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Tax And Purchase Procedures For Title 2 Firearms

Tax And Purchase Procedures For Title 2 Firearms

Your choice to purchase NFA items is protected by the Second Amendment. If you have never experienced the fun and pride in being an NFA firearm or suppressor owner, give an NFA item a try. Many ranges throughout the United States offer the chance to shoot full auto machine guns, shortbarreled rifles, and suppressors, and more individuals are buying them every day. It’s all up to you to take the next step toward ownership. Please let us know how we can help you.

Individuals, Corporations, and Trusts

Where permitted, purchase and ownership of NFA firearms and suppressors is available to Individuals, Corporations, and Trusts. Which entity you choose to purchase under is up to you, but we recommend getting qualified advice from a knowledgeable source, such as an attorney who is well-versed in NFA law. We can report that many people are utilizing trusts, but if you use a trust, be certain your trust does not violate the NFA; the repercussions can be substantial.

How much does it cost?

An individual purchasing an existing NFA item- other than an AOW item–is required to pay a onetime, $200.00 dollar transfer tax to the Bureau of Alcohol, Tobacco, Firearms and Explosives in addition to the purchase price of the item and the receiving dealer’s transfer fee. The AOW firearms transfer tax is only $5.00 dollars, plus the purchase price of the item and the receiving dealer’s transfer fee. Should the item be transferred to another person in the future, a separate transfer tax must be paid at that time by the new prospective owner. This tax is commonly referred to as your “tax stamp.”

What kind of forms to file?

Your transferring FFL will usually assist you with the filing of ATF Form 5320.4, also known as the “Form 4.” This form is required in order to transfer the NFA item from the receiving FFL to you. Two copies of the Form 4 will be submitted to the ATF and a third copy should be mailed to your CLEO (Chief Law Enforcement Officer) in your city or county. This is simply a notification and they no longer have to sign off on your Form 4. Additionally, if you are applying as an individual versus under a trust/corporation, the required paperwork will differ slightly. Your transferring FFL should be able to assist you with the paperwork (Form 4 and Responsible Person Form) and mail it off to the ATF for you as part of your transfer fee.

Things You Need

When completing a Form 4 as an individual, you will need:
• Three completed and signed Form 4s. TWO copies will be sent off to the ATF (they will keep one copy and send the second copy back with your approval and tax stamp). The remaining ONE copy will be sent to the CLEO (Chief Law Enforcement Officer) in your city/county.
• TWO fingerprint cards. These can be completed at your local Sheriff’s Office or Police Dept.
• TWO passport sized photos (2″ x 2″ inch).
• ONE check or money order made out to the BATFE in the amount of $200.00 dollars ($5.00 for AOWs). You will need the above for EACH NFA item that your purchase, even if you are purchasing multiple items at once.
How long is the wait?
Wait time for ATF approval on Form 4s varies. The current estimate is 4-6 months.

How old do you have to be to have an NFA Item?

You must be 21 years old.
Barring certain federal, state, or local prohibitions, an individual who is at least 21 years of age and currently able to purchase and possess any non-NFA firearm will also be eligible to purchase an NFA firearm from an NFA dealer. You only need to provide us with three things to complete an NFA item purchase online:
• Payment: You will pay us for the firearm or suppressor in full at the time of purchase (there are no layaway purchase plans for NFA items).
• Your dealer’s Federal Firearms License (FFL)
• Your dealer’s Special Occupational Tax License (SOT):
NFA – Title 2 Weapons – Machineguns, Short Barreled Rifles (SBR), Short Barreled Shotguns (SBS), Silencers (Suppressors), AOW (Any Other Weapons) and Destructive Devices
Title 2 firearms are not as commonly known nor as straight forward as the Title 1s. All title 2 weapons fall into 1 of 6 different categories.
1) Machineguns,
2) Short Barreled Rifles (SBRs),
3) Short Barreled Shotguns (SBSs),
4) Suppressors,
5) Any Other Weapon (AOWs) and
6) Destructive Devices.
All title 2 firearms are regulated by what’s known as the National Firearm Act or what we like to refer to as NFA. One could spend months reading about NFA but I’ll hit the major misconceptions… which are (contrary to the assumptions by many individuals AND even law enforcement) that NFA weaponry.
• Is legal in almost every state. Most all 6 categories above are allowed in just about all states within the Continental United States. A few states restrict machinegun ownership; others may restrict short barreled shotguns (SBSs) or suppressors, etc.
• One does not need or obtain a “Class 3” license to own. In fact there really is no such thing as a class 3 license. When a Title 1 FFL dealer pays what’s known as a Special Occupation Tax, he/she then becomes a SOT that can then deal in NFA/Title 2 weapons. SOTs have several classes too and they are based on the type of FFL license you currently hold. The term Class 3 comes from when a normal Type 1 (standard dealer) FFL holder pays his SOT tax. He becomes a Type 3 SOT hence the term Class 3. When a manufacturer likes me (a type 7 FFL) pays his/her SOT, they become a Type 2 SOT and can both MAKE and DEAL in NFA weapons.
• Transfering ownership of an NFA weapon – All NFA weapons regardless of category (machineguns, silencers, etc.) are controlled during their transfership from one person/entity to another. These weapons transfer to another entity on what is called ATF tax forms. Each ownership transfer MUST be approved by the ATF before the transfer takes place. This approval takes sometimes many months. Generally individual transfership is approved in 3-4 months, dealer to dealer in 3-4 weeks. When the ATF approves the transfer, they cancel a tax stamp and this is why you sometimes hear some say class 3 stamp. Transfers from/to individuals require a one time $200 tax stamp to be paid for EACH transfer (AOWs require just a $5 stamp). These are considered tax paid transfers and usually are on ATF form 4s. Dealers can transfer to other dealers using a tax free Form 3. If a person buys a NFA item from someone outside his/her domicile (home) state, the weapon must be transferred 1st to a SOT holder within the buyer’s state. Similar to a Title 1 firearm transaction. It must go to a FFL/SOT dealer in the buyer’s state before going to the buyer.

