Firearms Dealers Engaged in the Business

Firearms Dealers Engaged in the Business

Updated April 15, 2024
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 P.L. 117-159 amends definitions related
dealers],
to 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 provisions
stocks, trigger mechanism to firearms [i.e.,
that require persons buying and selling firearms at the
wholesale or retail level to be federally licensed as firearms
gunsmiths], or
dealers. Section 12002 of P.L. 117-159 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 dealers
licensed under the provision of this chapter.
by striking the language “with the principal objective of
livelihood and profit,” and replacing it with “to
It is notable that the subparagraph (18 U.S.C.
predominantly earn a profit.” As ame
§921(a)(21)(C)) that defines engaged in the business for
nded, the definition at
federally licensed firearms dealers only refers to
18 U.S.C. §921(a)(21)(C) reads as follows:
subparagraph (11)(A) of the GCA definition of dealer. The
subparagraph does not refer to subparagraphs (11)(B) and
[Engaged in the business,] as applied to a dealer in
(11)(C) of the definition of dealer. Hence, gunsmiths and
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 licensed
trade or business to predominantly earn a profit
firearms dealers at 18 U.S.C. §921(a)(21)(C).
through the repetitive purchase and resale of
firearms, but such term shall not include a person
Defining “To Predominantly Earn a Profit”
who makes occasional sales, exchanges, or
The amendment to P.L. 117-159 further emphasizes a profit
purchases of firearms for the enhancement of a
motive as a factual circumstance requiring federal licensure
personal collection or for a hobby, or who sells all
as a gun dealer by defining “to predominantly earn a profit”
or part of his collection of firearms.
to mean
As discussed below, Section 12002 also amends the GCA
the intent underlying the sale or disposition of
to define the clause “to predominantly earn a profit” as
firearms is predominantly one of obtaining
specifically excepting firearms transfers made to improve
or liquidate a personal firearms collection. Notably, Section
pecuniary gain, as opposed to other intents, such as
12002 does not amend the parallel GCA subparagraphs
improving or liquidating a personal firearms
defining engaged in the business for firearms and
collection.
ammunition manufacturers, gunsmiths, and importers at 18
Regarding firearms transfers related to terrorism and other
U.S.C. §921(a)(21)(A), (B), (D), (E), and (F).
criminal conduct, this definition includes the following
proviso:
Engaged in the Business and Licensure
The GCA requires all persons engaged in the business of
That proof of profit shall not be required as to a
importing, manufacturing, and dealing firearms to be
person who engages in the regular and repetitive
licensed as federal firearms licensees (FFLs) (18 U.S.C.
purchase and disposition of firearms for criminal
§923). Any person who imports or manufactures
purposes or terrorism. For purposes of this
ammunition must also be licensed, but a federal dealer’s
paragraph, the term ‘terrorism’ means activity,
license is not required to deal in ammunition. Under Section
directed against United States persons, which—
922(a)(1)(A) of Title 18 of the U.S. Code, it is unlawful to
(A) is committed by an individual who is not a
engage in the business of importing, manufacturing, or
national or permanent resident alien of the United
dealing in firearms without a federal license. Offenses are
punishable by up to five years’ imprisonment.
States;
The Bureau
of Alcohol, Tobacco, Firearms and Explosives (ATF) is the
(B) involves violent acts or acts dangerous to
federal agency that administers and enforces the GCA and
human life which would be a criminal violation if
licenses FFLs. Section 921(a)(11) of the GCA defines the
committed within the jurisdiction of the United
term dealer to mean
States; and
(C) is intended—
(i) to intimidate or coerce a civilian population;
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Firearms Dealers Engaged in the Business
(ii) to influence the policy of a government by
• the person sells or offers for sale firearms and represents
intimidation or coercion; or
or demonstrates to potential buyers a willingness to
purchase and sell additional firearms;
(iii) to affect the conduct of a government by
assassination or kidnapping.
• the person spends more money or its equivalent on
This new provision is designated in the GCA as Section
purchases of firearms for the purpose of resale than their
922(a)(22) of Title 18 of the U.S. Code, moving and re-
reported taxable gross income during the applicable
designating to Section 922(a)(23) the definition of “with the
period of time;
principal objective of livelihood and profit” as it still
applies to licensed manufacturers and importers.
• the person “repetitively sells or offers for sale firearms”
through straw or sham businesses or straw purchasers,
GCA Recordkeeping and Background Checks
or that cannot be lawfully purchased or possessed;
The GCA generally prohibits anyone who is not licensed as
an FFL from acquiring a firearm from an out-of-state
