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Federal law makes it unlawful for any person except a licensed dealer to engage in the business of dealing in firearms. 18
U.S.C. § 922(a)(1)(A). As applied to a firearms dealer, the term “engaged in the business” is defined
as:
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.
18 U.S.C. § 921(a)(21)(C).
The Gun Control Act of 1968 established the federal licensing system for firearms dealers. According to the Bureau of
Alcohol, Tobacco and Firearms (ATF), however, that system was “overly simple” from 1968 until 1993. Department
of the Treasury, Bureau of Alcohol, Tobacco and Firearms, Commerce in Firearms in the United States (February 2000).
During that time, any person who was over 21, paid a $10 annual fee, had premises from which to operate, and was not prohibited
from possessing firearms was issued a license. As a result, the number of federal firearm licensees (FFLs) soared, reaching
a peak of 284,117 in 1992. Id. In 1993, ATF estimated that 46 percent of all FFLs conducted no business at all, but used their
licenses to buy and sell firearms in violation of state and local zoning or tax laws. Id.
In 1993 and 1994, Congress adopted laws to strengthen the licensing system. The 1993 Brady Act increased the licensing
fee to $200 for the first three years and $90 for each additional three-year period. That law also required applicants to
certify that they had informed local law enforcement of their intent to apply for a license. 18 U.S.C. § 923(a)(3)(B), (d)(1)(F)(iii).
The Violent Crime Control and Law Enforcement Act of 1994 required applicants to submit photographs and fingerprints, and
to certify that their business was not prohibited by state or local laws, and would, within 30 days, comply with such laws.
18 U.S.C. § 923 (a),(d)(1)(F)(i),(ii).
Once licensed, dealers are obligated to:
Initiate background checks on unlicensed firearm purchasers;
Maintain records of the acquisition and sale of firearms;
Report multiple sales of handguns (i.e., the sale of two or more pistols or revolvers to an unlicensed person within any
five consecutive business days); and
Report the theft or loss of a firearm within 48 hours after the theft or loss is discovered.
18 U.S.C. §§ 922(t), 923(g)(1)(A), 923(g)(3)(A), 923(g)(6).
FFLs must also submit to a maximum of one ATF inspection per year to ensure compliance with federal record-keeping requirements.
More frequent inspections are permitted if a federal magistrate has issued a search warrant or if the search is incidental
to a criminal investigation. 18 U.S.C. § 923(g)(1)(A),(B). In addition, FFLs must respond to requests for information from
ATF regarding the disposition of a firearm if such request is made during the course of a bona fide criminal investigation.
18 U.S.C. § 923(g)(7).
A FFL may not sell or deliver: 1) a handgun to a resident of another state; 2) a shot gun or rifle or ammunition for that
firearm to a person the dealer knows or has reasonable cause to believe is under the age of 18; or 3) a handgun or handgun
ammunition to a person the dealer knows or has reasonable cause to believe is under the age of 21. 18 U.S.C. § 922(b)(1),(3).
FFLs may temporarily conduct business at a location other than that specified on the FFL’s license if the temporary
location is a gun show in the state specified on the license. 18 U.S.C. § 923(j).
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