What is a Private Sale?

[BarryLee]

I had a friend tell me today that he believes there is indeed a Gun Show Loophole that needs to be closed. He basically said that a private individual can rent a booth at a gun show to buy, sell and trade with other private individuals and no background check is required.

He claims to have seen the same people at various gun shows around Atlanta and that they move a lot of guns with no background check. He claims these are not private individuals getting rid of a few extra guns, but dealers that avoid obtaining an FFL by dealing in used guns.

So, is it true that there are basically no volume limits on private sales at gun shows and no FFL required? Is my buddy simply mistaken about what he thinks is going on or is he correct that this is indeed allowed?

While I oppose background checks for private sales across a kitchen table this seems like something totally different. What do you guys think?

 

[Evan Thomas]

Your buddy is mistaken. It's true that in general, it's legal for a private individual to rent a booth at a gun show to sell his collection, or for private individuals to sell to each other, without a federal license. However, if you don't have one and make a habit of buying guns in order to resell them, you'll be in a peck of trouble once the authorities notice. See the current thread Virginia Woman Charged with Dealing w/o a License for an example...

 

[Spats McGee]

As I understand it, there is no hard and fast rule for the number of guns which must be bought or sold by any one entity before that entity is "engaging in the business of" buying and selling firearms, such that an FFL is required. However, just because one buys and sells a gun or a few, does not mean that it is a business venture.

At some gun shows, I have seen guns labeled "private collection" on rented tables. My hunch is that it's just someone selling from, well, his "private collection." If a private individual wants to rent a table to do so, I see no problem. OTOH, if that private individual rents tables at 6 different shows a year, buying and selling at each one, then a good argument could be made that he's "engaged in the business" and required to have an FFL. Engaging in the business without an FFL is already illegal though, and won't be cured by universal background checks.

 

[BarryLee]

if that private individual rents tables at 6 different shows a year, buying and selling at each one, then a good argument could be made that he's "engaged in the business" and required to have an FFL. Engaging in the business without an FFL is already illegal though, and won't be cured by universal background checks.

Yes, this is what my Buddy claims he has seen and he made a very good case for requiring NICS reviews of all transactions at a gun show.

However, it also sounds like there are already rules in place and maybe this just falls into the lack of enforcement category. Of course it could also fall into the “Buddy exaggerated” category.

 

[Spats McGee]

If that is what your buddy has seen, that falls into "lack of enforcement," IMHO. If he can back it up, he's spotted someone already in violation of federal law. The rules for transfers do not have anything to do with whether a transfer takes place at a gun show, on a golf course, in a swamp, or a garage.

Now ask your buddy this: If such a person is willing to violate federal law at the gun show, does your buddy think that making another law will be The One Law that such a person won't violate?

 

[Tom Servo]

OTOH, if that private individual rents tables at 6 different shows a year, buying and selling at each one, then a good argument could be made that he's "engaged in the business" and required to have an FFL.

I had an argument with a guy over that definition a couple of weeks ago that ended up with him barking at me and hanging up the phone. He sells guns on a very regular basis through various auction sites and forums. He's doing it repetitively and for a profit, and he's been doing it for several years.

There's certainly a tangible difference between him and a guy who sells a couple of guns he doesn't want anymore at the local show. The law is murky, and "repetitive" might be a gray area, but sometimes it's fairly obvious.

 

[Willie Sutton]

^^ what Tom said.

This sort of thing is done to the detriment of us all.

There's a difference between an old man who rents a table to liquidate his collection and someone who routinely sells at shows and continues to turn over guns. It's as obvious as day that this does, in fact, present a way for people to circumvent NICS checks. The antis actually have a point here, hate to say it.



Willie

.

