Starting a firearm business (laws?)

[s2thalayer]

Hi, I'm a resident of southern VA, and am thinking of starting a firearm business. Our area has the highest unemployment rate in the state, and the economy is in terrible shape (though that seems to be the story everywhere these days). In these hard times I don't have the money, and don't want to risk taking a major loan until i know the profitability of my business. We have a couple gun shops here, but they all have terrible service and most are out of their own homes. I would rather not have a public shop out of my home for privacy purposes, and i understand you can't get an FFL without a secure location and storefront. So, my idea is to buy used firearms and resell them. The ATF doesnt like it, but from what i understand it is completely legal. What are the laws for ammunition sale? I'm not clear on if you need a license to sell that. Also, are there any licenses needed for gunsmithing (i know its a stupid question, im just wondering), and is there anything you can do without one? I DO plan on getting a business license, I am aware you can't sell anything without one. The IRS is quite possibly the only agency more scary than the ATF. I am checking the laws for myself, but i want to make sure im not getting anything wrong. If all goes well, i plan on getting my FFL and getting a secure location.

[jdonovan]

If you don't already have one, you ____NEED____ a lawyer.

You would be a fool if you took advice from some random internet person regarding starting a firearms based business.

paraphrasing....

The economy here is in terrible shape, so I want to start a business selling goods that are a luxury purchase for most people

I'm not sure I see a good path in that business plan.

No ffl needed to sell just ammo.

Yes a license is needed for gunsmithing. Depending on what you are doing, it might even cross into being a 'manufacturer' which needs yet another class of FFL.

The mark up on firearms is REMARKABLY low.... a few per-cent at best. Ammo isn't much better until you are buying in HUGE lots. Think truck-load quantities.

The real profit is in the accessories. Holsters, cleaning supplies, optics, etc...

[s2thalayer]

If you don't already have one, you ____NEED____ a lawyer.

You would be a fool if you took advice from some random internet person regarding starting a firearms based business.

paraphrasing....

The economy here is in terrible shape, so I want to start a business selling goods that are a luxury purchase for most people

I'm not sure I see a good path in that business plan.

No ffl needed to sell just ammo.

Yes a license is needed for gunsmithing. Depending on what you are doing, it might even cross into being a 'manufacturer' which needs yet another class of FFL.

The mark up on firearms is REMARKABLY low.... a few per-cent at best. Ammo isn't much better until you are buying in HUGE lots. Think truck-load quantities.

The real profit is in the accessories. Holsters, cleaning supplies, optics, etc...

Thanks for the advice jdonovan. I do have a lawyer, but no i was not planning on using him. And of course i wouldnt go just on advice from someone on the internet. I'm doing research of my own, people on this forum just tend to know the laws and I'm looking more for people saying "I KNOW you can't do this" rather than "It's perfectly okay to do this". I have a friend who is a former FFL that i will seek final advice from before actually going through with it. I've got a degree in business and have taken a few law classes, though that doesnt make me a lawyer, it makes me stay out of the dark.

As far as the economy is concerned, this would not be my main income. I work full time as a manager for a large restoration company, so this would not be a full time thing but more of a "on the side". Because of that, I don't exactly have to make a living off of it. I personally believe that a major reason the economy around here is so bad is service, or lack of. My reasoning for wanting to do this isn't even as much for money as to provide a better service. All the shops around here gouge terribly or just can't do what you need. For example, the cheapest i've found .308 is $25 for 20 rounds of federal. I order online and get them at .37 a round sometimes. I understand the places have to keep the lights on, but that's insane. The cheapest you'll find a WASR around here is $700. $700 for a WASR. Gunsmithing is even worse. There is maybe one shop around here worth a damn, but i still think i can do better.

As far as gunsmithing, eventually i plan to get a license, but let's say building an AR (customer provides lower), or converting a Saiga (customer provides core rifle), or modifying such rifles without screwing up and 922r or ATF regulations. Simplistic stuff like that i would imagine does not require a smith license?

[jdonovan]

All the shops around here gouge terribly or just can't do what you need. For example, the cheapest i've found .308 is $25 for 20 rounds of federal. I order online and get them at .37 a round sometimes. I understand the places have to keep the lights on, but that's insane. The cheapest you'll find a WASR around here is $700. $700 for a WASR. Gunsmithing is even worse. There is maybe one shop around here worth a damn, but i still think i can do better.

Once you buy insurance, both for the goods, and professional liability, pay your self for you time etc... you'll see how fast the 0.37/round ammo becomes 0.90 a round.

Talk to some insurance agents and see what a liability policy for a gunsmith will cost you. I'd be surprised if you find a policy for less than $2000 a year, just for the smithing part of the operation.

As far as gunsmithing, eventually i plan to get a license, but let's say building an AR (customer provides lower), or converting a Saiga (customer provides core rifle), or modifying such rifles without screwing up and 922r or ATF regulations. Simplistic stuff like that i would imagine does not require a smith license?

