
consideration cannot be given except as to comments received on or
before the closing date.
B. Confidentiality
ATF will make all comments meeting the requirements of this
section, whether submitted electronically or on paper, available for
public viewing at www.ATF.gov, on the internet through the Federal
eRulemaking Portal, and through the Freedom of Information Act (5
U.S.C. 552). Commenters who submit by mail and who do not want their
name or other PII posted on the internet should submit their comments
by mail along with a separate cover sheet containing their PII. Both
the cover sheet and comment must reference this docket number (ATF
2022R-17). For comments submitted by mail, information contained on the
cover sheet will not appear when posted on the internet, but any PII
that appears within the body of a comment will not be redacted by ATF
and it will appear on the internet. Commenters who submit through the
Federal eRulemaking portal and who do not want any of their PII posted
on the internet should omit such PII from the body of their comment or
in any uploaded attachments.
[[Page 62020]]
A commenter may submit to ATF information identified as proprietary
or confidential business information. The commenter must place any
portion of a comment that is proprietary or confidential business
information under law on pages that are separated from the balance of
the comment, with each page prominently marked ``PROPRIETARY OR
CONFIDENTIAL BUSINESS INFORMATION'' at the top of each page.
ATF will not make proprietary or confidential business information
submitted in compliance with these instructions available when
disclosing the comments that it received, but will disclose that the
commenter provided proprietary or confidential business information
that ATF is holding in a separate file to which the public does not
have access. If ATF receives a request to examine or copy this
information, it will treat it as any other request under the Freedom of
Information Act (5 U.S.C. 552). In addition, ATF will disclose such
proprietary or confidential business information to the extent required
by other legal process.
C. Submitting Comments
Submit comments using either of the two methods described below
(but do not submit the same comment multiple times or by more than one
method). Hand-delivered comments will not be accepted.
Federal eRulemaking Portal: ATF recommends that you submit
your comments to ATF via the Federal eRulemaking portal at
www.regulations.gov and follow the instructions. Comments will be
posted within a few days of being submitted. However, if large volumes
of comments are being processed simultaneously, your comment may not be
viewable for up to several weeks. Please keep the comment tracking
number that is provided after you have successfully uploaded your
comment.
Mail: Send written comments to the address listed in the
ADDRESSES section of this document. Written comments must appear in
minimum 12-point font size (.17 inches), include the commenter's first
and last name and full mailing address, be signed, and may be of any
length. See also Section IV.B of this preamble.
D. Request for Hearing
In accordance with 18 U.S.C. 926(b), any interested person who
desires an opportunity to comment orally at a public hearing should
submit a request, in writing, to the Director of ATF within the notice
period. The Director, however, reserves the right to determine, in
light of all circumstances, whether a public hearing is necessary.
Disclosure
Copies of this proposed rule and the comments received in response
to it will be available through the Federal eRulemaking portal, at
www.regulations.gov (search for RIN 1140-58), and for public inspection
by appointment during normal business hours at: ATF Reading Room, Room
1E-063, 99 New York Ave. NE, Washington, DC 20226; telephone: (202)
648-8740.
Severability
Consistent with the Administrative Procedure Act, the issues raised
in this proposed rule may be finalized, or not, independently of each
other, after consideration of comments received. The Department intends
separate aspects of any final rule that results from this proposed rule
to be severable from each other, as demonstrated by the rule's
structure. In the event any provision of this rule as finalized is held
to be invalid or unenforceable by its terms, the remainder shall not be
affected and shall be construed so as to give remaining provisions the
maximum effect permitted by law.
List of Subjects in 27 CFR Part 478
Administrative practice and procedure, Arms and munitions, Exports,
Freight, Imports, Intergovernmental relations, Law enforcement
officers, Military personnel, Penalties, Reporting and recordkeeping
requirements, Research, Seizures and forfeitures, Transportation.
