Part 2: Getting a Home-Based FFL (Zoning & FFL Type)

ffl-license-600x787

Let’s make this clear, zoning is a real pain in the arse. Before I delve into the details, my BIG thanks to all the readers who sent in tips & tricks. I would especially like to call out Jesse, Jess, Ashley, Justin of Echelon Arms, & Bryan. Thank you and keep them advice coming!

For this installment, I will focus on overcoming two hurdles: my landlord and my city. Further, I will discuss how their covenants will choose my FFL type.

Example apartments from my complex.

Example apartments from my complex.

The Lease:

Considering that I would be opening a business for guns (not your typical mail-order business), I decided to take the route of asking for permission instead of forgiveness. Since I rent in multi-family housing, the first step was to check with my lease and ensure there were no specific prohibitions.

Right under “Limitations on Conduct” clause there was the dreaded statement: “Conducting any kind of business (including child care services) in your apartment or in the apartment community is prohibited…” My heart sank! I thought I was done well before I got started…

“Except…” (Whahoo!)

My "Limitations on Conduct" clause that just about sank me...

My “Limitations on Conduct” clause that just about sank me…

“…that any lawful business conducted “at home” by computer, mail, or telephone is permissible if customers, clients, patients, or other business associates do not come to your apartment for business purposes.” The key word there was lawful;  I would have to see if the City would put up any roadblocks.

Just to be safe, I stopped by and talked with the Property Manager to ensure she knew what I was doing and was OK with it. Much to my surprise, she was enthusiastic, if only to find a new less expensive source for her husband.

Municipal Zoning

Fort Wayne, Indiana. Great small town and very "Open for Business"

Fort Wayne, Indiana. Great town and very “Open for Business”

Much to my surprise, the City was very accommodating. Calls to the Planning Commission were returned the next day and they were quite happy to encourage new business (Side note- a few major employers left the city a few years ago and the mayor is doing everything to get the city going again. Shockingly, he is a Democrat. That said, Indiana Democrats are about as liberal as California Republicans).

There were three types of home businesses, with no restrictions on the type of dwelling (ie house or apartment). Home Workshop, Home Business, and Home Occupation, going from most approvals to least. In fact, Home Occupations require no approval from the city. The other two were a quick meeting and $150 unless someone objected (of which the burden of proof was on the objector). Since I could not take visitors, only Home Occupation applied, the definition of which is very open.

Capture

Type of FFL for Me

Annoyingly, my lease precludes me from having customers stop by (4473 transfers) or “manufacturing” any goods. As such, I have to ship or drop off weapons at local gun shops for transfers or sell online through GunBroker/etc.. Since I cannot “manufacture”, there is little sense in applying for a FFL 07/SOT 02. Plus, with the yearly ITAR fees the FFL 07 is expensive. Guess I am stuck with a FFL 01/SOT 03… Nuts!

Key thing to know: FFL 07s require the company to register for ITAR (International Trade & Arms Regulations) with the Department of State. This is a $2,500 fee, yearly! While many FFL 07’s did not register for years, the Government has started prosecuting those who do not. Some internet lawyers will say there is some “debate” on if you have to register. I will state unequivocally, you were/are required to (per published DoS guidance) and you should. My day job is working for a DoD company with classified projects. ITAR is serious business and you do not want to run afoul of it. All legal heck will rain upon you. 

After reading through the FFL123 guides and online forums, I really expected my zoning to be a major issue. While it does stop me from having customers stop by, I can still sell online and market to LE agencies (manufacturer’s ship directly to the agency). For now, I am good to go and cleared hot for further pursuit

Next step: Choosing a Company Structure & Creating It

Current Running Total for FFL & SOT ($54.99):

 

 



Nathan S.

One of TFB’s resident Jarheads, Nathan now works within the firearms industry. A consecutive Marine rifle and pistol expert, he enjoys local 3-gun, NFA, gunsmithing, MSR’s, & high-speed gear. Nathan has traveled to over 30 countries working with US DoD & foreign MoDs.

