Class III NFA Weapons/Title 2 firearms are not as commonly known nor as straight forward as the Title 1 firearms. All class III /title 2 weapons fall into 1 of 6 different categories.
• Short Barrelled Rifles (SBRs),
• Short Barrelled Shotguns (SBSs),
• Any Other Weapon (AOWs) and
• Destructive Devices.
All title 2 firearms are regulated by what’s known as the National Firearm Act or what we refer to as NFA. One could spend months reading about NFA but I’ll hit the major misconception – which are, contrary to the assumptions by many individuals AND even law enforcement, that NFA weaponry:
• Is legal in almost every state. Most all 6 categories above are allowed in just about all states within the Continental United States. A few states restrict machinegun ownership, others may restrict short barrelled shotguns (SBSs) or suppressors, etc.
• One does not need to obtain a “Class III” weapons license to own. In fact, there really is no such thing as a class III NFA weapons license. When a Title 1 FFL dealer pays what is known as a Special Occupation Tax, he/she then becomes a SOT that can then deal in NFA/Title 2 weapons. SOTs have several classes too and they are based on the type of FFL license you currently hold. The term Class 3 comes from when a normal Type 1 (standard dealer) FFL holder pays his SOT tax. He becomes a Type 3 SOT hence the term Class 3.
• Transferring ownership of an NFA weapon – All NFA weapons regardless of category (machineguns, silencers, etc.) are controlled during their transfer from one person/entity to another. These weapons transfer to another entity on what is called ATF tax forms. Each ownership transfer MUST be approved by the ATF before the transfer takes place. This approval takes sometimes many months. Generally individual transfer is approved in 3-4 months, dealer to dealer in 3-4 weeks. When the ATF approves the transfer, they cancel a tax stamp and this is why you sometimes hear some say class 3 stamp. Transfers from/to individuals require a one-time $200 tax stamp to be paid for EACH transfer (AOWs require just a $5 stamp). These are considered tax paid transfers and usually are on an ATF form 4. Dealers can transfer to other dealers using a tax free Form . If a person buys NFA weapon(s) or item from someone outside his/her domicile (home) state, the weapon must be transferred 1st to a SOT holder within the buyer’s state, similar to a Title 1 firearm transaction. It must go to a FFL/SOT dealer in the buyer’s state before going to the buyer.
• Making of NFA weapons. In 1986 President Ronald Reagan signed a bill that basically stopped the making of any new machineguns. The Firearm Owners Protection Act, which would loosen restrictions on gun ownership with the reopening of interstate sales of long guns on a limited basis, legalization of ammunition shipments through the U.S. Postal Service (a partial repeal of the Gun Control Act), removal of the requirement for record keeping on sales of non-armour-piercing ammunition, and federal protection of transportation of firearms through states where possession of those firearms would otherwise be illegal, also contained an amendment, The Hughes Amendment which prohibited civilians from owning any machine gun manufactured after 1986. All the other 5 categories (SBRs, SBSs, Silencers, AOWs and Destructive Devices) however can still be made, even by an individual, if he/she first applies for and receives permission to do so. They will file an ATF Form 1 (maker form) and pay a $200 make tax fee. A civilian can still legally own any machinegun that was created PRIOR to May, 1986 as long as they get approval on the ATF form 4 discussed above. Remember that no civilian can possess a machinegun manufactured AFTER May 1986 except for law enforcement and military so there is a finite quantity available.
• Utah is a special state when it comes to Class III NFA weapons. Part of the Form 1 or Form 4 approval process requires that you need to get local Chief Law Enforcement Official (Sheriff or Chief of City Police) to sign off on your form. Well, several years ago, a bill was passed in TN that makes it a SHALL SIGN state which means the Sheriff or Chief MUST sign approval for your transfer unless there is something in your NCIS background check that would otherwise prevent it. No other state does this. Some officials have erroneously associated their approval with liability on their part. When in all actuality, the signoff in the ATFs eyes is ONLY to state that the individual has nothing negative in his or her NCIS check. Corporations (LLC, INC, etc.) and Trusts (Revocable) do NOT need LEO signoff or fingerprints (still need ATF approval) however they may have tax implications.
• An interesting and widely unknown fact, since the NFA went into effect in 1934, there has only been ONE, yes, ONE single felony committed in the whole United States since 1934 that involved a legally registered NFA firearm. And it was committed ironically by a crooked police officer who went to a drug house and shot someone on the premises. He used his legally acquired UZI sub machinegun to commit the crime. You hear all the time of machineguns and sawed off shotguns in the news but these have all been by individuals possessing an illegal, non registered weapon. There are millions of records of legally owned entries on the NFA registry too, so it’s not like we’re talking just a few hundred or thousand potential individuals.
Six (6) distinct types of Class III NFA weapons
• Machineguns – Often referred to as full-autos, automatics, etc… any firearm which fires more than 1 bullet for each individual pull of the trigger.
• Short Barrelled Rifles (SBR) – Rifles with barrels less than 16″.
• Short Barrelled Shotguns (SBS) – Shotguns with barrels less than 18”.
• Silencers (Suppressors). Silencers/Suppressors are never portrayed accurately in the movies. If the bullet speed breaks the sound barrier, you WILL hear a pop. Suppressors are meant to alter the signature of a weapon so that it sounds like something else and/or the sound heard doesn’t mark the shooter’s position as easily as a non-suppressed weapon. .22 cal firearms can be suppressed very well though. You can make them so quiet that the action cycling produces more sound than the fired bullet does. With other calibers, sub sonic ammo can be used to lessen the signature as the bullet leaves the barrel. Best analogy I can give is a normal suppressed 5.56/223 from an AR15 will sound more like a .22 cal. rifle being fired.