Authority and Issuance
For the reasons discussed in the preamble, the Department proposes
to amend 27 CFR part 478 as follows:
PART 478--COMMERCE IN FIREARMS AND AMMUNITION
0
1. The authority citation for 27 CFR part 478 continues to read as
follows:
Authority: 5 U.S.C. 552(a); 18 U.S.C. 847, 921-931; 44 U.S.C.
3504(h).
0
2. Amend Sec. 478.11 by:
0
a. Revising the definition of ``Dealer'';
0
b. Revising paragraph (c) of the definition of ``Engaged in the
business'';
0
c. Adding the definitions of ``Personal collection, personal collection
of firearms, or personal firearms collection'' and ``Predominantly earn
a profit'' in alphabetical order;
0
d. Revising the definition of ``Principal objective of livelihood and
profit''; and
0
f. Adding the definitions of ``Responsible person'' and ``Terrorism''
in alphabetical order.
The revisions and additions read as follows:
Sec. 478.11 Meaning of terms.
* * * * *
Dealer. Any person engaged in the business of selling firearms at
wholesale or retail; any person engaged in the business of repairing
firearms or of making or fitting special barrels, stocks, or trigger
mechanisms to firearms; or any person who is a pawnbroker. The term
shall include any person who engages in such business or occupation on
a part-time basis. The term shall include such activities wherever, or
through whatever medium, they may be conducted, such as at a gun show
or event, flea market, auction house, or gun range or club; at one's
home; by mail order; over the internet; through the use of other
electronic means (e.g., an online broker, online auction, text
messaging service, social media raffle, or website); or at any other
domestic or international public or private marketplace or premises.
* * * * *
Engaged in the business--
* * * * *
(c) Dealer in firearms other than a gunsmith or a pawnbroker. (1) A
person who devotes time, attention, and labor to dealing in firearms as
a regular course of trade or business to predominantly earn a profit
through the repetitive purchase and resale of firearms, but such term
shall not include a person who makes occasional sales, exchanges, or
purchases of firearms for the enhancement of a personal collection or
for a hobby, or who sells all or part of the person's personal
collection of firearms. The term shall not include an auctioneer who
provides only auction services on commission by assisting in
liquidating a personal collection of firearms at an estate-type
auction, provided the auctioneer does not purchase the firearms, take
possession of the firearms prior to the auction, or consign the
firearms for sale.
(2) For purposes of this definition--
(i) The term ``purchase'' (and derivative terms thereof) means the
act of obtaining a firearm in exchange for something of value;
(ii) The term ``sale'' (and derivative terms thereof, including
``resale'') means the act of providing a firearm in exchange for
something of value; and
(iii) The term ``something of value'' includes money, credit,
personal property (e.g., another firearm or ammunition), a service, a
controlled
[[Page 62021]]
substance, or any other medium of exchange or valuable consideration.
(3) Whether a person is engaged in the business of dealing in
firearms requiring a license is a fact-specific inquiry. Selling large
numbers of firearms or engaging or offering to engage in frequent
transactions may be highly indicative of business activity. However,
there is no minimum threshold number of firearms purchased or sold that
triggers the licensing requirement. Similarly, there is no minimum
number of transactions that determines whether a person is ``engaged in
the business'' of dealing in firearms. For example, even a single
firearm transaction or offer to engage in a transaction, when combined
with other evidence (e.g., where a person represents to others a
willingness to acquire more firearms for resale or offers more firearms
for sale), may require a license. A person shall be presumed to be
engaged in the business of dealing in firearms in civil and
administrative proceedings, absent reliable evidence to the contrary,
when the person--
(i) Sells or offers for sale firearms, and also represents to
potential buyers or otherwise demonstrates a willingness and ability to
purchase and sell additional firearms;
(ii) Spends more money or its equivalent on purchases of firearms
for the purpose of resale than the person's reported gross taxable
income during the applicable period of time;
(iii) Repetitively purchases for the purpose of resale, or sells or
offers for sale, firearms--
(A) Through straw or sham businesses, or individual straw
purchasers or sellers; or
(B) That cannot lawfully be purchased or possessed, including:
(1) Stolen firearms (18 U.S.C. 922(j));
(2) Firearms with the licensee's serial number removed,
obliterated, or altered (18 U.S.C. 922(k), 26 U.S.C. 5861(i));
(3) Firearms imported in violation of law (18 U.S.C. 922(l), 22
U.S.C. 2778, or 26 U.S.C. 5844, 5861(k)); or
(4) Machineguns or other weapons defined as firearms under 26
U.S.C. 5845(b) that were not properly registered in the National
Firearms Registration and Transfer Record (18 U.S.C. 922(o); 26 U.S.C.