Nathan can be reached at Nathan.S@TheFirearmBlog.com

The above post is my opinion and does not reflect the views of any company or organization.


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  • Eric S

    I was recently reading up on the ITAR and it appears you can get a commodity jurisdiction exemption from the fee if you can prove you’re manufacturing for civilian use. But each product you make has to be exempted through some pretty hefty documentation, but it can be done.

    • The only exemption is if you are making items purely for research. IE (you are a FFL 07 and working on your prototypes). As soon as you make a finished product (ie register the serial number with the BATFE), you must pay the ITAR registration. Fair warning, the burden of proof for research is on the licensee, not the DoS, so document EVERYTHING.

      The only exemptions are 121 (B) outlined below:

      Sec. 122.1 Registration requirements.

      (a) General. Any person who engages in the United States in the business
      of either manufacturing or exporting defense articles or furnishing
      defense services is required to register with the Office of Munitions
      Control. Manufacturers who do not engage in exporting must nevertheless
      register.

      (b) Exemptions. Registration is not required for: …

      (2) Persons whose pertinent business activity is confined to the
      production of unclassified technical data only. …

      (4) Persons who engage only in the fabrication of articles for
      experimental or scientific purposes, including research and development.

      (c) Purpose. Registration is primarily a means to provide the U.S.
      Government with necessary information on who is involved in certain
      manufacturing and exporting activities. Registration does not confer any
      export rights or privileges. It is generally a precondition to the
      issuance of any license or other approval under this subchapter.

      • Eric S

        Well, balls, there goes my hope of setting up shop. Thanks for the clarification.

        • Geodkyt

          Yup. ITAR registration is why I decided not to get all FFL/SOT’ed up as a manufacturer for small volume sales and R&D as a part time business. ITAR fees made the program too risky, in terms of making a profit.

      • Andrew

        I also work DoD and had to learn both Dept of Defense and Dept of State compliance laws. My understanding matches Nathan’s, that the only current exception is for R&D only.

        That said, the government has been working hard to move a LOT of stuff off the ITAR list and into the commerce domain (Dept of State) with the “U.S. Export Control Reform initiative”. Previously, if a screw was used on a military product, that screw was ITAR controlled. That made no sense and was a major issue for commerce. In the immediate future, those types of issues are being fixed.

        ITAR USML Category I (firearms) has been revamped but is awaiting the proper political climate to be released for rulemaking. SO, we can hope / expect that in the next 2 to 5 years Category 1 will be updated and *hopefully* most devices will move off the ITAR list, hence many FFL’s will not need to worry about registering.

        For more info, export.gov is your goto source. The ECR Dashboard is a quick glance for each area’s status.

  • claymore

    How do you plan on “operating” a retail firearm business without having customers come to your residence?

    • Good question. Being a FFL dealer does not require retail presence.

      The requirement is that you are required to have the “intent to engage in a firearms business for profit.” With GunBroker and an online presence, I will be able to satisfy the requirement by selling online and having other FFLs do the transfers.

      • Phil Hsueh

        Would it be legal to deliver guns to people who are local? I mean once they’ve done all their paperwork, you’ve determined they are legal to own a gun, and have paid could drive out to the customer’s house and hand deliver it to them or do they have to pick up from an FFL?

        • claymore

          No they MUST be picked up at the place of business if they are not also FFLs.

          • Phil Hsueh

            Figured as much but I had to ask regardless. It makes me wonder though, why? What difference does it make if an FFL delivers, in person and face to face, somebodies gun as opposed to them coming to the FFL to pick it up? I can’t see what issues that would cause but whatever, nobody ever said that the law has to make sense and gun laws are certainly no exception and probably make less sense than most other types of laws.

          • echelon

            Phil,

            None of our gun “laws” make sense. Just look at the NFA nonsense. You can go today and buy an AR-15 or AK with a short barrel and it can accept a 30rd mag, but you throw a stock on it and: uhoh – now you broke the “law” because it’s now considered a short barreled rifle and is now an NFA weapon. Apparently it’s much more evil with a stock!

