Agin this is patently wrong. see the letter I posted above, again I will copy and paste for those to lazy to go to it (page 9 of 11 scenario #2):
"SCENARIO #2
SUPPLIER
Sells used military-type firearms to gunsmith.
GUNSMITH
Discards stocks, sights and trigger guards which leaves only barrel and
action.
Adds custom-made stock.
Cuts down barrel.
Blues and polishes bolt.
Replaces sights and trigger guards
Adds telescopic sights on some firearms
CUSTOMER
Purchases modified firearm.
Gunsmith is held to be the manufacturer since the production of the above
described custom-type firearms resulted in a new and different article from
the original used military-type firearms.
(Based on IRS Revenue Ruling 64-202)",
The importer first paid an ecxise tax when he form 6'ed the gun and brought it in country, now the Gunsmith is engaged in a taxable activity, "manufacturing" but he still doesn't pay till he goes past the "50 firearms exemption"
to further quote the letter (directly copied and pasted) " In a situation where a customer supplies a firearm to a gunsmith for
modification, the customer is usually considered to be the manufacturer
for FAET purposes. The customer is considered to be the manufacturer
because he directs what type of modification is to be done to the firearm
and he retains title to the firearm while it is being modified. Even though
the gunsmith performs the physical modifications to the firearm, he would
not usually be considered the manufacturer for FAET purposes in this
situation. However, an exception to the above example is where the alterations are
made in connection with the sale of the firearm by the gunsmith. Where
the gunsmith is selling the firearm to the customer, and in connection with
that sale, the gunsmith performs alterations that constitute manufacture,
the sale of the altered firearm results in tax liability. The clearest example
of this situation is where the gunsmith offers to customize a firearm to the
customer’s specifications prior to sale. The tax liability cannot be avoided
by merely breaking the transaction into two parts, i.e., selling the firearm
and subsequently performing the manufacture.
If the manufacture is done in connection with the sale of a firearm, the
gunsmith is liable for tax, whether he performs the act of manufacture
before or after the sale. In the latter instance, the Alcohol & Tobacco Tax
& Trade Bureau (TTB) will adhere to Internal Revenue Service (IRS)
rulings in this area and blend the sale and the subsequent manufacture
into one transaction. The substance of the transaction will control, not the
form.
Where the gunsmith is not selling the firearm to the customer, or in
circumstances where the sale and subsequent alterations are truly
separate transactions, the customer is deemed to be the manufacturer. In
these situations, tax liability, if any, would fall on the customer." the letter repeatedly states when it is for pesonal use no FAET when it is part of a busines transaction FET applies.
Agin to restate my position on Manufacturing and Tax here is what page #4 states (again directly copied and pasted):
"If the manufacturer sells the firearm before using it, he is liable for the
FAET. If the manufacturer uses the firearm for personal (not business)
use after delivery from the gunsmith, no tax liability is incurred. The
regulations specifically provide that the tax does not apply to a firearm that
has been manufactured for personal use. (See 27 CFR 53.112(b).)
If the manufacturer uses the firearm in the operation of any business in
which he is engaged, tax liability would be incurred. (See 26 U.S.C. 4218
and 27 CFR 53.112(a).)"
it is quite simple, there are no "Homebuilders" the diferentiation is if someone "Manufactures" for themselves or for business- if in Business tax may apply (over and over depending on how many times an item is "remanufactured"), if you are engaged in buisness- marking requirements in 27 CFR § 478.92 apply, if you are not ingaged in business they don't apply except when a non-buisnesss engaged manufacturer makes a NFA item
Last edited:
