August 19, 2022
Firearms Dealers “Engaged in the Business”
On June 25, 2022, President Joe Biden signed into law the
(A) any person engaged in the business of selling
Bipartisan Safer Communities Act (BSCA; P.L. 117-159).
firearms at wholesale or retail [i.e., firearms
Section 12002 of the BSCA amends definitions related to
dealers],
firearms dealer licensure in the Gun Control Act of 1968
(B) any person engaged in the business of repairing
(GCA, 18 U.S.C. §§921 et seq.). Under the GCA, the
firearms or of making or fitting special barrels,
definition of “engaged in the business” undergirds
stocks, trigger mechanism to firearms [i.e.,
provisions that require persons buying and selling firearms
gunsmiths], or
at the wholesale or retail level to be federally licensed as
firearms dealers. Section 12002 of the BCSA amends a
(C) any person who is a pawnbroker.
subparagraph of the GCA definition of “engaged in the
The term “licensed dealer” means any dealer who is
business” as it pertains to federally licensed firearms
licensed under the provision of this chapter.
dealers, by striking the language “with the principal
objective of livelihood and profit,”
It is notable that the subparagraph (18 U.S.C.
and replacing it with “to
§921(a)(21)(C)), which defines “engaged in the business”
predominantly earn a profit.” As amended, the definition at
for federally licensed firearms dealers, only refers to
18 U.S.C. §921(a)(21)(C) reads as follows:
subparagraph (A) of the GCA definition of “dealer.” The
[“Engaged in the business
subparagraph does not refer to subparagraphs (B) and (C)
,”] as applied to a dealer
of the definition of “dealer.” Hence, gunsmiths and
in firearms, as defined in section 921(a)(11)(A),
pawnbrokers must be federally licensed as gun dealers,
[means] a person who devotes time, attention, and
even if they do not meet the conditions set out in the
labor to dealing in firearms as a regular course of
definition of “engaged in the business” for federally
trade or business to predominantly earn a profit
licensed firearms dealers at 18 U.S.C. §921(a)(21)(C).
[with the principal objective of livelihood and
profit] through the repetitive purchase and resale of
“To Predominantly Earn a Profit” Definition
firearms, but such term shall not include a person
The BSCA further emphasizes a profit motive as a factual
who makes occasional sales, exchanges, or
circumstance requiring federal licensure as a gun dealer by
purchases of firearms for the enhancement of a
defining the phrase, “to predominantly earn a profit,” to
personal collection or for a hobby, or who sells all
mean
or part of his collection of firearms.
that the intent underlying the sale or disposition of
As discussed below, Section 12002 also amends the GCA
firearms is predominantly one of obtaining
to define the clause “to predominantly earn a profit,”
pecuniary gain, as opposed to other intents, such as
specifically excepting firearms transfers made to improve
or liquidate a personal firearms collection. Notably, Section
improving or liquidating a personal firearms
12002 does not amend the parallel GCA subparagraphs
collection.
defining “engaged in the business” for firearms and
Again, this definition reiterates a personal firearms
ammunition manufacturers and importers at 18 U.S.C.
collection exception included in the definition of “engaged
§§921(a)(21)(A), (B), (D), (E), and (F).
in the business.” On the other hand, in regard to firearms
transfers related to terrorism and other criminal conduct,
“Engaged in the Business” and Licensure
this definition includes the following proviso:
The GCA requires all persons “engaged in the business” of
importing, manufacturing, and dealing firearms to be
That proof of profit shall not be required as to a
licensed as federal firearms licensees (FFLs) (18 U.S.C.
person who engages in the regular and repetitive
§923). Any person who imports or manufactures
purchase and disposition of firearms for criminal
ammunition must also be licensed, but a federal dealer’s
purposes or terrorism. For purposes of this
license is not required to deal in ammunition. Under Section
paragraph, the term ‘terrorism’ means activity,
922(a)(1)(A), it is unlawful to engage in the business of
directed against United States persons, which—
importing, manufacturing, or dealing in firearms without a
(A) is committed by an individual who is not a
federal license. Offenses are punishable by up to five years’
national or permanent resident alien of the United
imprisonment. The Bureau of Alcohol, Tobacco, Firearms
and Explosives (ATF) is the federal agency that administers
States;
and enforces the GCA and licenses FFLs. Section
(B) involves violent acts or acts dangerous to
921(a)(11) of the GCA defines the term “dealer” to mean
human life which would be a criminal violation if
committed within the jurisdiction of the United
States; and
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Firearms Dealers “Engaged in the Business”
(C) is intended—
the sale or disposition of firearms is predominantly one
(i) to intimidate or coerce a civilian population;
of obtaining livelihood and pecuniary gain, as opposed
to other intents, such as improving or liquidating a
(ii) to influence the policy of a government by
personal firearms collection.”
intimidation or coercion; or
Consistent with this approach, federal law explicitly
(iii) to affect the conduct of a government by
exempted persons “who make occasional sales,
assassination or kidnapping.
exchanges, or purchases of firearms for the
This new provision is designated in the GCA as
enhancement of a personal collection or for a hobby, or
who sells all or part of his personal collection of
Paragraph 922(a)(22) of Title 18 of the U.S. Code,
firearms.”
moving and re-designating to Section 922(a)(23) the
definition of “with the principal objective of livelihood
And, “as a general rule,” a person needed to be licensed
and profit” as it still applies to licensed manufacturers
“if they repetitively buy and sell firearms with the
and importers. The terrorism/criminal purposes proviso
principal motive of making a profit.”
is, and was previously, included in the latter provision
According to the National Shooting Sports Foundation
as well.