            And what, pray tell, is an “AOW”? Wow what kind of gun is that sir? Oh it’s an Any Other Weapon, do you like it?

            It’s all pure, fictional made up nonsense contrived to make money for the tyrannical state and deprive us of our rights…but I digress 🙂

        • Claymore is correct. FFLs may only do transfers to non licensees at the registered address on their FFL. If it was not the case, I would have certainly set up a delivery business.

          • Kevin Craig

            Type 01 FFLs may also do transfers at gun shows. That’s one of the specific exemptions to the “licensed premises” rule.

          • claymore

            No only to other FFL holders.

          • Kevin Craig

            You might be thinking of out-of-state gun shows. From the ATF FAQ page:

            “May licensed dealers sell firearms at gun shows?”
            “Generally, a licensee may sell firearms at a gun show located only in the same State as that specified on the seller’s license. However, a licensee may sell curio or relic firearms to another licensee at any location.
            [18 U.S.C. 923(j), 27 CFR 478.100]”

            But when out of state, the rules are completely different:

            “What may a licensed dealer do at an out-of-State gun show?”
            “A licensed dealer may sell and deliver curio or relic firearms to another licensee at an out-of-State gun show. With respect to other firearms transactions, a licensed dealer may only display and take orders for firearms at an out-of-State gun show. In filling any orders for firearms, the dealer must return the firearms to his or her licensed premises and deliver them from that location. Any firearm ordered by a non-licensee must be delivered or shipped from the licensee’s premises to a licensee in the purchaser’s State of residence, and the purchaser must obtain the firearm from the licensee located in the purchaser’s State. Except for sales of curio or relic firearms to other licensees, sales of firearms and simultaneous deliveries at the gun show, whether to other licensees or to non-licensees, violate the law because the dealer would be unlawfully engaging in business at an unlicensed location.
            [18 U.S.C. 922(a)(1), (b)(3), 923(a) and (j)]”

          • claymore

            “a licensed dealer may only display and take orders for firearms at an
            out-of-State gun show. In filling any orders for firearms, the dealer
            must return the firearms to his or her licensed premises and deliver
            them from that location”

            “you are confusing curios and relics with modern firearms. FFLs still can NOT deliver modern firearms to anybody but another FFL at gun shows.

          • Kevin Craig

            You’re very confused. The vast majority of sellers at gun shows are Type 01 (Dealer) FFLs, and they are selling to the general public, not just other FFLs. Otherwise, there would be no gun shows.

            Within the same state that the dealer is licensed, there is no distinction between modern and C&R, or between licensed premises and a gun show (as defined in ATF regulations).

            Feel free to cite *anything* that says dealers can only transfer to other licensees at gun shows. But before you do, please read the cite I provided above that says the opposite of what you’re claiming.

          • claymore

            Not confused at all. FFLs can SELL anything they want at gun shows. BUT delivery must be made at the place of business except for other FFLs.

          • Kevin Craig

            Fine, you’re not confused. You’re simply wrong. You keep quoting language about FFLs conducting business at out-of-state gun shows, and stating that it applies everywhere.

            It doesn’t. Here is the full text of the regulation covering the conduct of business away from the licensed premises. A gun show in the same state as which the FFL is licensed is simply an extension of his licensed premises.

            http://www.law.cornell.edu/cfr/text/27/478.100

            § 478.100 Conduct of business away from licensed premises.

            (a)

            (1) A licensee may conduct business temporarily at a gun show or event as defined in paragraph (b) if the gun show or event is located in the same State specified on the license: Provided, That such business shall not be conducted from any motorized or towed vehicle. The premises of the gun show or event at which the licensee conducts business shall be considered part of the licensed premises. Accordingly, no separate fee or license is required for the gun show or event locations. However, licensees shall comply with the provisions of § 478.91 relating to posting of licenses (or a copy thereof) while conducting business at the gun show or event.

