A person has to obtain a license as a federal firearms dealer if he/she is engaged in the business of selling firearms, see an experienced firearms attorney. Title 18 U.S. Code §921 contains various definitions of engaging the business of selling / being a dealer, engaging in the business of manufacturing firearms, and exceptions to being engaged in such a business. An experienced firearms attorney can clarify these laws for you.
Often, persons who casually make sales, or sell from their collections, become subject to licensing and federal criminal prosecution if they sell weapons, or “manufacture” weapons. “Manufacture” can include simply assembling legal weapons parts, which results in a completed weapon that an operable firearm.
The “gray area” is, or can be, where a person assembles parts (including receivers, uppers, etc.) into a completed weapon, but only does this on a limited basis. Another area that can be considered “manufacturing” weapons without a license, is when he/she is paid a fee to assemble the parts into a weapon but then returns the completed weapon to the person who paid for the assembly, rather than keeping the completed weapon to sell it himself/herself.
If enough weapons are sold where it appears that the person is doing more than enjoying a hobby, then he/she could be subject to prosecution for sales of weapons without a license (dealing without a license). The same can apply when the person is making more than casual, limited sales.
The same concept can apply to manufacturing weapons. That is, if enough weapons are created, or “manufactured” from weapon parts, then the person could be under investigation and prosecuted for manufacturing weapons without a license.
Again, the number of sales or assemblies may determine whether or not the person was engaged in the business of either sales or manufacturing.
Definitions of Dealer, Manufacturer, and Engaged in the Business
Note that a number of the definitions of Title 18 U.S. Code §921 are particularly significant for discussions and advocacy concerning whether a person is indeed a “dealer” within federal firearms law, or whether he/she is not a dealer requiring a firearms license, but rather a collector or hobbyist:
(3) The term “firearm” means (A) any weapon (including a starter gun) which will or is designed to or may readily be converted to expel a projectile by the action of an explosive; (B) the frame or receiver of any such weapon; (C) any firearm muffler or firearm silencer; or (D) any destructive device. Such term does not include an antique firearm.
(10) The term “manufacturer” means any person engaged in the business of manufacturing firearms or ammunition for purposes of sale or distribution; and the term “licensed manufacturer” means any such person licensed under the provisions of this chapter.
(11) The term “dealer” means (A) any person engaged in the business of selling firearms at wholesale or retail, (B) any person engaged in the business of repairing firearms or of making or fitting special barrels, stocks, or trigger mechanisms to firearms, or (C) any person who is a pawnbroker. The term “licensed dealer” means any dealer who is licensed under the provisions of this chapter.
(13) The term “collector” means any person who acquires, holds, or disposes of firearms as curios or relics, as the Attorney General shall by regulation define, and the term “licensed collector” means any such person licensed under the provisions of this chapter.
(21) The term “engaged in the business” means–
(A) as applied to a manufacturer of firearms, a person who devotes time, attention, and labor to manufacturing firearms as a regular course of trade or business with the principal objective of livelihood and profit through the sale or distribution of the firearms manufactured;
(C) as applied to a dealer in firearms, as defined in section 921(a)(11)(A), a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms;
(D) as applied to a dealer in firearms, as defined in section 921(a)(11)(B), a person who devotes time, attention, and labor to engaging in such activity as a regular course of trade or business with the principal objective of livelihood and profit, but such term shall not include a person who makes occasional repairs of firearms, or who occasionally fits special barrels, stocks, or trigger mechanisms to firearms;
(22) The term “with the principal objective of livelihood and profit” means that the intent underlying the sale or disposition of firearms is predominantly one of obtaining livelihood and pecuniary gain, as opposed to other intents, such as improving or liquidating a personal firearms collection: Provided, That proof of profit shall not be required as to a person who engages in the regular and repetitive purchase and disposition of firearms for criminal purposes or terrorism. For purposes of this paragraph, the term “terrorism” means activity, directed against United States persons, which…
It appears that “occasional sales” are not enough to require a federal dealer’s license. The Fifth Circuit concluded “…the Government must show a greater degree of activity than the occasional sale of a hobbyist.” (quoting U.S. v. Masters, 622 F.2d 83 (4th Cir. 1980). However, it need not prove that the defendant’s primary business was dealing in firearms or that he necessarily made a profit from dealing. United States v. Wilmoth, 636 F.2d 123, 125 (5th Cir. 1981)
In Wilmoth, the defendant’s sales where found to be beyond “occasional” in part because he sold approximately seven (7) guns within a one-month period. Also, and perhaps even more importantly, he had lots more guns available for sale, and he held them out as being for sale.