(NSSF), this guidance represented a broader interpretation
of the law than what had been commonly accepted
GCA Recordkeeping and Background Checks
previously, although ATF cited several criminal cases as
To deter unlawful firearms commerce and gun trafficking,
precedent in its guidance. Hence, it could be concluded that
the GCA generally prohibits anyone who is not licensed as
the BSCA more explicitly codifies ATF’s interpretation of
an FFL from acquiring a firearm from an out-of-state
prior law. In addition, the NSSF has observed that the
source, requiring that such transfers be facilitated through
BSCA could increase the number of federally licensed
an FFL in the state where the transferee resides. The GCA
dealers, possibly straining ATF resources. ATF aims to
requires FFLs to maintain records on all commercial
inspect every FFL for compliance with federal firearms
firearms transactions. The act also requires an FFL to
regulations on a three-year cycle. For FY2021, ATF
initiate a background check through the National Instant
reported that it conducted 6,721 inspections of FFLs, or
Criminal Background Checks System (NICS) on any
8.1% of 83,457 FFLs.
unlicensed person who seeks to acquire a firearm from the
FFL through a sale, trade, or redemption of firearms
Shift in Focus from Livelihood to Profit
exchanged for collateral (18 U.S.C. §922(t)). In the case of
The BSCA shifts the focus of the GCA dealer licensing
a NICS system “proceed” response, the FFL may complete
requirement onto an intent to seek a profit by eliminating
the transfer. In the case of a system “delayed” response, the
the “principal objective of livelihood” as a condition for
FFL is permitted to proceed with the transfer at their
licensure. As noted above, for federally licensed firearms
discretion after three business days have elapsed if the FFL
manufacturers and importers, there is no change in the law.
has not received a final NICS eligibility determination.
For federally licensed firearms and ammunition
manufacturers and importers, the “principal objective of
Intrastate, private transfers between unlicensed persons “not
livelihood and profit” remains a central condition requiring
engaged in the business” of dealing in firearms “to
licensure. For federally licensed gun dealers “to
predominantly earn a profit” are not covered by the
predominantly earn a profit” is now the central condition
recordkeeping or the background check provisions of the
requiring licensure.
GCA, as amended by the BSCA. However, such transfers
and other matters such as possession, registration, and the
The BSCA amendments are intended to require persons
issuance of licenses to firearms owners may be covered by
who buy and resell firearms repetitively for profit to be
state laws or local ordinances. Some gun control advocates
licensed federally as gun dealers, even if they do not do so
refer to intrastate, private firearm transfers as the “gun show
with “the principal objective of livelihood.” As a result, the
loophole” and call for comprehensive/universal background
BSCA definitional changes could make some, but not all,
checks. Related legislation has passed the House in the
intrastate, private firearm transfers subject to GCA
116th and 117th Congresses. See CRS In Focus IF11781,
recordkeeping and background check requirements, if those
Firearm Background Checks Under H.R. 8 and H.R. 1446.
transfers are made by profit-oriented, repetitive firearms
buyers and sellers. Arguably, such transfers were not
ATF Guidance Prior to BSCA
covered under previous law, if the firearms transfers in
In January 2016, the ATF provided guidance to firearms
question were not also made for the “principal objective” of
dealers with regard to FFL licensure requirements at that
one’s “livelihood.” According to the BSCA’s sponsors,
time. According to this ATF guidance:
there was confusion about the GCA’s definition of
“engaged in the business,” as it pertained to individuals
Any person engaged in the business of dealing in
who bought and resold firearms repetitively for profit, but
firearms is a person who “devotes time, attention and
possibly not as the principal source of their livelihood. They
labor to dealing in firearms as a regular course of trade
maintain that these changes clarify who should be licensed,
or business with the principal objective of livelihood
eliminating a “gray” area in the law, ensuring that one
and profit through the repetitive purchase and resale of
aspect of firearms commerce is more adequately regulated.
firearms” and must be federally licensed.
Conducting business “with the principal objective of
William J. Krouse, Specialist in Domestic Security and
livelihood and profit” meant that “the intent underlying
Crime Policy
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Firearms Dealers “Engaged in the Business”
IF12197
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https://crsreports.congress.gov | IF12197 · VERSION 1 · NEW