            (2) A licensed importer, manufacturer, or dealer may engage in the business of dealing in curio or relic firearms with another licensee at any location.

            (b) A gun show or an event is a function sponsored by any national, State, or local organization, devoted to the collection, competitive use, or other sporting use of firearms, or an organization or association that sponsors functions devoted to the collection, competitive use, or other sporting use of firearms in the community.

            (c) Licensees conducting business at locations other than the premises specified on their license under the provisions of paragraph (a) of this section shall maintain firearms records in the form and manner prescribed by subpart H of this part. In addition, records of firearms transactions conducted at such locations shall include the location of the sale or other disposition, be entered in the acquisition and disposition records of the licensee, and retained on the premises specified on the license.

            [T.D. ATF-270, 53 FR 10498, Mar. 31, 1988, as amended by T.D. ATF-401, 63 FR 35523, June 30, 1998]

          • claymore

            Like I said you may SELL and or BUY at gun shows but the delivery must take place at the physical place of business.

          • Kevin Craig

            You said it, but provided nothing to support your claim.

            I cited the CFR that says the FFL may conduct business at a gun show exactly the same as if it’s the licensed premises.

            Your inability to read simple English is not my problem.

          • claymore

            No your lack of actually being an FFL is the problem.

            It says no such thing this is what it really says “A licensee may conduct business temporarily at a gun show or event as defined in paragraph”

            Conduct business means just what I have been saying buy sell trade, BUT the delivery still has to be made at the physical licensed premises.

          • Kevin Craig

            Serious question: have you ever actually attended a gun show?

            Because if you have, you would have seen that the vast majority of gun sales at gun shows are by Type 01 FFL Dealers, where buyers take delivery on the spot and walk right out with their purchases.

            This is not the “gun show loophole”, because every law that applies to selling guns outside of gun shows, also applies inside.

            Perhaps you live in some screwed-up state with waiting periods, but the ATF regulations that I cited and quoted and even provided the link to (which you quote selectively while ignoring the substance), plainly state: “The premises of the gun show or event at which the licensee conducts business shall be considered part of the licensed premises.”

            So tell me: where is YOUR cite to support your claim that the physical transfer must take place at the licensed premises? Oh, wait: the gun show for an in-state FFL actually IS “part of the licensed premises” per ATF regulations.

            When the conduct of business takes place at the licensed premises, how exactly does the FFL then make the transfer at some other part of the licensed premises?

          • claymore

            Well for one I have been an FFL and have actually done transactions under ATF rules.

            Since you are never going to believe me simply go to the ATF site and ask “can an FFL sell and DELIVER firearms to a NON FFL at any location other than their physical location listed on the license.”

            As for your attempted put down I attended and did business every weekend at various gunshows for 10 years running THAT is why as an FFL I KNOW one must deliver at the location listed on the license. Don’t you think I personally know that I lost sales by following this rule?

            And not all people selling at gun shows are FFLs.

          • Kevin Craig

            What part of “The premises of the gun show or event at which the licensee conducts business shall be considered part of the licensed premises” do you not understand? That is the exact ATF rule that you claim to “know” says you can’t do what the rule says you can do.

            An FFL at a gun show *IS* at his licensed premises, and *CAN* make delivery there. If you refused to make delivery at a show, that was your own rule, not the ATF’s.

          • Geodkyt

            And of course, when I worked gun shows, as an employee of a gun store, where we sold guns AND DELIVERED THEM ON THE SPOT
            once the Brady Checks came back, never happened, either. . . right?

          • Geodkyt

            So, all the guns I have purchased from gun dealers, at gun shows (including a few weeks ago), where I walked out of the show with the guns (including NIB handguns and rifles), were illegal? And the hundreds of people at the same gun shows, doing the same thing, were all wrong? Even at the shows where ATF agents were PRESENT and witnessing teh transactions?
            Nope, you are just _wrong_, Claymore.

