The NFA tax stamp business is complicated, but it’s not that complicated. Anyone with a college degree should be able to have a pretty solid grasp of the legal concepts involved. The next step: find a gun businesses operated by people with college degrees. That’s actually the most difficult part. When buying a gun/ammo/silencer/machine gun/ACCO-WEDGE from an FFL you’re not just buying a tangible product. Let that sink in for a minute . . .
This business is rife with dishonesty. Since the name of this blog is The Truth about Guns, there’s no reason to shy away from reality. Admittedly, I’m honest to a fault and extremely brusque about it most of the time. But part of our reality reflects the fact that the truth is ugly far more often than it’s pretty.
I have seen it all when it comes to the gun business and the gun buying public. There are dozens of dishonest ways for a dealer to take someone’s money. It’s the modern version of the proverbial thumb on the butcher’s scale. One thing I find reprehensible: dealers will use their stature as a licensee of the federal government to spout things that are patently untrue in order to rake in more cash.
Case in point: firearm transfers. I’ve heard of dealers in states without universal background checks tell their customers that they aren’t allowed to sell guns they don’t want anymore and the firearm must be consigned back to the dealer for sale. If they don’t do that, they say, it’s against the law…and nobody wants to break the law. It’s a tax on those who are too lazy to fact check.
So, we have an industry with plenty of dishonesty from those with the ability to take money from consumers selling them services they don’t legally need. When confronted with accurate data and facts, these dealers will go ballistic and deny any impropriety whatsoever.
Stupid is our business and business is good.
What you pay for as a consumer is the reputation of the seller. The reputation of the seller is a critical component that people don’t seem to think much about anymore. There are many internet retailers out there known for taking money for product listed as “in stock” when it isn’t. They keep the consumer’s money until they get a fill. I don’t have to name names, but I’m certain many of you can figure out who I am referring to because their reputation is that poor.
The really irritating part: this behavior is common on the wholesale side, too. I have one customer who wanted an item special ordered. I ordered it from a wholesaler that claimed the product in stock. After six months waiting for a Form 3 from ATF, they finally admitted they didn’t have it. They were waiting for a restock to arrive.
I told them to send me my money back and they said they’d send me some free goods to make up for the lost sale. They sent the refund which went back to my customer. They never sent me the free goods. I do this because I have a good reputation to uphold. Other dealers would make the customer wait for their product to eventually arrive.
Now, to address some of the comments that were raised about the dealer’s termination of firearm business, the protagonist in our original story said the following:
“I get home and call the local and national ATF office hoping that they have some type of solution for me. Nope. Since the transfer was never approved by the ATF (hell, the paperwork was never even mailed to them) I’m officially SOL. My options at this point are to try and get ahold of the store’s owner and ask for a refund or pursue civil litigation.”
Here’s the truth about the situation. The ATF’s NFA Branch deals with the regulatory compliance aspect of NFA items. They have nothing to do with — and barely even know — if people are still in business or not. Their job isn’t problem solving. The Form 3 goes in, the Form 3 goes out. That’s their job. Yes, they have a few specialists in the building. But dealing with this sort of thing is not in the regulation book nor does it fall within the scope of their responsibilities.
Yes, the customer paid for the product. Yes, the customer is holding an unapproved Form 4. The customer doesn’t own anything in the eyes of the ATF. A blank Form 4 without a stamp is as much good as toilet paper. Could the customer find the business owner? Possibly. My hunch is that the cost to recover is greater than the original outlay.
Our protagonist has some more sage advice, which boils down to choose a good local dealer, pay with a credit card and send in your forms quickly. Mostly good advice. Being the local dealer who has done plenty of business with lots of happy customers over the years, I can say that what you’re paying me for is a little more complex than cost of goods sold + margin = retail price. Here’s why.
A few years ago, I had someone come in that needed a transfer on a machine gun he wanted to buy online. I sat down with him and talked about the process from start to finish, told him where the critically important phases were (if anyone guessed “ALL OF IT”, you get a cookie or alcoholic beverage of your choosing) and how things typically went wrong. I answered all his questions. After he was satisfied that I knew what I was talking about and he had a working understanding of the process he asked me what I would charge him.