 

[colbad]

There is some truth to your buddies observations. However, what constitutes dealing without a license takes into account many factors. One of the easiest ways to tell if someone is "dealing" or just selling off his collection is to ask him to get you something that is not on the table or multiple copies of a particular type. If he can get you guns not on his table it is a good sign that he is illegally selling more than just his collection and should be reported. Also, once an investigation is open a review of his income source will also come into play. Licensed dealers have a vested interested in reporting these guys. Often a sign saying Private Sale No Paperwork means "I sell to criminals at this table". I do not see these guys very often anymore in the SW.

 

[Frank Ettin]

Under federal law, one needs an FFL to engage in the business of a dealer in firearms. "Engaged in the business" is defined at 18 USC 921(a)(21)(C), emphasis added:

(21) The term “engaged in the business” means—

(A)...

(B) ...

(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;...

The operative concepts are (1) devoting time, attention and labor; (2) doing so regularly as a trade or business; (3) the repetitive purchase and resale of guns; and (4) intending to make money.

"Livelihood" simply means:

1: means of support or subsistence

Nothing in the statutory definition of "engaged in the business" requires that it be one's only business or means of support. It could be a side business, a secondary business or one of several ways you have of bringing money into the household. What matters is that you're doing it regularly to make money. You don't even necessarily need to make a profit to be "engaged in business." People go into business all the time and wind up not making money. It's not that they're not engaged in business; it's just that they're not very good at it.

But an occasional sale is not being "engaged in the business." Where is the the line between an occasional sale and the repetitive purchase and resale? That's not clear from the statutes. Let's see what some courts have said:

• The Third Circuit, in upholding a conviction of dealing in firearms without a license noted (U.S. v. Tyson, 653 F.3d 192 (3rd Cir., 2011), at 200-201, emphasis added):

  ...By the statute's terms, then, a defendant engages in the business of dealing in firearms when his principal motivation is economic (i.e., “obtaining livelihood” and “profit”) and he pursues this objective through the repetitive purchase and resale of firearms. Palmieri, 21 F.3d at 1268 (stating that “economic interests” are the “principal purpose,” and “repetitiveness” is “the modus operandi ”). Although the quantity and frequency of sales are obviously a central concern, so also are (1) the location of the sales, (2) the conditions under which the sales occurred, (3) the defendant's behavior before, during, and after the sales, (4) the price charged for the weapons and the characteristics of the firearms sold, and (5) the intent of the seller at the time of the sales. Id. (explaining that “the finder of fact must examine the intent of the actor and all circumstances surrounding the acts alleged to constitute engaging in business”). As is often the case in such analyses, the importance of any one of these considerations is subject to the idiosyncratic nature of the fact pattern presented...

  
  
• And the Fifth Circuit noted (United States v. Brenner (5th. Cir., 2012, No. 11-50432, slip opinion), at 5-6, emphasis added):

  ...the jury must examine all circumstances surrounding the transaction, without the aid of a "bright-line rule". United States v. Palmieri, 21 F.3d 1265, 1269 (3d Cir.), vacated on other grounds, 513 U.S. 957 (1994). Relevant circumstances include: "the quantity and frequency of sales"; the "location of the sales"; "conditions under which the sales occurred"; "defendant's behavior before, during, and after the sales"; "the price charged"; "the characteristics of the firearms sold"; and, "the intent of the seller at the time of the sales". Tyson, 653 F.3d at 201.

  
  
• The Sixth Circuit noted (United States v. Gray (6th Cir., 2012, No. 11-1305, slip opinion), at 8):

  ...However, "a defendant need not deal in firearms as his primary business for conviction." United States v. Manthey, 92 F. App'x 291, 297 (6th Cir. 2004)....

  
  
• And in upholding Gray's conviction the Sixth Circuit also noted (Gray, at 8-9):

  ...We have previously held that evidence was sufficient to support a conviction under § 922(a)(1)(A) where it showed (1) that the defendant frequented flea markets and gun shows where he displayed and sold guns; (2) that the defendant offered to sell guns to confidential informants on multiple occasions and actually sold them three different guns on two different occasions; (3) and...that the defendant bought and sold guns for profit. See United States v. Orum, 106 F. App'x 972, 974 (6th Cir. 2004)...