• the person “repetitively sells or offers for sale firearms –
source, requiring that such transfers be facilitated through
within 30 days after they were purchased; that are new
an FFL in the state where the transferee resides. The GCA
or like new in their original packaging; or are of the
requires FFLs to maintain records on all commercial
same or similar kind (i.e., make/manufacturer, model,
firearms transactions. The act also requires an FFL to
caliber/gauge, and action) and type (i.e., the
initiate a background check through the National Instant
classification of a firearm as a rifle, shotgun, revolver,
Criminal Background Checks System (NICS) on any
pistol, frame, receiver, machinegun, silencer, destructive
unlicensed person who seeks to acquire a firearm from the
device, or other firearm)”;
FFL through a sale, trade, or redemption of firearms
exchanged for collateral (18 U.S.C. §922(t)). In the case of
• the person sells firearms that were in their business
a NICS system “proceed” response, the FFL may complete
inventory before their license was terminated; or
the transfer. In the case of a system “delayed” response, the
FFL is permitted to proceed with the transfer at their
• the person sells or offers for sale firearms that were
discretion after three business days have elapsed if the FFL
transferred to a personal collection prior to the time
has not received a final NICS eligibility determination.
someone lost their license.
Shift in Focus from Livelihood to Profit
Intrastate private transfers between unlicensed persons not
Amendments to P.L. 117-159 shift the focus of the GCA
engaged in the business of dealing in firearms were
dealer licensing requirement onto an intent to seek a profit
previously unregulated by the recordkeeping and
by eliminating the “principal objective of livelihood” as a
background check provisions of the GCA. Such transfers,
condition for licensure. For federally licensed firearms and
though, were occasionally covered by state laws or local
ammunition manufacturers and importers, the “principal
ordinances. Intrastate private firearm transfers in
objective of livelihood and profit” remains a central
unregulated firearms markets that do not require
condition requiring licensure. For federally licensed gun
background checks are rhetorically called private sale
dealers, “to predominantly earn a profit” is now the central
exemptions or gun show loophole transfers. Unlicensed
condition requiring licensure.
sellers can transfer firearms without conducting a
background check at gun shows or an “event sponsored by
The amendments to P.L. 117-159 are intended to require
any national, State, or local organization, devoted to the
persons who buy and resell firearms for profit to be licensed
collection, competitive use, or other sporting use of
federally as gun dealers, even if they do not do so with “the
firearms, or an organization or association that sponsors
principal objective of livelihood.” The definitional changes
functions devoted to the collection, competitive use, or
in P.L. 117-159 could make some, but not all, intrastate
other sporting use of firearms in the community.”
private firearm transfers subject to GCA recordkeeping and
background check requirements, if those transfers are made
The Biden Administration’s announcement of the final rule
by profit-oriented, repetitive firearms buyers and sellers.
references an April 4, 2024, ATF report that explains that
Arguably, such transfers were not covered under previous
trafficking in gun shows, flea markets, and auctions was
law if they were not also made for the “principal objective”
associated with the highest mean number of firearms
of one’s “livelihood.” According to the sponsors of P.L.
trafficked per investigation. The final rule explains that
117-159, these changes clarify who should be licensed,
“even a single firearm transaction, or offer to engage in a
eliminating a gray area in the law, ensuring that one aspect
transaction, when combined with other evidence, may be
of firearms commerce is more adequately regulated.
sufficient to require a license.” In turn, the Department of
Justice estimates that 23,006 unlicensed persons engaged in
Implementation of P.L. 117-159
the business of firearms dealing will need to apply for
Prior to P.L. 117-159, there had been disagreement and
licenses. This final rule attempts to close the gun show
confusion between ATF, courts, and legislators on how to
loophole by requiring currently unlicensed sellers to
interpret who is required to be a registered FFL. P.L. 117-
become FFLs and conduct background checks before a sale,
159 codified a broader interpretation of being “engaged in
regardless of the state where the purchase is made.
the business” than interpretations before the legislation was
enacted. ATF further clarified this in its final rule, which
Jordan B. Cohen, Analyst in Firearms Policy
goes into effect on May 11, 2024, and explains that a
person is a firearms dealer if
IF12197
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Firearms Dealers Engaged in the Business

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https://crsreports.congress.gov | IF12197 · VERSION 5 · UPDATED