Gunsmithing Type 7 FFL

[6.81star]

I have an type 7 FFL and I am looking into finally building a shop and filling it with equipment for producing. I have a few questions.

1. Do you guys with type 7s carry other liability policy's other than a LLC? If so where are you finding it and what type of policy? Would someone that manufactures their own receivers need a different policy than someone that uses existing receivers and rebarrels?

2. Do I need to pay the ITAR fees if I don't plan to export/import?

3. From my understanding I also need to pay the class 2 SOT?

Thanks for any help

 

[n64atlas]

There are a few company's that insure Gunsmiths. Not cheap. ITAR is supposed to be paid. Some don't, but if the government wants to get pickie, they can charge you for all the bacl fees owed. You only need a SOT if you are building or selling NFA items. If just building selling 01 firearms, an SOT is not needed

 

[bohem]

1) Some shops do, some shops don't. I would discuss with your insurance company
2) You do not pay ITAR until you make your 50th receiver, then you pay it. This is why a lot of Type 07's only make 49 firearms a year. Suppressors don't count in the 49 as I understand it but I have been wrong before.
3) You only have to pay the SOT fee for an 02 SOT if you're going to do stuff with Class III weapons.

 

[AJ_Goddard]

1)
2) You do not pay ITAR until you make your 50th receiver, then you pay it. This is why a lot of Type 07's only make 49 firearms a year. QUOTE]

I believe you are referring to the Manufacturing Excise Tax. ITAR (International Traffic in Arms Regulations) is a completely different agency it is run by the US Department of State and applies to anything that could be considered of military interest.

 

[jonaddis84]

Yeah its been my understanding that anyone with a type 7 is SUPPOSED to pay ITAR no matter what, I mean maybe not if you dont manufacture a single firearm, but then why would you have it in the first place.

As stated above, its also been my understanding that quite a few guys dont pay and get away with it, but if you for some reason get on the state dept's radar and they want their back taxes, they give you two options from what Ive heard: 1. pay all back taxes 2. Give up your mfg license and all items associated either get transferred or destroyed and they let you live

 

[Rthur]

In my experience it depends on who is interpreting the rules. I had a run around with my field rep on the 07 vs 01 debate. I mentioned the 50 gun/rifle rule as he dismissed it and claimed I would have to pay the 2-3k excise tax for being a manufacturer(07).

 

[jonaddis84]

This is why there are so many sides to the argument, atf has nothing to do with itar whatsoever

 

[6.81star]

This is why there are so many sides to the argument,

This has been my biggest problem.

 

[Carolina Shooter]

1. Do you guys with type 7s carry other liability policy's other than a LLC? If so where are you finding it and what type of policy? Would someone that manufactures their own receivers need a different policy than someone that uses existing receivers and rebarrels?

I don't have a Type 7 FFL yet, so I can't address all your questions. I am a CPA though, and would like to clarify one point with your first question...

The LLC is not a liability policy at all. It is a form of business. It can help protect your personal assets from being used to satisfy debts of the business. For instance, if your business fails to pay a debt or is sued, the LLC will make it much less likely that you'll lose your house to satisfy the debt of the business. There are exceptions to this rule though. The corporate veil can be "pierced" in certain circumstances. This is difficult to do with an LLC. The first thing you should do to protect against it is make sure you're not commingling business and personal funds.

But the LLC doesn't amount to any sort of liability insurance policy. It does nothing to protect the assets of the business itself and it does nothing to keep you from having to dig deep in your own pockets should you come out on the losing end of a lawsuit. Without liability insurance, your choices for the most part would be to pay the settlement or liquidate the assets of the business and pay whatever portion of the debt you can afterwards.

Bottom line - my recommendation is that every business should carry some type of liability insurance and organizing as an LLC does nothing to mitigate the need for insurance, unless folding up your business if you run into trouble is an acceptable option for you.

Maybe you're already aware of that and I'm misunderstanding your question, but I wanted to clarify so others aren't confused either. If you weren't aware, I hope that helps a little.