  
  
• In affirming a conviction of dealing in firearms without a license, the Ninth Circuit stated (U.S. v. Breier, 813 F.2d 212 (C.A.9 (Cal.), 1987), at 213-214, emphasis added):

  ...Courts have fashioned their own definitions of the term. For example, we have previously stated "that where transactions of sale, purchase or exchange of firearms are regularly entered into in expectation of profit, the conduct amounts to engaging in business." United States v. Van Buren, 593 F.2d 125, 126 (9th Cir.1979) (per curiam). In United States v. Wilmoth, 636 F.2d 123 (5th Cir. Unit A 1981), the Fifth Circuit stated that to prove the status of the accused as one engaged in the business of dealing in firearms, "the Government must show a greater degree of activity than the occasional sale of a hobbyist." Id. at 125. "It is enough to prove that the accused has guns on hand or is ready and able to procure them for the purpose of selling them from time to time to such persons as might be accepted as customers." Id.; accord United States v. Carter, 801 F.2d 78, 82 (2d Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 657, 93 L.Ed.2d 712 (1986); United States v. Burgos, 720 F.2d 1520, 1527 n. 8 (11th Cir.1983)....

Also, it's worthwhile to note that profits are taxable as short term or long term capital gains. But if one isn't engaged in a business some deductions ordinarily allowable as business expenses would not be allowable.

 

[kilimanjaro]

Here in Washington state, the Washington Arms Collectors club sponsors several large shows each year. Generally, 200 tables at each. Quite a few of the vendors are just collectors who rent a table and sell off part of their collection, older members wanting to liquidate, things like that, along with many FFL dealers. You need to be a club member to purchase or sell any firearm at the shows, and your membership comes with a background NICS check each year. The FFL dealers still do the 4473 and another NICS check, but the private vendors are selling only to NICS-checked members.

If the shows would just make a requirement like that, we could tell the anti-gunners to take a hike.

 

[jason_iowa]

Even an FFL can sell out of their private collection with out a check. No real reason to do it but they can.

 

[Ghost1958]

If we would we could tell them to take a hike anyway since none of that actually accomplishes anything in the way of stopping criminals from buy guns. But we all know that

 

[Frank Ettin]

Even an FFL can sell out of their private collection with out a check....

Please provide a citation to legal authority supporting that contention.

 

[ScottRiqui]

I think this might be what jason's talking about - from the ATF website:



A licensee may sell a firearm from his or her personal collection, subject only to the restrictions on firearm sales by unlicensed persons, provided the firearm was entered in the licensee’s bound book and then transferred to the licensee’s private collection at least 1 year prior to the sale. When the personal firearm is sold, the sale must be recorded in a “bound book” for dispositions of personal firearms, but no ATF Form 4473 is required.

[27 CFR 478.125a]

 

[lcpiper]

Edited, overcome by events

 

[Frank Ettin]

I think this might be what jason's talking about - from the ATF website:



A licensee may sell a firearm from his or her personal collection, subject only to the restrictions on firearm sales by unlicensed persons, provided the firearm was entered in the licensee’s bound book and then transferred to the licensee’s private collection at least 1 year prior to the sale. When the personal firearm is sold, the sale must be recorded in a “bound book” for dispositions of personal firearms, but no ATF Form 4473 is required.

[27 CFR 478.125a]

Thank you. I had been looking through the ATF website and must have missed that.

I thought it important to be absolutely sure. While I knew that an FFL could transfer a firearm from inventory to his private collection, I didn't know whether or to what extent there were further special requirement associated with a subsequent transfer out of his private collection to a non-licensee.

Even though a firearm in an FFLs personal collection is just a privately owned firearm, it would be inappropriate to simply assume that therefore a transfer by him would be the same as any private transfer, and it indeed appears not to be. The FFL is still required to document the transfer in his bound book, and the relief from having to have the transferee complete a 4473 and go through NICS appears to apply only if the firearm transferred had been transferred from the FFL's inventory to his private collection more than a year prior to the transfer to the non-licensee.

