No longer an 01 by rule, now an 07

[aippi]

I build Custom Tactical Shotguns and I was advised on August 3rd that I am an 07 manufacture. The ATF agent explained it like this:

If a customer sends me a weapon and do A,B,C,D, and E to it then I am gun smith. However, if I buy a weapon and do the exact same A,B,C,D and E it and offer it for sale I am an 07 manufacture and I owe the federal exsize tax and every dollar of vaule I increase the original value of the weapon.

So, I have to turn in my 01 after six years and I am now waiting on the 07. This is nothing more then a back door tax the federal government figured out how to raise. Of course I will not pay it as it will be factored into the price of my weapons and my customers will pay it as all taxes are paid by the consumer.

Some of you in the AR business got hit with this in the past year or so. They have just now got around to shotgun people like me and Hans Vang. Also, any of you with an O1 that are modifying weapons in any way then selling them be aware that is a no go these days and you need an 07 license for this.

[ke6guj]

I've been talking about this for a couple years based on 01FFLs doing "drop-in" conversions to make Single-shot exempt pistols. BAsed on ATF opinions, it would appear that you would need to be an 07FFL and need to engrave the firearm with your 07FFL info, but it appears that "The Right People" think it is safe for an 01FFL to swap out a barrel, install and pin a SLED without it being considered a manufacturing activity that needs an 07, that it be engraved, and that it be subject to FAET.

[tenpercentfirearms]

I've been talking about this for a couple years based on 01FFLs doing "drop-in" conversions to make Single-shot exempt pistols. BAsed on ATF opinions, it would appear that you would need to be an 07FFL and need to engrave the firearm with your 07FFL info, but it appears that "The Right People" think it is safe for an 01FFL to swap out a barrel, install and pin a SLED without it being considered a manufacturing activity that needs an 07, that it be engraved, and that it be subject to FAET.

I talked about this in another thread.

So everyone is talking about drop in parts and how it isn't manufacturing. However, that isn't convincing enough for me. So Google gave me a better feeling about it.

http://www.atf.gov/regulations-rulings/rulings/atf-rulings/atf-ruling-2009-2.pdf

And there you have it 01 FFLs, we do not have to be 07 FFLs to install drop in parts.

[aippi]

From my understanding of the new opinion of the old rule it is rather simple. Any thing you do to a customers weapon is as a gun smith and anything you do to a weapon you purchase and then sell is manufacturing. No way around it.

I am not qualified to do anything to a weapon simply because I have an 01. I am qualified to build the custom shotguns I build because I go to the Remington Factory in Ilion and Certify as a Law Enforcement Armorer every three years. So the fine line between who is a gun smith and who is not certainly needs clarification. I am not a gun smith, I am an Armorer on specific models and I don't even work on my own weapons unless they are Remington Shotguns nor do I work on any weapon unless it is a Remington Shotgun, 700 or 7615.

You mentioned the engraving and that is the main issue I have with the rule. My engraver will not meet the depth requirements I now fall under and I am looking at needing around 10K for a machine to do this effectively. I will of course get one, meet the requirement and continue as an 07 as I am not going to abandon a business that I have made so sucessful.

I posted this to warn others that this rule is being enforced differently now and they have to look at what they are doing and come into compliance. ATF has given me lead way since the rule changed but as time goes by others may not get that consideration. They can come in, determine you are manufacturing and go back to day one after the due federal taxes. Also, get caught doing this after you have been told it is the function of an 07 license and you will not only loose your license but they will come after you for the back taxes.

[kemasa]

As I was told by a person I know at the BATF, it is as you said, but also if a customer comes to you and says that they want A, B, C, D and E and you then put it together for them, then you are not a manufacturer, it is only if you do it in advance and try to sell it.

This is no longer viewed this way.

[Mstrty]

This is nothing more then a back door tax the federal government figured out how to raise. Of course I will not pay it as it will be factored into the price of my weapons and my customers will pay it as all taxes are paid by the consumer.

I own a small business. It always cracks me up when people tell me "just tax the big rich guy". You fools, the consumer will always pay any tax burden placed upon myself or my business.

Sorry for the threadjack... Now resume normal programming.

[tenpercentfirearms]

From my understanding of the new opinion of the old rule it is rather simple. Any thing you do to a customers weapon is as a gun smith and anything you do to a weapon you purchase and then sell is manufacturing. No way around it.

Do you have any references to this "new opinion"?

[GoingQuiet]

I build Custom Tactical Shotguns and I was advised on August 3rd that I am an 07 manufacture. The ATF agent explained it like this:

If a customer sends me a weapon and do A,B,C,D, and E to it then I am gun smith. However, if I buy a weapon and do the exact same A,B,C,D and E it and offer it for sale I am an 07 manufacture and I owe the federal exsize tax and every dollar of vaule I increase the original value of the weapon.