5861(d));
(iv) Repetitively sells or offers for sale firearms--
(A) Within 30 days after the person purchased the firearms;
(B) That are new, or like new in their original packaging; or
(C) Of the same or similar kind (i.e., make/manufacturer, model,
caliber/gauge, and action) and type (i.e., rifle, shotgun, revolver,
pistol, frame, receiver, machinegun, silencer, destructive device, or
`other' firearm);
(v) Who, as a former licensee (or responsible person acting on
behalf of the former licensee) sells or offers for sale firearms that
were in the business inventory of such licensee at the time the license
was terminated (i.e., license revocation, denial of license renewal,
license expiration, or surrender of license), and were not transferred
to a personal inventory in accordance with 18 U.S.C. 923(c) and 27 CFR
478.125a; or
(vi) Who, as a former licensee (or responsible person acting on
behalf of the former licensee) sells or offers for sale firearms that
were transferred to the personal inventory of such former licensee or
responsible person prior to the time the license was terminated,
unless:
(A) The firearms were received and transferred without any intent
to willfully evade the restrictions placed on licensees by chapter 44,
title 18, United States Code; and
(B) One year has passed from the date of transfer to the personal
collection.
(4) Where a person's conduct does not otherwise demonstrate a
predominant intent to earn a profit, the person shall not be presumed
to be engaged in the business of dealing in firearms when the person
transfers firearms only as bona fide gifts, or occasionally sells
firearms only to obtain more valuable, desirable, or useful firearms
for the person's personal collection or hobby.
(5) The activities set forth in the rebuttable presumptions in
paragraphs (c)(3)(i) through (vi) of this definition are not exhaustive
of the conduct that may show that, or be considered in determining
whether, a person is engaged in the business of dealing in firearms.
(6) The rebuttable presumptions in paragraphs (c)(3)(i) through
(vi) of this definition shall not apply to any criminal case, although
they may be useful to courts in criminal cases, for example, when
instructing juries regarding permissible inferences.
* * * * *
Personal collection, personal collection of firearms, or personal
firearms collection. (1) Personal firearms that a person accumulates
for study, comparison, exhibition, or for a hobby (e.g., noncommercial,
recreational activities for personal enjoyment, such as hunting, or
skeet, target, or competition shooting). The term shall not include any
firearm purchased for the purpose of resale or made with the
predominant intent to earn a profit.
(2) In the case of a firearm imported, manufactured, or otherwise
acquired by a licensed manufacturer, licensed importer, or licensed
dealer, the term shall include only a firearm described in paragraph
(1) of this definition that was--
(i) Acquired or transferred without the intent to willfully evade
the restrictions placed upon licensees under chapter 44, title 18,
United States Code;
(ii) Recorded by the licensee as an acquisition in the licensee's
acquisition and disposition record in accordance with Sec. 478.122(a),
478.123(a), or 478.125(e) (unless acquired prior to licensure and not
intended for sale);
(iii) Recorded as a disposition from the licensee's business
inventory to the individual's personal collection in accordance with
Sec. 478.122(a), 478.123(a), or 478.125(e);
(iv) Stored separately from, and not commingled with the business
inventory, and appropriately identified as ``not for sale'' (e.g., by
attaching a tag), if on the business premises; and
(v) Maintained in such personal collection (whether on or off the
business premises) for at least one year from the date the firearm was
so transferred, in accordance with 18 U.S.C. 923(c) and 27 CFR
478.125a.