Often persons who are licensed to engage in a particular profession, trade or business may be subject to certain special duties or requirements even in connection with their personal activities involving the subject matter of that profession, trade or business. Such can be the case with real estate brokers, securities dealers, lawyers, accountants, etc.

 

[44 AMP]

Engaged in the business....I kind of got lost in the legal stuff, so I'm going to use the main concept, doing it for money. Profit/loss isn't the defining point, like a silencer, it is the intent of doing it that is the crime, not whether or not it succeeds. Right?

Now, I know some people (and have been one of them in the past) that go to gunshows, maybe rent a table, and sell some of their stuff. OR trade it. We take the money made, if any, and get more stuff. I have come home from gun shows with more guns than I took. And with the same number, but different ones, and sometimes less than I took, and no cash (got fewer but more expensive guns). I'm not engaging in the business, I'm engaging in my hobby.

Now, maybe a month or a year or ten, some of the guns I got at the shows will go away (sold/traded) and maybe they'll even be sold for more than I paid when I bought them. Again, all I'm doing is recycling part of my collection. Some guns are, or ought to be catch and release....

I don't see that as engaging in the business...

Now, the guy that buys and sells and uses his profits to make the payments on his Ramcharger, him I say is in the business, because he is not making deals to get guns to play with, he's making deals to make money for his living expenses.

I knew another guy, a serious Contender guy, used to be at a lot of the shows, with a nice table, lots of barrels and stuff, some guns, frames, grips, etc. He got kind of shut down by the authorities, not exactly for being in "the business" without a license, because he wasn't doing it as livelyhood (or partial) so they didn't have a good case against him for that.

BUT, what he was doing was taking his stuff around to shows in a three state area, and selling handguns (his personal collection) face to face at shows. SO he kind of was violating the transfer laws, because he wasn't using an FFL and was "out of state". As I heard it, he didn't realize he was breaking any laws. Heard he got a stiff talking to about it (maybe paid a fine), and promised to behave. Haven't seen him recently, but the last time I did see him at a show, he just had barrels & accessories, no frames or complete guns.

It is really a matter of intrepretation. Have heard horror stories of zealous enforcers, pulling stings at shows, but I think those things are pretty rare, at least in my area. Still, I do have a rule, if I buy a gun at a show, I won't sell it at that show. Why should I? I bought it because I wanted it for some reason (type, cal, etc..) and I want to play with it before I decide I'm tired of it. Someone offering me more for it than I just paid makes me want to keep it even more! Someone offering a lot more than I just paid sets off my alarms.

One good reason we go to gun shows to sell, as private sellers is time. Say I decide I have half a dozen guns that are surplus to my needs and wants. I stand a fair chance of being able to sell them in a couple days at a gun show. It might take a couple months or more to sell them in the want ads, or on line.

Want to know why there are so many hobbyists out there "dealing" without licenses? Thank the Clintons. In their zeal to protect us all from the scourge of guns (and gun dealers) they raised the license fee. From $30 to $300!!!!

Net effect, twofold. Drop in numbers of licensed dealers (big drop) as a lot of guys who only did it as a sideline/hobby simply stopped, because of the high fee, AND an increase in the number of people who simply refuse to pay that kind of money for a small amount of guns bought/sold per year.

 

[Frank Ettin]

...Now, maybe a month or a year or ten, some of the guns I got at the shows will go away (sold/traded) and maybe they'll even be sold for more than I paid when I bought them. Again, all I'm doing is recycling part of my collection. Some guns are, or ought to be catch and release....

I don't see that as engaging in the business...

Now, the guy that buys and sells and uses his profits to make the payments on his Ramcharger, him I say is in the business, because he is not making deals to get guns to play with, he's making deals to make money for his living expenses...

How the money is used really won't be determinative.