In another case, the Fifth Circuit again concluded “It is true that the government must prove both willingness to deal and more than an occasional sale in order to prove the status of the accused as one engaged in the business of dealing in firearms.” United States v. Berry, 644 F.2d 1034, 1037 (5th Cir. 1981)
Now turning to a more recent case, the Fifth Circuit observed “Individuals without licenses may make periodic sales of firearms from their personal collections, although they may not engage in the regular business of dealing firearms for profit.” United States v. Shipley, 546 Fed. Appx. 450, 452 (5th Cir. 2013)
Also in Shipley the Fifth Circuit (in analyzing the “engaging in business”), wrote:
To determine whether the defendant unlawfully engaged in the business of firearms dealing, as so defined, the jury ‘must examine the intent of the actor and all circumstances surrounding the acts alleged to constitute engaging in business.’ United States v. Tyson, 653 F.3d 192, 201 (3d Cir.2011) (citation omitted). The evidence at trial showed that Shipley did not have a license and that he nevertheless engaged in a regular course of dealing firearms for profit for a number of years, and that evidence was sufficient to support the jury’s verdict. Shipley’s primary argument for why this result should not follow is that he presented evidence at trial showing that, contrary to the government’s contentions and evidence, his firearms transactions actually caused him to suffer a net loss. The jury, however, was entitled to disbelieve that evidence. Furthermore, a conviction requires that the defendant had the ‘principal objective’ of making a profit, but it does not require that he succeeded in that endeavor.
United States v. Shipley, 546 Fed. Appx. 450, 454 (5th Cir. 2013)
The U.S. Supreme Court case decided in 1998, (Bryan v. U.S., 524 U.S. 184 (1998), concluded that a conviction for dealing in firearms without a federal license requires a showing of willful conduct on the part of the defendant. However, it also held that the term “willfully” in Title 18 U.S. Code §924(a)(1)(D) requires proof only that the defendant knew his conduct was unlawful, not that he also knew of the federal licensing requirement.
In Bryan, the trial judge refused to instruct the jury that he could be convicted only if he knew of the federal licensing requirement, instructing, instead, that a person acts “willfully” if he acts with the bad purpose to disobey or disregard the law, but that he need not be aware of the specific law (federal firearms law and licensing requirements) that his conduct may be violating.
The Fifth Circuit does not go into great detail about whether merely assembling parts is manufacturing. But a Fourth Circuit case (Broughman) addresses this. In that case, the court analyzed the word “manufacture” and wrote,
“We therefore conclude that manufacturing firearms under §923(a) entails assembling a firearm’s individual components so as to render the firearm ‘suitable for use.'” Broughman v. Carver, 624 F.3d 670 (4th Cir. 2010) Applying said meaning under the facts of Broughman, said court wrote:
The manner in which Broughman conducts his gun business; i.e., ‘build[ing] custom bolt action rifles’ by threading and chambering barrels to fit firearms actions, bluing the actions, and making and fitting stocks to the actions and barrels; undoubtedly places him within the statutory category of a firearms ‘manufacturer.
The government has to prove that you had more activity than an occasional sale or more activity than a hobbyist to show that you were engaged in the business of dealing firearms. If so, then you would need a federal firearms license to sell (deal). The argument by the government will be that several sales in a relatively short period of time constitutes “selling,” and therefore you need a dealer’s license.
Although legally-obtained parts are used, if the end product is a firearm, then your status of your assembly work being considered “manufacture” is certainly a realistic probability. Consult a firearms attorney to discuss these potential issues.
Federal defense attorney John Teakell can advise you as to your hobby or business, and any potential investigation that comes from your activities.