* * * * *
Predominantly earn a profit. (1) The intent underlying the sale or
disposition of firearms is predominantly one of obtaining pecuniary
gain, as opposed to other intents, such as improving or liquidating a
personal firearms collection: Provided, that proof of profit, including
the intent to profit, shall not be required as to a person who engages
in the regular and repetitive purchase and disposition of firearms for
criminal purposes or terrorism. For purposes of this definition, a
person may have the intent to profit even if the person does not
actually obtain pecuniary gain from the sale or disposition of
firearms.
(2) The intent to predominantly earn a profit is a fact-specific
inquiry. A person shall be presumed to have the intent to predominantly
earn a profit from the sale or disposition of firearms in civil and
administrative proceedings, absent reliable evidence to the contrary,
when the person--
(i) Advertises, markets, or otherwise promotes a firearms business
(e.g., advertises or posts firearms for sale, including on any website,
establishes a website for offering their firearms for sale, makes
available business cards, or tags firearms with sales prices),
regardless of whether the person incurs expenses or only promotes the
business informally;
(ii) Purchases, rents, or otherwise secures or sets aside permanent
or
[[Page 62022]]
temporary physical space to display or store firearms they offer for
sale, including part or all of a business premises, table or space at a
gun show, or display case;
(iii) Makes or maintains records, in any form, to document, track,
or calculate profits and losses from firearms purchases and sales;
(iv) Purchases or otherwise secures merchant services as a business
(e.g., credit card transaction services, digital wallet for business)
through which the person makes or offers to make payments for firearms
transactions;
(v) Formally or informally purchases, hires, or otherwise secures
business security services (e.g., a central station-monitored security
system registered to a business, or guards for security) to protect
business assets or transactions that include firearms;
(vi) Formally or informally establishes a business entity, trade
name, or online business account, including an account using a business
name on a social media or other website, through which the person makes
or offers to make firearms transactions;
(vii) Secures or applies for a State or local business license to
purchase for resale or to sell merchandise that includes firearms; or
(viii) Purchases a business insurance policy, including any riders
that cover firearms inventory.
(3) The activities set forth in the rebuttable presumptions in
paragraphs (2)(i) through (viii) of this definition are not exhaustive
of the conduct that may show that, or be considered in determining
whether, a person has the intent to predominantly earn a profit from
the sale or disposition of firearms.
(4) The rebuttable presumptions in paragraphs (2)(i) through (viii)
of this definition shall not apply to any criminal case, although they
may be useful to courts in criminal cases, for example, when
instructing juries regarding permissible inferences.
* * * * *
Responsible person. Any individual possessing, directly or
indirectly, the power to direct or cause the direction of the
management, policies, and business practices of a corporation,
partnership, or association, insofar as they pertain to firearms.
* * * * *
Terrorism. For purposes of the definitions ``predominantly earn a
profit,'' and ``principal objective of livelihood and profit,'' the
term ``terrorism'' means activity, directed against United States
persons, which--
(1) Is committed by an individual who is not a national or
permanent resident alien of the United States;
(2) Involves violent acts or acts dangerous to human life which
would be a criminal violation if committed within the jurisdiction of
the United States; and
(3) Is intended--
(i) To intimidate or coerce a civilian population;
(ii) To influence the policy of a government by intimidation or
coercion; or
(iii) To affect the conduct of a government by assassination or
kidnapping.
0
3. In Sec. 478.57, designate the introductory text as paragraph (a)
and add paragraph (b) to read as follows:
Sec. 478.57 Discontinuance of business.