Money is fungible. The money spent on guns and shooting is interchangeable with the money spent to pay bills and buy groceries. I can set up different operating accounts to track my money, but it's all my money. When my finances are considered in the aggregate, the sources of the money don't change the character of the money, nor does what I spend it on change the character of the money. It's just my money. (The times tracking is important are for keeping proper track of marital property, e. g., distinguishing between separate property and marital/community property; or when amounts of money from certain sources, or amounts paid, might be subject to different tax treatment, e. g., capital gains or municipal bond income or medical expenses.)

The only way to really keep finances truly separate is by creating different legal entities, like corporations, for different activities. Of course if you have a corporation for your gun buying and selling, that looks even more like a business.

So the bottom line is that if a federal prosecutor, looking at the totality of the circumstances and all the factors discussed in the various cases, decides that he can first convince a grand jury that there's probable cause to believe you're buying and selling guns as a trade or business, and then convince a trial jury beyond a reasonable doubt that you're buying and selling guns as a trade or business, he very well might prosecute you.

So how might that play out:

1. If I shoot regularly, perhaps compete or attend classes as a matter of course, or if I hunt from time to time, but on occasion sell one of the guns I regularly use for such activity, I'm most likely in the clear even if I make a profit on the sales.
   
   
2. I'm also probably okay if I like to hang around guns show or visit gun stores, buy a gun every so often for my recreational shooting, but sometimes find a gun at a good price that I think someone I know might be interested in, buy it and sell it. One factor that might matter is whether I buy more guns for my own shooting than I occasionally buy thinking I could sell it.
   
   
3. Things start to get murkier when I'm spending a lot of time roaming gun shows and gun shops looking for interesting and under priced guns, buying them and selling them, more than I'm buying guns to keep or to shoot.

While there's no bright line test or safe harbor, I don't think it's really all that random.

I think most people will know what they're doing unless they are fooling themselves or are disingenuous. The danger signs probably revolve around when one is buying and selling more than he is shooting and keeping. Is he really just rationalizing at that point about being a "collector"? Is he being honest with himself when he avoids accepting that his real interest is the dealing -- buying and selling rather than owning and shooting? Because at that point he's really at risk.

As a hobby, there's nothing wrong with deriving one's satisfaction and fun from the "action" of dealing. With any sort of collectible there are folks whose real pleasure isn't owning that painting or watch or antique table or baseball card; it's the buying and selling of such things. The difference is that one doesn't need a license to deal in baseball cards. But he does need a license to deal in guns.

And one needs a license to deal in guns because, I think the ATF would contend, gun transfers by a dealer need to comport with certain formalities, e. g., background checks, forms that are retained, validation of a transferee's identity and place of residence, etc. So limiting transactions by unlicensed persons limits transfers "off the books." We might not like that, but that is government's rationale, and ATF is going to serve that interest until a court tells it that it can't or until Congress changes the law (both extreme long shots).

 

[Justice06RR]

I have been to many gun shows myself and this is my interpretation only; You would be in violation of the law if you buy and sell firearms repetitively at different shows as your MAIN source of income and livelihood, as stated in Section 921

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,

Now if you as an individual have a regular day job, and you only engage in the firearms business on the side once every month or less, then it is NOT your primary means of livelihood and only a supplement to your income.


The OP's friend may be violation IF he does this as his main source of income.

 

[Frank Ettin]

...Now if you as an individual have a regular day job, and you only engage in the firearms business on the side once every month or less, then it is NOT your primary means of livelihood and only a supplement to your income....

What makes you think that? What makes you think dealing in guns needs to be your primary source of income to require a license? Can you cite a court decision that says so? Are you a lawyer?

See the court decisions I cited in post 9. Not one of those courts in considering what constituted "engaged in the business" considered whether dealing in guns was the defendant's primary source of income. In fact, the Sixth Circuit specifically noted in United States v. Gray (6th Cir., 2012, No. 11-1305, slip opinion), at 8:

...However, "a defendant need not deal in firearms as his primary business for conviction." United States v. Manthey, 92 F. App'x 291, 297 (6th Cir. 2004)....