National Firearms Act - Registration, Purchases, Taxes and Transfers

Registration, Purchases, Taxes and Transfers

It is a common misconception that an individual must have a "Class 3 License" in order to own NFA firearms. An FFL is required as a prerequisite to become a Special Occupation Taxpayer (SOT): Class 1 importer, Class 2 manufacturer-dealer or Class 3 dealer in NFA firearms, not an individual owner. Legal possession of an NFA firearm by an individual requires transfer of registration within the NFA registry. An individual owner does not need to be an NFA dealer to buy Title II firearms. The sale and purchase of NFA firearms is, however, taxed and regulated, as follows:

All NFA items must be registered with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Private owners wishing to purchase an NFA item must obtain approval from the ATF, obtain a signature from the Chief Law Enforcement Officer (CLEO) who is the county sheriff or city or town chief of police (not necessarily permission), pass an extensive background check to include submitting a photograph and fingerprints, fully register the firearm, receive ATF written permission before moving the firearm across state lines, and pay a tax. The request to transfer ownership of an NFA item is made on an ATF Form 4. Many times law enforcement officers will not sign the NFA documents. There have been several unfavorable lawsuits where plaintiffs have been denied NFA approval for a transfer. These lawsuit include; Lomont v. O'Neill 2002 9th circuit, Westfall v. Miller 1996 5th circuit, and Steele v. National Firearms Branch 1985 11th circuit. In response Tennessee and Alaska have passed state laws which require the CLEO to execute the NFA documents. On October 28, 2010 in response to a writ of mandamus a Tennessee Williamson County Chancellor Robbie Beal found that the sheriff or CLEO is not required to execute NFA documents according to Tenn. Code Ann. 39-17-1361.

NFA items may also be transferred to corporations (or other legal entities such as a trust). When the paperwork to request transfer of an NFA item is initiated by an officer of a corporation, a signature from local law enforcement is not required, and fingerprint cards and photographs do not need to be submitted with the transfer request. Therefore, an individual who lives in a location where the chief law enforcement officer will not sign a transfer form can still own an NFA item if he or she owns a corporation. This method has downsides, since it is the corporation (and not the principal) that owns the firearm. Thus, if the corporation ever dissolves, it must transfer its NFA firearms to the owners. This event would be considered a new transfer and would be subject to a new transfer tax.

The tax for privately manufacturing any NFA firearm (other than machineguns, which are generally illegal to manufacture) is $200. Transferring requires a $200 tax for all NFA firearms except AOW's, for which the transfer tax is $5 (although the manufacturing tax remains $200).

Dealers who pay a special yearly occupational tax are exempt from these taxes for transfers to or from other special occupational taxpayers (SOT's). Only a Class 2 manufacturer can “make and register” a machine gun—and that gun becomes a Post May-19th, 1986 Gun—salable only to police, State, local, Federal-Government, and the military. Low volume Class 2 manufacturers (those with sales under $500,000.00) pay the $500.00 per year SOT tax, while high sales volume Class 2’s pay the full $1,000.00 SOT “ticket” price.

Transferable machine guns made or registered before May-19th 1986 are worth far more than their original, pre-1986 value. And items like registered “auto-sears,” “lightning-links,” trigger-packs, trunnions, and other “combination of parts” registered as machineguns before the aforementioned date are often worth nearly as much as a full registered machine gun. For instance, as of September 2008, a transferable M16 rifle costs approximately $11,000 to $18,000, while a transferable "lightning-link" for the AR-15 can sell for $8,000 to $10,000. New manufacture M-16s sell to law enforcement and the military for around $600 to $1000.

The registration or transfer process (to an individual or corporation) takes approximately 3–6 months to complete as of October 2011. Additionally, the firearm can never be handled or transported by any other private individual unless the firearm's registered owner is present. Corporations which own NFA firearms can loan them to any employee of the corporation with a letter of permission on the corporate letterhead. NFA items owned by trusts may be legally possessed by any trustee (i.e., if a husband and wife are both trustees, either of them may use and transport the firearm without the other present).

Upon the request of any ATF agent or investigator, or the Attorney General, the registered owner must provide proof of registration of the firearm.

In a number of situations, an NFA item may be transferred without a transfer tax. These include sales to government agencies, temporary transfers of an NFA firearm to a gunsmith for repairs, and transfer of an NFA firearm to a lawful heir after the death of its owner. A permanent transfer, even if tax-free, must be approved by the ATF. The proper form should be submitted to ATF before the transfer occurs. For example, lawful heirs must submit a Form 5 and wait for approval before taking possession of any NFA item willed to them. Temporary transfers, such as those to a gunsmith or to the original manufacturer for repair, are not subject to ATF approval since they are not legally considered transfers. The ATF does, however, recommend filing tax-free transfer paperwork on all such temporary transfers, to confer an extra layer of legal protection on both the owner and the gunsmith.