* * * * *
(b) Upon termination of a license (i.e., license revocation, denial
of license renewal, license expiration, or surrender of license), the
former licensee shall within 30 days, or such additional period
designated by the Director for good cause:
(1) Liquidate the remaining business inventory by selling or
otherwise disposing of the firearms to a licensed importer, licensed
manufacturer, or licensed dealer for sale, auction, or pawn redemption
in accordance with this part; or
(2) Transfer the remaining business inventory to a personal
inventory of the former licensee, or a responsible person of the former
licensee, provided the recipient is not prohibited by law from
receiving or possessing firearms. Except for the sale of remaining
inventory to a licensee within the 30-day period (or designated
additional period), a former licensee or responsible person of such
licensee who resells any such inventory, including business inventory
transferred to a personal inventory, is subject to the presumptions in
Sec. 478.11 (definition of ``engaged in the business'' as a dealer in
firearms other than a gunsmith or pawnbroker) that apply to a person
who repetitively purchased those firearms for the purpose of resale. In
addition, the former licensee shall not continue to engage in the
business of importing, manufacturing, or dealing in firearms by
importing or manufacturing additional firearms for purposes of sale or
distribution, or purchasing additional firearms for resale (i.e.,
``restocking'').
0
4. In Sec. 478.78, designate the introductory text as paragraph (a)
and add paragraph (b) to read as follows:
Sec. 478.78 Operations by licensee after notice.
* * * * *
(b) Upon final disposition of license proceedings to disapprove or
terminate a license (i.e., by revocation or denial of renewal), the
former licensee shall within 30 days, or such additional period
designated by the Director for good cause, either:
(1) Liquidate the remaining business inventory by selling or
otherwise disposing of the firearms to a licensed importer, licensed
manufacturer, or licensed dealer for sale, auction, or pawn redemption
in accordance with this part; or
(2) Transfer the remaining business inventory to a personal
inventory of the former licensee, or a responsible person of the former
licensee provided the recipient is not prohibited by law from receiving
or possessing firearms. Except for the sale of remaining inventory to a
licensee within the 30-day period (or designated additional period), a
former licensee or responsible person of such former licensee, who
resells any such inventory, including business inventory transferred to
a personal inventory, is subject to the presumptions in Sec. 478.11
(definition of ``engaged in the business'' as a dealer in firearms
other than a gunsmith or pawnbroker) that apply to a person who
repetitively purchased those firearms for the purpose of resale. In
addition, the former licensee shall not continue to engage in the
business of importing, manufacturing, or dealing in firearms by
importing or manufacturing additional firearms for purposes of sale or
distribution, or purchasing additional firearms for resale (i.e.,
``restocking'').
0
5. In Sec. 478.124, revise paragraph (a) to read as follows:
Sec. 478.124 Firearms transaction record.
(a) A licensed importer, licensed manufacturer, or licensed dealer
shall not sell or otherwise dispose, temporarily or permanently, of any
firearm to any person, other than another licensee, unless the licensee
records the transaction on a firearm transaction record, Form 4473:
Provided, that a firearms transaction record, Form 4473, shall not be
required to record the disposition made of a firearm delivered to a
licensee for the sole purpose of repair or customizing when such
firearm or a replacement firearm is returned to the person from whom
received; provided further, that a firearms transaction record, Form
4473, shall not be used if the sale or other disposition is being made
to another licensed importer, licensed manufacturer, or licensed
dealer, or a curio or relic to a licensed collector, including a sole
proprietor who transfers a firearm to their personal collection in
accordance with Sec. 478.125a. When a licensee transfers a
[[Page 62023]]
firearm to another licensee, the licensee shall comply with the
verification and recordkeeping requirements in Sec. 478.94 and subpart
H of part 478.
* * * * *
0
6. In Sec. 478.125a, in paragraphs (a)(2) and (3), remove the citation
``Sec. 478.125(e)'' and add in its place ``Sec. Sec. 478.122(a),
478.123(a), or 478.125(e)''.
Dated: August 30, 2023.
Merrick B. Garland,
Attorney General.
[FR Doc. 2023-19177 Filed 9-7-23; 8:45 am]
BILLING CODE 4410-FY-P