        • Geodkyt

          Um, this seems to completely ignore the statutory language of
          §922(c) (which I have used when buying guns from “kitchen table” dealers in a remote rural area, and meeting them at a convieninet location to conduct the paperwork and later physical transfer) —
          §922
          (c) In any case not otherwise prohibited by this chapter, a licensed importer, licensed manufacturer, or licensed dealer may sell a firearm to a person who does not appear in person at the licensee’s business premises (other than another licensed importer, manufacturer, or dealer) only if—
          (1) the transferee submits to the transferor a sworn statement in the following form:
          [Form omitted]
          and containing blank spaces for the attachment of a true copy of any permit or other information required pursuant to such statute or published ordinance;
          (2) the transferor has, prior to the shipment or delivery of the firearm, forwarded by registered or certified mail (return receipt requested) a copy of the sworn statement, together with a description of the firearm, in a form prescribed by the Attorney General, to the chief law enforcement officer of the transferee’s place of residence, and has received a return receipt evidencing delivery of the statement or has had the statement returned due to the refusal of the named addressee to accept such letter in accordance with United States Post Office Department regulations; and

          (3) the transferor has delayed shipment or delivery for a period of at least seven days following receipt of the notification of the acceptance or refusal of delivery of the statement. A copy of the sworn statement and a copy of the notification to the local law enforcement officer, together with evidence of receipt or rejection of that notification, shall be retained by the licensee as a part of the records required to be kept under section 923(g).

          • Not seen this clause before, but I will have to look into it.

            Even if completely legal, this sounds like a real PITA compared to even transferring through another LGS.

          • Looked into it. The clause typically applies only in cases where you do not need to do a background check (states that accept permits in lieu of checks or for NFA items, such as suppressors). Interesting stuff!

          • Geodkyt

            Funny, because that’s pretty standard practice for kitchen table FFLs in my rural county. Hell, I once met the FFL in the parking lot of my church after work, because we were driving in opposite directions (he worked near my house, I worked near his — about 30 miles apart; my church was half way).

          • Geodkyt

            Oh, and background checks were still run on all of those purchases. I did the paperwork, and about a week later met him to finalize the transfer.

      • “having other FFLs do the transfers”

        At which point you become an un-nessacary Extra middle man between distributor and retailer.
        To conduct sales you must transact transfers on the licensed premises, so you are trying to create a store that cannot sell anything legally
        Good luck with the BATFE buying that one, bet they will say that since you cannot have customers at your licensed premises, and that you are required to do business at that location you are not actually ‘engaging in the business’ and deny your app.

        Wish ya the best but it sounds too far fetched for them to buy into it, especially since they seem to want to stop people from being licensed unless they have an actual “Business” address. They really seem to frown on home business to start with and you are really giving them a good reason to deny you.

  • echelon

    Nathan,

    The ATF agent who did my interview gave me good info on the ITAR stuff. If I were you I’d still go the 07 route, ask the ATF your questions, and then if you have to change it to 01 so be it.

    If you ever move and/or decide you want to do something else in the future you’ll have to go through the whole FFL process again to change your license types.

    Just my 2 cents…

  • Joe Alexander

    Thank you for writing this all up, great job Brother!

    I look forward to the rest of the series

  • Steve

    “As such, I have to ship or drop off weapons at local gun shops for transfers or sell online through GunBroker/etc”

    While an exclusively-online sales business (shipping nationally to buyers) makes sense, you’ll likely be wasting your time locally, as most dealers charge customers a premium for receiving/transferring a firearm that was not purchased from them. Why would they buy from you rather than just buying from that dealer and paying the lower transfer fee? Locally, this typically jumps from a $10 BGC fee to $20-50+ including the BGC fee.

    If I was talking to a local dealer over the phone and he told me he could order the gun but not transfer it for me, I’d quickly be looking elsewhere. One of the only benefits that brick-and-mortar local shops offer over internet sales these days is the ability to get it directly into your hands faster. Making a customer jump through hoops to get there isn’t gonna work, long-term, and the your efforts would be better-off directed toward online sales/shipping.