• Any Other Weapon (AOW) – these are usually things that don’t meet the other criteria above. Put a fore grip on a pistol, guess what? You JUST made an AOW weapon and if the proper paperwork and approval were not obtained prior, you have violated NFA regulations and possess a contraband weapon that carries severe fines and penalties. Other common AOW classifications are these wallet holsters you see that are meant to be/could be fired while the weapon is still in the holster. Pen guns are another example. AOWs are a little special in that the transfer tax for them is only $5.00. Ironically, the “maker” of the AOW still has to pay a $200 maker Form 1 fee just like he/she would to make a SBR, SBS or Silencer.
• Destructive Devices (DDs) – these are self explanatory, but the ATF has classified several classes of shotguns now as destructive devices. The infamous ‘Street Sweeper’ shotgun is considered a DD by the ATF and falls into the title 2/NFA realm.
ATF forms usually used in dealing with these weapons
• ATF Form 1 – Maker Form – used by non manufactures to make NFA weapons – for civilians, only Short Barrel Rifles, Short Barrelled Shotguns, Silencers and AOWs can still be made (after May 1986). The ‘one time’ tax stamp for this form is $200. Maker will receive an approved form back from ATF and he/she can then make the item in question. Once made, if transfer of ownership is ever needed, this would be facilitated on a Form 4 below.
• ATF Form 2 – Manufacturer Registration Form – used by manufacturers only.
• ATF Form 3 – Dealer to Dealer tax-free form. Any SOT can transfer to any other SOT tax free NFA weapons he/she has in their possession/ownership. This is usually done when someone buys an item and it is transferred from a dealer in one state to a dealer in the buyer’s state to facilitate the approval/filing process.
• ATF Form 4 – Tax paid to/from individual form – used when a NFA item is transferred TO or FROM an individual. Even if the individual transfers the said item to a SOT holder/dealer, there still is a $200 transfer tax. Once the SOT has it, they can transfer it back out to another SOT holder tax free (Form 3) or directly to another individual in their state on a tax paid (Form 4).
• ATF Form 5 – Used to transfer NFA items to police departments for official use – tax fee transfer. Dealer use only.
• ATF Form 5320 – Used in the Interstate Transportation of all Title II firearms. If you are traveling between states, you WILL need to fill this form out a few weeks in advance. NFA weapons must remain in the possession of the registered owner so short of just a few exceptions; you may not permit anyone to have possession of your weapon without you being in immediate presence.
What is an SOT?
An SOT is a taxpayer (entity) with an FFL that has registered with the federal government and paid an annual tax. The status as an SOT applies to the entity (business). This means that a business can get more than one FFL and it can rely on its status as the same SOT. The SOT tax must be paid every year by July 1st, and the cost of the FFL and SOT registration varies per FFL Type and, in some cases, by annual sales. Unfortunately, if you decide to become an SOT on June 1st, you’ll either need to pay again for the next year on July 1st or you’ll need to wait until July 1st to start the next SOT tax year.
How to Become a Class 3 Dealer?
This is what most people are wondering about when they ask “How do I become a Class 3 License?” The first step is to become a Federal Firearm Licensee. After you have your FFL, you’re ready to register as an SOT and pay the appropriate tax:
Ensure that You Have the Correct FFL/Business Structure
You must ensure that you set your business up properly and got the correct type of FFL. If you took our course, don’t worry – you’re all set! If you want to be a dealer, you may use a Type 7 manufacturer’s license. The opposite isn’t true – a Type 1 dealer may not manufacture firearms. NFA firearms will be registered to the entity. We recommend using an actual business entity (a corporation or LLC) for liability purposes, but being a sole proprietor does have one benefit for some. If you decide to go out of business and give up your FFL, then all of the firearms, including NFA firearms (except post-1986 machine guns), can transfer freely (no transfer tax) to you as an individual. This is because the NFA firearms are registered to the SOT (the entity) and not the FFL license.
Select Your Class of SOT and Tax-rate
the Class of SOT you must become depends on the activity you want to engage in. Once you’ve determined that Class of SOT you need to become, you must then figure out your tax rate. For some FFLs, the SOT tax rate changes depending on whether your total sales are over or under $500,000 annually.
Take an Online SOT Registration Course
The actual process of getting your FFL License and registering as an SOT can be difficult. However, thanks to online SOT certification courses, it’s never been easier. However, it’s incredibly important that you take the right one. When choosing an SOT Registration course, you should look to make sure that you are getting: legal advice from an actual firearms attorney that has the appropriate certifications:
• legal advice from an actual firearms attorney that has the appropriate certification guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the ATF
• guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the AT professional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees
• professional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees
Finally, Apply for and Register as an SOT
Upon ensuring you have the correct FFL and business type, have chosen the right Class of SOT, and taken your course, you’re finally ready to apply for your SOT registration to become a Class 3 dealer, a Class 2 Manufacturer, or a Class 1 Importer. Now, the steps to this can be very difficult and may require multiple forms and extra steps depending on your situation.
Title 2 Firearms Lawyer Free Consultation
When you need legal help with spcial occupations tax or firearms licensing in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506