Out of Business FFLs-- What Happens to Their Inventory? (Also see an informed debate on this below!)
There is a lot of confusing information on the web about disposition of an FFL's inventory when the dealer goes out of business. Even many attorneys are not aware of the actual regs.
In general, if the FFL was a sole proprietor, and if he/she logged out all remaining inventory to "personal inventory" (himself) when he turned his bound book into the OOB center, then, after a year's wait, the dealer can then sell his inventory privately, at gun shows, and to the public, under part 478. This is the FEDERAL CFR at the time of this writing, but State laws vary. For example, in Ohio, there are laws that say handguns have to be sold to other FFLs. BATF is even more confusing-- four calls to four offices plus national industry relations gave us five different answers! Realize that ATF's official position is that they won't give a written opinion on an issue already "clearly covered" by the CFR-- and this one is considered to be in that category. Besides, the harried Atlanta group is taking up to 9 months to generate letters on issues they will opine on.
Even though 4473's are not required for private sales, the CFR gives specific regs about logging-- the former dealer has to keep a "bound book" of personal sales, listing the model, serial, and name, address and date of birth of the purchaser. He also cannot sell to anyone he "reasonably suspects" could not pass a background check (as in, buyers who say: "I'm glad you're private, I couldn't pass a check anyway..."). Other comments about DVs, mental issues or felonies would be equally "reasonable" for a denial by the dealer.
THE ABOVE IS NOT LEGAL ADVICE-- consult an attorney (available at NSSF), the CFRs, or an ATF consultant for specific information about your situation. The NSSF has a number of outstanding resources-- such as Wally Nelson-- who can assist you on any specific questions you might have if you're going into, or out of, business.
Out of Business FFL Debate
Following is an email exchange with a smart emailer commenting on the OOB process:
Emailer: Just wanted to send you some information regarding your webpage section on FFL's going out-of-business. The statement about sole proprietors having to wait a year before selling any personal firearms which they acquired with their firearms license is incorrect. 478.125a discusses the disposition of personal firearms by licensed dealers, manufacturers, and importers who originally acquired the firearms with their license. This regulation has no bearing on individuals or entities that are no longer licensed.
In general, FFL's going out of business shall properly dispose of their remaining inventory to other licensed dealers or to non-licensees by means of a properly completed ATF Form 4473 and conducting a background check prior to going out of business or the expiration of their license.
Once the license has expired and the FFL has no intention of renewing or the FFL decides to discontinue business, the remaining firearms in inventory become the legal property of the sole proprietor or the entity and must be recorded in the acquisition and disposition record as such. All firearms in possession of a corporation or other business entity must be disposed of once the entity ceases to exist. NFA firearms would need to be properly transferred and registered prior to the legal dissolution of the entity.
In the case of a situation where the license is revoked by the ATF, the disposition of the firearms inventory and records maintained by the licensee would be determined by the ATF. Some FFL's are required to properly dispose of all firearms in inventory and are prohibited from keeping any for their personal collection. Some inventories are forfeited to the ATF upon revocation of the license but it is a case by case determination based on the severity of the revocation and if there are criminal charges involved.
Nevertheless, licensees who go out of business must properly dispose of their inventory and deliver their license and records to the ATF out-of-business records center within 30 days following the discontinuance of business. All firearms maintained by the licensee after going out of business may be sold at any time subject to 478.32(d), prohibited dispositions to certain persons, 18 USC 922(x), dispositions of handguns to juveniles, and any other state or local laws. There are no record keeping requirements for non-licensees, however, ATF encourages people who sell their personal firearms to record the sale in a bound book and note any relevant information of the purchaser, such as driver's license information.
Hope this helps.
FFL Answers:Thanks so much, I agree with 99%. The 1% I'd debate is record keeping and the year wait. One of our dealers (an auctioneer) followed 478 to the letter, even waiting the year once the remaining A and D was recorded back to personal inventory.
The remaining private inventory was sold over two years at gun shows, without, of course, 4473s. ATF busted the individual at a gun show, and demanded to see in-State driver's license records WITH serial numbers.
After spending $25,000 dollars on his defense, ATF dropped the case, but handed the records over to the State of California where the former dealer is spending 3 years in jail for the lack of records under separate CA disposition laws.
Interpretation of 478 is risky as you know, as some ATF offices (notably Miami, Chicago, LA, NY) treat handgun and long gun post license disposition differently, and each office's AIC is allowed to prosecute as they see fit, as you intimated. Another friend was recently fined 50K in Cleveland for selling a pistol, which the local office said fell under dealer to dealer even after being signed back into personal post license. None of these were seizures, all were voluntary license surrenders by old folks.
To be sure, I'd wait the year and keep the license/serial records, just to be safe. I know of dozens of former dealers who still get calls from ATF on inventory items, and even when they say "check out your own OOB center" ATF asks about the private inventory if the item is flagged in a crime. Selling without a background check after you've gone back private risks much more if the item is used in a crime, as this current Obama ATF is not reticent about turning over their records to "victims" (criminal's families) and anti gun groups, who love to make 478s an example. But I'm preaching to the choir, you are clearly very intelligent and know all this!
Emailer:Yes, these situations are different from state to state, city to city. Individuals who go out of business or, in some cases, have their license revoked, usually walk a fine line and must be careful from continuing to conduct activities that would be defined as engaged in the business of selling firearms.
The purpose behind 478.125a is to prevent licensed dealers from acquiring firearms with the intention of disposing of them without completing 4473's and running background checks if they dispose of them to their personal inventory first. If they maintain a firearm in their personal inventory for more than a year then they are only bound by the disposition record keeping of the sale. However, if its been less than a year, the licensee must log the firearm back in the A&D record and dispose of it the same as any other firearm. I would say it's kind of a safeguard.
I believe that if you are an FFL who goes out of business, it is best to dispose of your remaining inventory properly before you turn in your license. Selling 'personal' firearms at gun shows for the next few years may not look good to the local office.
Thanks for your response.
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