My understanding, is if you keep a receiver in your possession overnight for a customer.... you need an FFL

If you are taking a bare receiver and converting it to a fully assembled firearm, its also my understanding you would need to be an 07 - manufacturer of firearms, ammunition and ammunition components other than NFA, Destructive Devices and Armor Piercing ammunition

The ATF has gotten a bit stricter these days about what constitutes being a 'manufacturer'. In the past it had been if you engraved your name then your were a maker otherwise you were not. Nowadays if you do a substantial portion of the assembly that can turn you into a maker as well.

[s2thalayer]

Yeah, i understand the insurance end and all the overhead associated. But i still don't understand how anyone can justify selling a common round such as .308 at over a dollar per round, when some sellers can afford under half that.

Wow i honestly did not know that about the manufacturer stuff. I had assumed the lower is considered the actual firearm, the rest are just accessories. I'm beginning to see what you mean by needing a lawyer.

[Diomed]

I would rather not have a public shop out of my home for privacy purposes, and i understand you can't get an FFL without a secure location and storefront.

That is false. You can have your licensed premises in an open field if you want, ATF's concerns are whether the location is zoned to allow for it (either retail, industrial, or other permissive situation), whether you have a business license if you need one, and if you have a homeowner's association or covenants they allow for the business.

So, my idea is to buy used firearms and resell them. The ATF doesnt like it, but from what i understand it is completely legal.

Actually, ATF loves that, because buying firearms for resale is dealing under federal law and requires a license.

I DO plan on getting a business license, I am aware you can't sell anything without one.

Depends on the locality. Some do not require business licenses.

My understanding, is if you keep a receiver in your possession overnight for a customer.... you need an FFL

I think you're confusing things, if a FFL has a customer's gun in their possession overnight (for more than one day) they have to enter it in their logbook.

If you are taking a bare receiver and converting it to a fully assembled firearm, its also my understanding you would need to be an 07 - manufacturer of firearms, ammunition and ammunition components other than NFA, Destructive Devices and Armor Piercing ammunition

This is correct, however, the OP wants to work on customer-supplied firearms. So long as the customer is supplying the firearm being worked on, it's gunsmithing.

The ATF has gotten a bit stricter these days about what constitutes being a 'manufacturer'. In the past it had been if you engraved your name then your were a maker otherwise you were not. Nowadays if you do a substantial portion of the assembly that can turn you into a maker as well.

The maker-vs.-manufacturer thing is more related to NFA firearms. What ATF's been doing for the last several years is tightening up on what practices and processes constitute manufacturing, in what contexts. A lot of this is driven by hunger for revenue. The more folks fall under manufacturing, the more money FFLC and TTB collect (and also State, if you're not savvy). The issue of markings has mostly been cleared up now. It does require reading through about half a dozen rulings to get it all sorted out.

[Diomed]

But i still don't understand how anyone can justify selling a common round such as .308 at over a dollar per round, when some sellers can afford under half that.

There are lots of things that go into retail pricing. Unless you're treating ammo as a loss leader, it's very hard to undercut the guys who wholesale it.

Just wait until you look at new guns. There's hardly any margin at all - and some places can sell to the public for less than you can buy from a distributor! Money in the gun biz comes from used guns, accessories, and gunsmithing.

Wow i honestly did not know that about the manufacturer stuff. I had assumed the lower is considered the actual firearm, the rest are just accessories. I'm beginning to see what you mean by needing a lawyer.

The receiver (or frame for handguns) is the firearm; while the other parts are unregulated, together they make rifles, shotguns, and handguns. The government collects taxes on rifles, shotguns, and handguns (as well as ammunition). They do not collect on receivers. So at the basic level, it's about taxes. A dealer/gunsmith (they are the same from a licensing standpoint) cannot remit manufacturing taxes, only manufacturers can. That is why if you want to do what the government considers manufacturing, they tell you to get the manufacturing license.

[user]

You don't have to have a "storefront" to get an FFL, but you do have to have regular business hours and a secure means of storing products. Your big problem is that most distributors won't deal with someone who is not a "stocking dealer". The reason markup on guns is low is that they're not the primary product - the real money is in accessories. Slings, cleaning supplies, ear and eye protection, replacement grips, holsters, sights & optics, etc. You could just sell the accessories, don't need an FFL for that, and there are plenty of distributors who will sell to you in dribs and drabs as needed.

The requirements for establishing any business in Va. are pretty much the same, and to get an FFL, you have to be able to prove you're already "street-legal" as far as your local government is concerned. That means: registration of any corporate entity you plan to use with the State Corporation Commission; registration of any fictitious or "DBA" tradenames you want to use with your local Clerk of Court (copy to the SCC if appropriate); occupancy permit and business license from your county or city. If you've got employees, then worker's comp insurance certificate. Get an Employer's Identification Number from the IRS if you're not doing business as a sole proprietor and then get a bank account. Register with the Va. Dept. Tax. for authorization to collect sales tax. Presto, you're in business. Make copies of the EIN certificate, sales tax certificate, and certificate of incorporation or business license, and be prepared to send those things to distributors to prove you're "real". If you want to get an FFL you have to be able to prove you jumped through all those hoops first. And getting the occupancy permit depends on local zoning ordinances - I know a guy whose FFL was revoked because the local government approved his occupancy permit application based on an erroneous reading of the local zoning ordinance - the BATFE keeps track of that stuff and determined that the local government was incorrect in awarding the permit and cancelled his ticket.