    When I first started reading this article, I was under the assumption you owned a home… doing this out of an apartment will be particularly challenging. Will the ATF have issue with the landlord having access to your home when you are not around? This is typically part of the local CLEO sign-off portion of the application (which relates specifically to LOCAL laws). You might want to call or e-mail your local CLEO with your living situation and intentions, and see if they are even willing to sign off before you go any further.

    In my case, I was renting a home, and having a safe large enough to contain all regulated inventory was enough for the CLEO to sign-off that I complied with local laws – YMMV. I wish you the best of luck, but I’d work up a solid business plan first – some of your comments really make it sound like you are coming up with plans off-the-cuff here.

    • Steve, valid comments and concerns. Happy to explain where my head is at.

      First, I want to address your comment on the CLEO. ATF rules do not require CLEO sign-off for a FFL. Your application is submitted to them only as a courtesy heads-up. Indiana has laws that preempt and prohibit localities from posing undue restrictions on firearms dealers not subject to other businesses. As such, so long as I qualify under zoning (which I do), the CLEO has no choice but to just live with the situation. All of this aside, my CLEO is just fine with dealers so long as they operate legally.

      The ATF only requires that access is limited to inventory. Putting a locked handle on a closet door technically qualifies, but I have safes that can hold a small amount of inventory it lists online. Typically, its going to be 5 guns or less with only a few NFA items around.

      In relation to selling locally, I have started discussions where the LGS FFL charges me for the transfer and not my client. Since I am locally selling to friends and family only, most will not mind the inconvenience and the LGS is happy to at least make a buck where they would not have otherwise. The advantage here is that with almost zero overhead, I can absorb the transfer cost and still be able to sell it less than the LGS. I am fortunate to have decent relationships with other FFLs in the area. My guess is if one cold-called one on a similar arrangement, they may balk.

      But, for the very reasons you have outlined above, the vast majority of my time will be spent focusing on online-only sales.

      I think the important thing to note here is that I am not planning on doing this full-time. Turning a profit? Yes, but typically only spending about 10 hours a week at the most.

      Its probably about time I started another post with just Q&A?

      • Steve

        Ah yes, you are correct. I was mistaken on the CLEO portion. I believe I got it mixed up with a local law regarding CLEO approval of secure storage.

        One thing I will correct you on, however, is that a locked handle on a closet door may not qualify under 18 U.S.C. 921(a):

        The term “secure gun storage or safety device” means (A) a device that, when installed on a firearm, is designed to prevent the firearm from being operated without first deactivating this device; (B) a device incorporated into the design of the firearm that is designed to prevent the operation of the firearm by anyone not having access to the device; or (C) a safe, gun safe, gun case, lock box, or other device that is designed to be or can be used to store a firearm and that is designed to be unlocked only by means of a key, a combination, or other similar means.

        You *might* squeak by under (C) with a locked closet, but it could be asking for trouble. Obviously, since you are using a safe, this doesn’t apply to you.

        Only one other thing I thought to mention in regards to an apartment – if your address changes, the address change process through the ATF takes a while, and can be a bit of a headache. Not a deal-breaker, but something to consider if you plan to move in the future.

    • Kevin Craig

      “YMMV”, as they say.

      I used to patronize a LGS who was well stocked and had great prices (cheapest in the area), was always willing to bargain, but would also happily do transfers all day long at just $10 apiece. Why? Because receiving the package, entering it into their bound book and conducting NICS and the transfer *might* take a total of 15 minutes of employee time. That was an easy, liability-free $40 per hour, and it generated good will that almost guaranteed the purchase of ammo and accessories while customers were in the shop.

      I’ve also seen the LGS who wanted to charge $50 per transfer, and only accept transfer items that they couldn’t get from their distributors. Net result: zero sales, of either guns or add-ons.

      • claymore

        It is also a good way to generate some profit on the books so one is actually “conducting business for profit”.

  • Tim

    do you need a type 07 to build uppers?