I looked at my watch. It was 11:30 in the morning. We sat down at 10. I made a rough calculation on how much time I’d spend getting FedEx labels and proper forms written up for the party out-of-state to get the item to me and the rest of the process. This figure would cover wading through all the legal detritus that are ATF NFA Forms, FedEx and making sure everything went according to the well thought out plan.
My size up completed, I told the fellow that he’d owe me about $350 for getting all the work done including the return labels and answering all his questions. He seemed and sounded unimpressed. He asked me rather directly how I came to that number. The conversation went something like this:
FC: I’m going to need about $350.
1: From what I’ve gathered, you’re going to do spend about 5 minutes typing out paperwork for me and mailing it to ATF. Why should I pay you $350 for 5 minutes of work?
FC: Because I’ve spent 5 years learning how to do it in 5 minutes. I work harder at working smarter. You’re partly right though, typing out Form 4’s and doing your 4473 should take me about 5 minutes all total after proofreading. There’s only one thing you’re not taking into account though.
1: What’s that?
FC: I’m charging you $350 to make sure I’m still in business between today and the time ATF approves your forms several months from now. Would you rather I charge you $50 and when you come back in 9 months, there’s a “FOR RENT” sign in my window?
1. Will you take a personal check?
This is the side of the business that people don’t want to talk about. For a bunch of folks who are constantly dreaming up worst-case scenarios, how come nobody has thought to apply it to the business side of things? I knew gun owners could be shortsighted but I didn’t think it would be this shortsighted.
As a consumer, you’re paying the dealer for their time and effort. You’re also making sure they have a business that is in business by the time forms get back. Several years ago, when forms were taking 9-12 months to return forms, there was one business near me that prided themselves on their $20 standard transfer on firearms not regulated by the NFA. They got an SOT shortly thereafter and started doing NFA transfers for $20.
Everyone thought this was the greatest thing since squeeze mayonnaise. My business fell off and everyone went over to large internet dealers of guns and NFA devices and bought things there and used my comparatively inexpensive competition for the transfer. It worked phenomenally well — until it didn’t.
As I said earlier, you can find a college graduate in nearly every industry. The retail gun industry is typically not on that list. One thing that dealers (including myself) have learned over the years: doing $20 transfers is not a sustainable business model, much less $20 transfers that encompass NFA items.
Conventional wisdom can be ignored from time to time under the proper circumstances. But this is not something I will argue about because the amount of money brought in versus the amount of liability is disproportionate.
Our exemplar enterprise had a difficult time keeping their head above water as a result. But how was such a thing possible? It was a strange case of everyone loving the business on Facebook, with rave reviews and referrals coupled with a store full of people spending money every day of the week.
After all, how could you not like a business that would transfer in a gun from Buds for $20? If they didn’t have the gun, they’d order it themselves and charge you a $20 markup for the service. Nothing seemed to add up in terms of a long-term business model.
Several months later, after it all went completely sideways and into the ditch, I got a call from someone asking for a quote for a transfer. We got to talking about life, liberty and the pursuit of more guns the wife shouldn’t know about.
The potential customer was an attorney who worked for a local law firm. I was familiar with the name partner; I’d attended high school with both his kids and served on student council with his daughter. (How small a town that Baton Rouge can be always amuses me.)
The customer wanted some products I had that were in stock and we closed the deal. I wrapped up all the paperwork on the phone and sent it over to his law office. Just before we got off the phone he told me his last transaction had been a nightmare. I asked him how bad could it be – there’s not much to screw up in terms of getting a 4473 done right the first time and making sure the serial numbers are straight.
As it turns out, he’d visited my $20 competition just up the road and ordered a bunch of silencers from large internet dealers. By the time the forms had cleared at ATF for transfer to his local designee, the dealer was already on the rocks with ATF.
I don’t know 100 percent of the details. From what I’ve been able to figure out from the public domain, the county courthouse public records portal and the subsequent lawsuits, there was plenty of taking money and not much delivering. Firearms were sold on consignment with the owners of the firearms not getting any of the sale proceeds.
Talking to a few of ATF’s local industry operations people confirmed how broken their business model really was. Not even a Greek accountant could have saved this store. Because of their $20-one-size-fits-all business model, they couldn’t pay the rent and started effectively robbing Peter to pay Paul. The local IOI’s were winding down the operation due to people going to the local sheriff and filing criminal charges of theft and fraud as well as poor bookkeeping on top of a civil claim.
