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Federal Firearms Licensees & Compliance

The Five Most Common Mistakes Federal Fiream License Holders or FFLs (LICENSEES) Make: Keep Your FFL And Business Out Of The Line Of Fire.

At Ciyou & Dixon, P.C. we have represented clients with virtually every permutation of gun-related cases imaginable. Over the years, we have observed a number of commonalities with FFL holders–matters they didn’t attend to that caused problems.

And with this, it is a fascinating time, full of contradictions.

We observed gun manufacturers obtain immunity from nuisance and related claims, under the Protection of Lawful Commerce in Arms Act; gun sales sore to unprecedented levels with a potential change in local, state or federal elections (to unprecedented levels up to and following President Obama’s election); and at least according to the FBI Uniform Crime Reports, violent crime continues to decline year upon year.

FFL holders and other realities buck these trends. The overall numbers of Licensees continues to decline. Our Society at large wants guns, perceives violent crime is up, and has zero tolerance for gun crimes. Where do guns come from and who bears the brunt of the tensions between these trends? FFL holders, gun dealers.

They (you) are in the proverbial cross-hairs. That is the nature of the beast and industry. However, not all is lost, in this post we hope to give the benefit of what we see to avoid five common mistakes that impact the daily affairs of FFLs more than random bad luck or probabilities associated with a high-risk business.


The biggest short-coming of FFL holders is bad record-keeping. In a compliance inspection, good is not good enough. Complete, accurate, and error-free records are required.

Unlike other provisions of the Gun Control Act of 1968 (amended by the Firearms Owners’ Protection Act of 1986), a warrant is not required for compliance checks, tracing firearms, and criminal investigations of persons other than the Licensee.

Nevertheless, a proper compliance inspection (within these exceptions) may reveal incomplete records and result in the Licensee being revoked and criminal charges being filed against the Licensee. Generally, sloppiness is not the same as willfulness and defines the civil/criminal boundary.

This should not diminish the seriousness of the civil/administrative component. A License may be revoked, causing the loss of a livelihood, and incur significant monetary penalties for violations.

Private Collection.

A logical, but widely abused, exception to the need for an FFL is the “private collection” exception. A FFL is not required to buy, sell and trade firearms if the person (seller) is doing so as part of assembling a firearms’ collection or disposing of one or some variation of trading up and building a collection.

However, day-in and day-out many people abuse this exception and are “engaged in the business” for gain of buying and selling firearms under the pretext of a “private collection” exception. ATFE and state and local government is attuned to this abuse.

As a general rule, this abuse hurts FFLs and lawful gun owners. It may not be today, but a day of reckoning is coming. If you have to ponder this exception, you probably need to consult with your counsel of choice about your activities.

Needing an FFL and not having one is not an enviable position. You will have a long prison sentence to contemplate this. And arrests and convictions do occur for selling firearms for gain without a License.

Dealer or Manufacturer.

The dealer versus manufacturer distinction seems apparent. A main street gun shop needs a dealer’s license. A big-name gun manufacturer may come to mind. But what about those situations in between?

Is a dealer who changes out barrels may be deemed to be manufacturer by AFTE. A gunsmith who may not ever sell a gun nevertheless needs an FFL of some type. To the extent any dealer alters firearms, he or she should be aware the line between the two is narrow and gray.

Be advised. Take care to understand the distinctions and make a reasoned choice about your situation as it relates to operations. Anything beyond retail sales of out-of-the box firearms is subject to closer scrutiny.

Illegal Transfer or Sale.

In the course of business, a dealer must be vigilant to avoid an illegal transfer or sale of a firearm. This may occur in an innocuous but nevertheless criminal or civilly actionable way. For instance, anyone who has spent much time in a gun shop will see a hard-up individual come in with a desperate story and sell a gun far below its value.

A patron at the shop may turn around and want to immediately purchase the gun. For the FFL holder, it is an easy profit without tying up working capital. However, it is correspondingly easy to just equate it to a private individual-to-individual sale since it was only in the dealer’s control briefly.

Nevertheless, it is a purchase of inventory by the dealer and sale. This must be logged and a 4473 completed and NICS check of the purchaser. If not, this is a state and federal crime and basis for revocation of the Licensee’s License. The permutation of the way this may play out are limitless, but care is urged.

A more advanced concept is where a dealer provides an NFA weapon to a purchaser before the approved (tax stamped) paper work arrives. It may even seem logical, as the purchaser has paid for the restricted item. But it is nevertheless illegal. This may subject the dealer and purchaser to confiscation, criminal charge, and the FFL may face loss of the License.

Accidental Discharge.

A remarkable trend we observe as attorneys who are frequently involved in gun-type cases are accidental discharges. This is because anecdotal evidence suggests to us this is most often at the hand of a long-term gun owner.

It may be the case that the awe and power a new gun-handler experiences provides an extra measure of protection that it lost over time. In any case, a stray round may end a life and change that of the negligent shooter’s forever.

Almost like strict compliance is the expectation with record-keeping by a Licensee, with gun-handling 100%, 100% of the time is required. There are no good or bad days with gun ownership and possession. Just safe or unsafe ones.

Be sure of your target, backstop, and where your finger is at relative to the trigger each time, every time.

The attorneys of Ciyou & Dixon, P.C. hope you find this blog post helpful as a FFL holder. Be informed. Stay safe. And follow the letter and spirit of the law. Doing so will ensure a profitable future and protect your License.

Ciyou & Dixon, P.C. attorneys provide legal services for Indiana FFL holders and consulting services throughout the United States, except as otherwise prohibited by law. Be an example, not a statistic.


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Dixon & Moseley, P.C., is a law firm located in Indianapolis, Indiana. We serve clients in six core practice areas: family lawappellate practicefirearms lawgeneral practicepersonal injury and criminal law.

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