Firearms Auctions

Midway Auction Company and Federal Firearms License (FFL)

FFL (Federal Firearms License) is a license issued by the Bureau of Alcohol, Tobacco, Firearms and, and Explosives (ATF) that enables individuals at a company to engage in business pertaining to the manufacture, importation, and interstate/intrastate sales of firearms and ammunition.

The sale of guns is regulated, first, by the federal government in the United States. Then, states can have (and do have) additional laws that regulate the sale and/or transfer of guns. Too, some local laws have been enacted by cities, counties, townships, etc.

First, most notably, there are four federal gun acts to consider:

  • The Gun Control Act of 1968, L. No. 90-618, 82 Stat. 1213 (also known as GCA or GCA68, and codified as Chapter 44 of Title 18, United States Code) is a federal law in the United States that broadly regulates the firearms industry and firearms owners. It primarily focuses on regulating interstate commerce in firearms by generally prohibiting interstate firearms transfers except among licensed manufacturers, dealers and importers.
  • The Firearm Owners’ Protection Act (FOPA), Pub. L. No. 99-308, 100 Stat. 449 (May 19, 1986), codified at 18 U.S.C. § 921 et seq., is a United States federal law that revised many statutes in the Gun Control Act of 1968.
  • The Brady Handgun Violence Prevention Act (Pub.L. 103-159, 107 Stat. 1536) was an Act of the United States Congress that, for the first time, instituted federal background checks on firearm purchasers in the United States. It was signed into law by President Bill Clinton on November 30, 1993 and went into effect on February 28, 1994. The Act was named after James Brady, who was shot by John Hinckley, Jr. during an attempted assassination of President Ronald Reagan on March 30, 1981.
  • The Federal Assault Weapons Ban (AWB) (or Public Safety and Recreational Firearms Use Protection Act) was a subtitle of the Violent Crime Control and Law Enforcement Act of 1994, a federal law in the United States that included a prohibition on the sale to civilians of certain semi-automatic firearms, so called “assault weapons.” There was no legal definition of “assault weapons” in the U.S. prior to the law’s enactment. The ten-year ban was passed by Congress on September 13, 1994 and was signed into law by President Bill Clinton the same day. The ban only applied to weapons manufactured after the date of the ban’s enactment. The Federal Assault Weapons Ban expired September 13, 2004, as part of the law’s sunset provision. It is important only here because there are recent efforts to reenact similar AWB laws.

 

Now, here is the exact text of Title 18 § 923 and Rule 96-2 of the United States Code:

18 U.S.C. § 923 (a): ENGAGING IN THE BUSINESS OF DEALING IN FIREARMS (Auctioneers)
Auctioneers who regularly conduct consignment-type auctions of firearms, for example, held every 1-2 months, on behalf of firearms owners where the auctioneer takes possession of the firearms pursuant to a consignment contract with the owner of the firearms giving the auctioneer authority to sell the firearms and providing for a commission to be paid by the owner upon sale of the firearms are required to obtain a license as a dealer in firearms.

ATF Rul. 96-2
An association of auctioneers has asked the Bureau of Alcohol, Tobacco and Firearms (ATF) for a ruling concerning the auctions conducted by their members and whether the sale of firearms at such auctions requires a Federal firearms license as a dealer in firearms.

The auctioneers’ association stated that their members generally conduct two types of auctions: estate-type auctions and consignment auctions. In estate-type auctions, articles to be auctioned, including firearms, are sold by the executor of the estate of an individual. In these cases, the firearms belong to and are possessed by the executor. The auctioneer acts as an agent of the executor and assists the executor in finding buyers for the firearms. The firearms are possessed by the estate and their sale to third parties is controlled by the estate. The auctioneer is paid a commission on the sale of each firearm by the estate at the conclusion of the auction.

The association states that, in consignment-type auctions, an auctioneer may take possession of firearms in advance of the auction. The firearms are inventoried, evaluated, and tagged for identification. The firearms belong to individuals or businesses who have entered into a consignment agreement with the auctioneer giving the auctioneer authority to sell the firearms. The agreement states that the auctioneer has the exclusive right to sell the items listed on the contract at a location, time, and date to be selected by the auctioneer. The consignment-type auctions generally involve accepting firearms for auction from more than one owner. Also, these auctions are held on a regular basis, for example, every 1-2 months.

Section 923(a), Title 18, U.S.C., provides that no person shall engage in the business of dealing in firearms until he has filed an application and received a license to do so. Section 922(a)(1), Title 18, U.S.C., provides that it is unlawful for any person, other than a licensee, to engage in the business of dealing in firearms. Licensees generally may not conduct business away from their licensed premises.

The term “dealer” is defined at 18 U.S.C. § 921(a)(11)(A) to include any person engaged in the business of selling firearms at wholesale or retail. The term “engaged in the business” as applied to a dealer in firearms means 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. A dealer can be engaged in the business” without taking title to the firearms that are sold. However, the term does 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).

In the case of estate-type auctions, the auctioneer acts as an agent of the executor and assists the executor in finding buyers for the estate’s firearms. The firearms are possessed by the estate, and the sales of firearms are made by the estate. In these cases, the auctioneer does not meet the definition of “engaging in the business” as a dealer in firearms and would not require a license. An auctioneer engaged in estate-type auctions, whether licensed or not, may perform this function, including delivery of the firearms, away from the business premises.

In the case of consignment-type auctions held on a regular basis, for example, every 1-2 months, where persons consign their firearms to the auctioneer for sale pursuant to an agreement as described above, the auctioneer would be “engaging in the business” and would require a license. The auctioneer would be disposing of firearms as a regular course of trade or business within the definition of a “dealer” under §_921(a)(11)(A) and must comply with the licensing requirements of the law.

As previously stated, licensed auctioneers generally must engage in the business from their licensed premises. However, an auctioneer may conduct an auction at a location other than his licensed premises by displaying the firearms at the auction site, agreeing to the terms of sale of the firearms, then returning the firearms to the licensed premises for delivery to the purchaser.

Held:
Persons who conduct estate-type auctions at which the auctioneer assists the estate in selling the estate’s firearms, and the firearms are possessed and transferred by the estate, do not require a Federal firearms license.

Held further:
Persons who regularly conduct consignment-type auctions, for example, held every 1-2 months, where the auctioneer takes possession of the firearms pursuant to a consignment contract giving the auctioneer the exclusive right and authority to sell the firearms at a location, time and date to be selected by the auctioneer and providing for a commission to be paid upon sale are required to obtain a license as a dealer in firearms pursuant to 18 U.S.C. § 923(a). [ATFB 96-2 101]

One area not covered in the federal code is antique firearms. Auctioneers can sell to out-of-state buyers without a license, if the firearm meets the federal definition. An antique is described in the U.S. Firearms Code as any firearm with a matchlock, flintlock or percussion cap manufactured in or before 1898, or a replica of such item. Auctioneers can also sell a firearm without a license if it uses a ring-fire or conventional center-fire fixed ammunition that is no longer manufactured in the United States or is not readily available in the ordinary channels of commercial trade.