So, I have to turn in my 01 after six years and I am now waiting on the 07. This is nothing more then a back door tax the federal government figured out how to raise. Of course I will not pay it as it will be factored into the price of my weapons and my customers will pay it as all taxes are paid by the consumer.

Some of you in the AR business got hit with this in the past year or so. They have just now got around to shotgun people like me and Hans Vang. Also, any of you with an O1 that are modifying weapons in any way then selling them be aware that is a no go these days and you need an 07 license for this.

This is not new news. ATF has held that opinion for a while. There's nothing wrong with holding a manufacturers license, and the excise tax that you speak of only kicks in after 50 guns that you are putting your makers marks on. Many custom gun builders use existing commercial products and therefore do not have to make a new gun subject to FET.

Also - you said O7 - you mean 07. Zero Seven is the designation, not Oscar Seven.

Additionally - the price difference between the cost of dealer and manufacturer licensing is so little it is a non issue for 99.99% of the FFL's in business. I have never heard anyone actually complain about having to pay more to be licensed as a manufacturer rather than a dealer. I'm not sure how you figure that a $60/36 month or $20/year increase is a detriment to your business as a whole - that is of course working upon the concept that you will not manufacture more than one new gun from scratch, each a week for one year.

From my understanding of the new opinion of the old rule it is rather simple. Any thing you do to a customers weapon is as a gun smith and anything you do to a weapon you purchase and then sell is manufacturing. No way around it.

I am not qualified to do anything to a weapon simply because I have an 01. I am qualified to build the custom shotguns I build because I go to the Remington Factory in Ilion and Certify as a Law Enforcement Armorer every three years. So the fine line between who is a gun smith and who is not certainly needs clarification. I am not a gun smith, I am an Armorer on specific models and I don't even work on my own weapons unless they are Remington Shotguns nor do I work on any weapon unless it is a Remington Shotgun, 700 or 7615.

You mentioned the engraving and that is the main issue I have with the rule. My engraver will not meet the depth requirements I now fall under and I am looking at needing around 10K for a machine to do this effectively. I will of course get one, meet the requirement and continue as an 07 as I am not going to abandon a business that I have made so sucessful.

I posted this to warn others that this rule is being enforced differently now and they have to look at what they are doing and come into compliance. ATF has given me lead way since the rule changed but as time goes by others may not get that consideration. They can come in, determine you are manufacturing and go back to day one after the due federal taxes. Also, get caught doing this after you have been told it is the function of an 07 license and you will not only loose your license but they will come after you for the back taxes.

Are you (and not Remington) making NEW shotgun receivers? If you are not making new virginal (I can't think of a better word, its late) guns, there's not a reason to engrave your name on it. Engravers can be found for less than $10,000. Even better, you can get a marking variance to have someone else with a very expensive $10,000 engraver cut metal on the gun with your makers marks and you pay them by the job. A 44 cent stamp and a letter to your Director of Industry Ops is a hell of a lot cheaper than $10,000.

I think you are having a sky is falling moment. These are issues the industry has faced for a while and there are many folks out there - myself included, that manage to navigate them with ease and with minimal expense and aggravation. It is what it is, adapt to it.

[aippi]

Going quiet: It is new to those of us in the Shotgun Customizing business. They imposed this on the rilfe and pistol guys and are just getting around to us. This is why both Hans Vang of Vang Comp and I were advised the same week. Also, you are wrong. I do have to engrave the receivers as the ATF clearly advised me of this. The agent was here today at 10am for the 07 interview for my new license and there is no misunderstanding of anything I have posted.

Thank you for your encouragement, I am sure it is well intended, however, I am not having a "sky is falling" moment. A simple google of the term "Custom Tactical Shotgun" will show I am number one on page of the internet and a well established business as I am sure you are. Men with the ability to build such a business as we have do not have "The sky is falling moments".

I posted this to advise others who may be in the same business and unaware of the ruling. At some point those persons are not only subject to loss of thier license, but to back taxes on the weapons they have sold. My post is for information and also to show how they are now bring this ruling to bare on all of us in order to generate more taxes. This is what is being talked about every night on the news, Federal Regulations that impede small businesses and this is a perfect example.

I also though though it very trivial of you to even bring up the O and the 0, that adds nothing to the post but seems to be important to you for some reason. And since trivial things in post are important to you I will point out that the 01 license is a $200 fee and the 07 is only $150 and is not more like you posted. Please take no offence at me correcting the misinformation you posted.

[ke6guj]

I also though though it very trivial of you to even bring up the O and the 0, that adds nothing to the post but seems to be important to you for some reason. And since trivial things in post are important to you I will point out that the 01 license is a $200 fee and the 07 is only $150 and is not more like you posted. Please take no offence at me correcting the misinformation you posted.

its funny how they charge $200 for a new 01, but renewals are $90 IIRC. But that 07s are $150 for new licenses, and renewals. That $90 vs. $150 renewal cost might be the $60 he is talking about.

And ITAR might come into play now, and that is ~$2700/year. I know that many 07s don't pay ITAR, but have heard some horror stories about State Dept. trying to get people to pay retroactively any unpaid ITAR fees if you get audited by them.

[efillc]

And ITAR might come into play now, and that is ~$2700/year. I know that many 07s don't pay ITAR, but have heard some horror stories about State Dept. trying to get people to pay retroactively any unpaid ITAR fees if you get audited by them.

If you are a Type 06, 07, or 10 FFL then ITAR is very much in play. ATF won't say anything about it (and much of what they say is wrong) since it's a program administered by the Department of State. PMDDTC ITAR

Something else to consider is that the liability insurance for manufacturers is usually different (with higher premiums) than for dealers.

Keep an eye out for a used engraver. We picked up a nice rotary locally off of CL for under $4k.

[GoingQuiet]

Going quiet: It is new to those of us in the Shotgun Customizing business. They imposed this on the rilfe and pistol guys and are just getting around to us. This is why both Hans Vang of Vang Comp and I were advised the same week. Also, you are wrong. I do have to engrave the receivers as the ATF clearly advised me of this. The agent was here today at 10am for the 07 interview for my new license and there is no misunderstanding of anything I have posted.

Thank you for your encouragement, I am sure it is well intended, however, I am not having a "sky is falling" moment. A simple google of the term "Custom Tactical Shotgun" will show I am number one on page of the internet and a well established business as I am sure you are. Men with the ability to build such a business as we have do not have "The sky is falling moments".

I posted this to advise others who may be in the same business and unaware of the ruling. At some point those persons are not only subject to loss of thier license, but to back taxes on the weapons they have sold. My post is for information and also to show how they are now bring this ruling to bare on all of us in order to generate more taxes. This is what is being talked about every night on the news, Federal Regulations that impede small businesses and this is a perfect example.

I also though though it very trivial of you to even bring up the O and the 0, that adds nothing to the post but seems to be important to you for some reason. And since trivial things in post are important to you I will point out that the 01 license is a $200 fee and the 07 is only $150 and is not more like you posted. Please take no offence at me correcting the misinformation you posted.

What material alterations are you doing that requires application of makers marks?

Here was the way it was explained to me - you already covered if work is performed on behest of customer = gunsmithing. If I buy a beat up Glock 17 with dead night sights and I install new sights on it, that constitutes manufacturing and requires a manufacturers license but does NOT warrant engraving. If I buy a Rock River complete lower and complete upper and push two pins together - I have created an item, I need to engrave it and I need to report FET if applicable.

There was work performed there but one instance requires engraving and one does not.

I do not put my name on a lot of things, but the extent to which I do is because I have to. You see a lot of customizers offer a package of work to customer owned guns - which is supposed to alleviate engraving and FET compliance burdens.

The reason I brought it up is that people use google to do research and doing a search on FFL types with your syntax would not yield the most productive results. Not picking on you, just wanting to make search terms and industry nomenclature easily accessed. The 01 is a $200 and the 07 is $200 on initial, however as you are ALREADY an FFL it was my understanding from FFLC that you can renew your FFL at the reduced rate. If this is not correct, I welcome current information.

[ke6guj]

The reason I brought it up is that people use google to do research and doing a search on FFL types with your syntax would not yield the most productive results. Not picking on you, just wanting to make search terms and industry nomenclature easily accessed. The 01 is a $200 and the 07 is $200 on initial, however as you are ALREADY an FFL it was my understanding from FFLC that you can renew your FFL at the reduced rate. If this is not correct, I welcome current information.

I thought that your "correction" was not needed since I never once saw aippi type O7 in this thread, he always typed 07. I only saw him once type O1 once, most of the time he typed 01.

[mcisniper]

AAAGGGGGHHHH!!!! Ok, I am getting ready to start the FFL process. Yes, I read the above thread, got a migraine and need some Motrin. I was about apply for an 01 and 07 since I'm already being asked to build a few AR's. I now am more confused than ever.

Thanks,
Michael

[efillc]

AAAGGGGGHHHH!!!! Ok, I am getting ready to start the FFL process. Yes, I read the above thread, got a migraine and need some Motrin. I was about apply for an 01 and 07 since I'm already being asked to build a few AR's. I now am more confused than ever.

Thanks,
Michael

First, you don't need to apply for both licenses - an 07 can do everything an 01 can do. "Building a few AR's" requires an 07 UNLESS your customer brings you a stripped lower and a LPK, and you charge labor. Then it's gunsmithing.

Second, research the liability insurance between the two. As I pointed out above, manufacturers have more exposure, thus higher premiums.

Third, ITAR will be in play for you if you manufacture AR's. $2,250 per year.

Finally, these rules are more correctly categorized as "recently enforced" rather than "recently imposed". The IRS put them into the Code of Federal Regulations back in the 1950's when deciding what activities constituted manufacturing versus gunsmithing, and they were responsible for collecting FAET (the ATF didn't start up until 1968). Just be thankful that you're not getting hit for back taxes, penalties, interest, etc.