Their entire inventory was cataloged and seized as evidence in the criminal theft/fraud/conspiracy case – so now, nobody has the guns they paid for, nobody has the proceeds from the gun that they don’t own anymore, and all the NFA devices in limbo are in a regulatory purgatory only Sartre could understand.
Speaking of Sarte, on the topic of irony and critical thinking, I got him his product and his stamp in short order. He managed to take delivery of a purchase of in stock merchandise from a my business complete with tax stamp before he got to file a Form 4 on the first product he had purchased six months before from the folks that can’t run a business properly.
One popular alternative to running the risk of a dealer gone rogue (or Brazil): pay for items with a credit card. It’s a great idea in theory, but in practice we see quite the opposite.
Most merchant processors have a requirement in the terms of use about time-frame of delivery. In a nutshell, it says that as the merchant, we can only charge when product is ready to be delivered. In the case of a custom product, we can only take a deposit or have the product delivered in a window of X days.
The National Firearms Act of 1934 — where dealers have to wait for permission from the ATF to release an NFA item — creates a fugue state. Someone can come in and pay for an NFA product. We file forms with ATF and take their money via credit card. They do not take delivery of said product because ATF has not issued a stamp. However, the customer has paid for it.
In the view of the merchant processor and the issuing bank, the merchant has taken the customer’s money and not delivered product. This is a breach of the contract and the customer will be refunded. Not should be refunded – will be refunded. The issuing bank and processor will then yank money out of my account and return it to the customer.
The merchant processors have no idea of how long it takes to get a Form 4 cleared. So now I’ve done the regulatory work but I can’t resell the merchandise as it’s under transfer. And somehow the business is not allowed to get paid for the work performed or the merchandise in limbo.
I call shenanigans.
This is why many gun dealers shy away from credit card transactions. The idea of doing work and not being paid for it is a broken business model and I will avoid it whenever possible, as will many other dealers. We have enough things to worry about from a regulatory compliance standpoint. Add a“well did we get paid?” to that list? No thanks.
Some of this delay is on the customer. If your dealer gives you forms – TURN THEM IN. The sooner ATF gets paper, the sooner you can get the product. I have had people FORGET to turn in forms for YEARS. They then call me up and complain about how ATF is taking forever to get them a stamp. I’ll call ATF and they will report no record of forms being received. I’ll tell the customer to prove they paid the tax. Awkward conversation ensues and they finally admit they didn’t send in anything and I give them the evil eye.
I thought the gun culture was proud of “personal responsibility” – wouldn’t this be hypocritical behavior? While we’re on the subject, here’s a question from reddit about an NFA deal gone south. The short version: he bought a suppressor from a dealer, never turned in the paperwork and moved across town.
“So if those guys went out of business, they presumably had to give up their FFL/SOT, so OPs money aside for them to still hold onto the suppressor is a big no-no right? They also couldn’t resell it then without that, and since it doesn’t belong to them (no transfer took place and still belongs to the now defunct business I imagine) what happens? They destroy it and it sucks to be OP? I am a complete NFA n00b.“
This is a complicated question. As with all complicated questions, the correct answer is: IT DEPENDS. For starters, “So if those guys went out of business, they presumably had to give up their FFL/SOT, so OPs money aside for them to still hold onto the suppressor is a big no-no right?”
A Public Service Announcement for gun owners: I have no idea what this means. For the love of all that is holy, for one to ask a correct question, have a correct premise and clear objectives. Remember what I said about college graduates not being in the firearm industry? A few customers should head down to the junior college too in FC’s America. I digress…
Focusing on the question and the objectives that are clear, the product would still be on the books of the business and someone would still own it. Who/what is a question that requires further research. The only way for the product to be destroyed is if it was willfully destroyed by the owner. ATF wouldn’t be involved at that level.
The navigation of property recovery should not be something that any prospective gun buyer goes through, but this isn’t the first story I’ve heard nor will it be the last.
Anyone in the industry that is worth his or her salt should give the straight answer whenever possible. Especially when asked a frequent question from prospective customers. That question is: what’s stopping you from taking my money and not sending me a gun and disappearing?
”Nothing.” Except his honesty, or lack thereof.