I am not a lawyer, I am not an FFL, I don’t hold an SOT. Do NOT use anything I say in this article as reliable.
Having given you that warning, I want to talk about FFL and SOT for a bit.
There was a time, prior to 1968, when people were able to purchase firearms like any other good or commodity. If your local bar wanted to sell guns, they could. If the local hardware store wanted to sell guns, they could. If you were a large mail order company, you too could sell guns.
The only real requirement was that you had to pay a transfer tax on NFA items.
The government decided that it was too dangerous to allow just anybody to sell guns. They set up federal firearm licenses and federal firearm licensees. If you had an FFL, you could still buy guns the way you always could.
This “loophole” meant that many people became FFLs to be able to continue to buy and sell like they always had. These people were called “kitchen FFLs”.
The ATF didn’t like it. The federal government didn’t like it. What good did it do to have this method to control the sale of guns when everybody was going out to get FFLs?
The ATF pushed back and the definition of an FFL was updated to restrict who could hold FFLs. This led to the Curio and Relic FFL. The idea being that people who were collecting should only be collecting “old” guns. If a gun was old enough, then you could buy it with your C&R FFL.
They are attempting to change the definition of “curio and relic” because early production AR-15s are now becoming C&R firearms.
There are different FFLs for different types of firearm commerce.
- Firearm Dealer/Gunsmith
- Manufacture of Ammunition
- Manufacturer of Firearms
- Importer of Firearms
- Dealer of “Destructive Devices”
- Manufacturer of “Destructive Devices”
- Importer of “Destructive Devices”
The “normal” FFL we interact with is a Type 01, Firearm Dealer/Gunsmith. A Type 07 FFL would be a manufacturer of firearms. If you are a Type 01, you cannot manufacture firearms for resale.
If you are a Type 07, you can manufacture for resale. While you or I might consider the most important task of manufacturing a firearm to be quality and safety, the reality is that it is the paperwork. There is an instant in time when a piece of aluminum becomes a firearm.
Since a manufacturer of firearms must have an accurate record of every firearm they have, the moment a “thing” becomes a “firearm” it must have the correct markings. If it does not, then the manufacturer is in violation of federal law.
What that means, is if you put a raw forging into a CNC machine, that CNC machine spits out a finished AR-15 lower which is taken to have a serial number stamped on it, you have broken the law. That firearm existed from the moment the CNC machine “created” the firearm. Until the serial number is stamped on it, it is an unserialized firearm, a big no-no in the commercial manufacturing of firearms.
Given that you have jumped through all the hoops to be a Type 07 FFL, now you can make “fun” things too! Right?
Not so fast.
The government recognizes that to reduce the number of fun things available, you make them more expensive. Having somebody making fun things is not really a good idea. So they add a tax to it. If you want to deal in NFA items, you have to pay a special occupation tax, or SOT, to the government.
With a SOT of the right class, an FFL can also deal in NFA items.
If a Type 08 FFL, an importer of firearms, wants to sell foreign made NFA items to the government, they have to get a Class 1 SOT. Let’s say you are the mayor of Chicago, and you want MP5s for your 149-man personal protection detail, at some point in the process, a Class 1 SOT with an FFL 08 would be required to import those MP-5s.
You can also import for research and development under Class 1 SOT.
If you want to make NFA items, you have to get a Class 2 SOT to go with your Type 07 FFL. At that point, you can start manufacturing most NFA items. What you cannot manufacture is machine guns.
The only people who are allowed to possess post 1985 manufactured machine guns are state actors. Even if you have those magic permission slips, making a machine gun is still a no-no.
A Class 3 SOT in combination with a Type 01 or 02 FFL allows that dealer or pawnbroker to buy and sell NFA items.
What this means in practice is that you can go get a Type 07 FFL and make model GFZ-007 pistols and sell them.
If you get a Class 2 SOT to go with that Type 07 FFL, you can make the model GFZ-007s, the version with the built-in silencer.
You still cannot make the GFZ-007g, the version with the giggle switch. That is forbidden.
Unless… You are making the GFZ-007g for a state actor.
How does the ATF know you are making it for a state actor? You have a letter from that state actor saying that they want a demonstration and are looking to buy some sort of giggling firearm.
Now you have the state actor requesting that you provide them with a demonstration. Since the state actor in most cases is a police department, these are called “law letters”.
So you manufacture a GFZ-007g, you show it to the state actor that asked to see one. They decide they would rather not buy it. You put it back in the safe as a “demo”. You now possess a post ’85 sample machine gun.
If you give up your FFL (or just your SOT), you have to divest yourself of that machine gun. You are not allowed to possess a post ’85 machine gun for your purposes. You are only allowed to have possession of it to demonstrate, in hopes of sales, to a state actor.
Now, there are some old boy friendly law enforcement groups. They often have good working relationships with the local gun people.
So you have a Type 07 FFL and a Class 2 SOT, and you decide you want to drill the extra hole and drop an auto-sear into your AR-15. That is illegal.
The next time the chief stops in, you mention to him that you’d like to have a law letter to do such a thing. He thinks about it and says, “hell yes, I’d love to get a chance to fire a full auto AR-15!”
A few days later, you have your law letter. You manufacture a full auto AR-15.
You call up the chief, and he comes out, and the two of you have a day of blasting through hundreds of rounds of 5.56×45 mm.
The Chief goes back happy, you’re happy. Life is good.
The next day, you are at lunch with some of the guys and somebody says, “wouldn’t be cool to make a full auto AK?” “Let’s do it!” you respond.
You still have that law letter, you can still manufacture machine guns. All should be good, right?
Nope, the state actor hasn’t requested that item. You don’t have all that is required to make that type of NFA item. You can still do it, but you have to try to sell it to the state actor, or it doesn’t count.
If the Chief wrote you that letter and there was never an interest by a state actor to acquire machine gun(s), then that letter is fraudulent.
If the law letter is fraudulent, then the Class 2 SOT doesn’t allow you to manufacture machine guns.
Numerous people that want to play with machine guns have jumped through the hoops to become the right type of FFL with the right type of SOT to acquire machine guns. Including getting a law letter.
The ATF is cracking down on those people who are getting the proper combination of permission cards from the government to possess post ’85 machine guns but never intended to sell to the government.
In some cases, the people involved knew what they were doing was a crime. Since they have been caught, they have to do the time.
We can hope that their lawyers bring up Second Amendment protection issues that lead to good outcomes, I don’t believe we are there yet.