• Making of NFA weapons. In May, 1986 President Reagan signed a bill that basically stopped the making of any new machineguns. All the other 5 categories (SBRs, SBSs, Silencers, AOWs and Destructive Devices) however can still be made even by an individual if he/she first applies for and receives permission to do so. They will file an ATF Form 1 (maker form) and pay a $200 make tax fee. A civilian can still legally own any machinegun that was created PRIOR to May, 1986 as long as they get approval on the ATF form 4 discussed above. Machineguns or full-autos as they are sometimes referred command a hefty price though due to supply and demand. Remember that no civilian can possess a machinegun manufactured after May 1986 except for law enforcement so there is a finite quantity available. Your more common machineguns (M16, MP5s, etc.) are currently selling for close to $20,000!!!! Pretty pricey for a gun that basically is really worth less than $1000.00! Machineguns generally go up several thousand dollars per year and some use as investments. I have bought and made considerable profits within just a few years by buying and selling NFA machineguns. They have been legal to own since 1934 so this is nothing new to the US laws.
• Utah is a special state when it comes to NFA. Part of the Form 1 or Form 4 approval process requires that you need to get local Chief Law Enforcement Official (Sheriff or Chief of City Police) to sign off on your form. Well, several years ago, a bill was past in TN that makes us a SHALL SIGN state which means the Sheriff or Chief must sign approval for your transfer unless there is something in your NCIC background check that would otherwise prevent it. No other state does this. Some officials have erroneously associated their approval with liability on their part. When in all actuality, the signoff in the ATFs eyes is ONLY to state that the individual has nothing negative in his or her NCIC check. Corporations (LLC, INC, etc.) and Trusts (Revocable) do NOT need LEO signoff (still need ATF approval) however they have tax implications and are not recommended to merely obtain NFA items.
• An interesting and widely unknown fact….. since the NFA went into effect in 1934, there has only been 1….. 1 single felony committed in the whole United States since 1934 that involved a legally registered NFA firearm. And it was committed ironically by a crooked police officer who went to a drug house and shot someone on the premise. He used his legally acquired UZI submachine gun to commit the crim. You hear all the time of machinegun and sawed off shotgun in the news but these have all been by individuals possessing an illegal, non registered weapon. There are millions of records of legally owned entries on the NFA registry too so it’s not like we’re talking just a few hundred or thousand potential individuals.

6 distinct types of NFA weapons

• Machineguns – Often referred to as full-autos, automatics, etc… any firearm which fires more than 1 bullet for each individual pull of the trigger. Law Enforcement Sales can convert current semi-auto patrol rifles into… or manufacture new post sample machineguns for departmental and/or officer use.
• Short Barreled Rifles (SBR) – Rifles with barrels less than 16″. LES can convert your existing firearm to SBR specifications or create a build from the ground up using a Spikes/LES lower assembly.
• Short Barreled Shotguns (SBS) – Shotguns with barrels less than 18″. LES primarily uses the Remington 870 platform but can perform the modifications on basically any other series.
• Silencers (Suppressors). Silencers/Suppressors are never hardly portrayed accurately in the movies. If the bullet speed breaks the sound barrier, you WILL hear a pop. Suppressors are meant to mostly alter the signature of a weapon so that it sounds like something else and/or the sound heard doesn’t mark the shooter’s position as easily as a non-suppressed weapon. 22 calibre firearms can be suppressed very well though. You can get them so quiet that the action cycling produces more sound than the fired bullet does. With other calibres, sub sonic ammo can be used to lessen the signature as the bullet leaves the barrel. Best analogy I can give is a normal suppressed 5.56/223 AR15 will sound more like a 22 rifle being fired. LES has begun manufacturing its own series of suppressors. As products become available, they will be posted on the site. Current versions are considered in developmental stages and are being evaluated for both their performance and mostly safety/durability.
• Any Other Weapon (AOW) – these are usually things that don’t meet the other criteria above. Put a fore grip on a pistol, guess what? You JUST made an AOW weapon and if the proper paperwork and approval were not obtained prior, you have violated NFA regulations and possess a contraband weapon that carries severe fines and penalties. Other common AOW classifications are these wallet holsters you see that are meant to be/could be fired while the weapon is still in the holster. Pen guns are another example. AOWs are a little special in that the transfer tax for them is only $5.00. Ironically, the “maker” of the AOW still has to pay a $200 maker Form 1 fee just like he/she would to make a SBR, SBS or Silencer.

• Destructive Devices (DDs) – these are prettly much self explanatory other than ATF has classified several classes of shotguns now as destructive devices. The infamous Street Sweeper shotgun is considered a DD by the ATF falls into the title 2/NFA realm.

The ATF forms we usually use in dealing with these weapons are …
• ATF Form 1 – Maker Form – used by non manufactures to make NFA weapons – for civilians, only Short Barrel Rifles, Short Barreled Shotguns, Silencers and AOWs can still be made (after May 1986). The one time tax stamp for this form is $200. Maker will received an approved form back from ATF and he/she can then make the item in question. Once made, if transfer of ownership is ever needed, this would be facilitated on a Form 4 below.
• ATF Form 2 – Manufacturer Registration Form – we use this form to notify the AFT of any NFA item we create in course of our manufacturing business. This form is not used by individuals.
• ATF Form 3 – Dealer to Dealer tax-free form. Any SOT can transfer to any other SOT tax free NFA weapons he/she has in their possession/ownership. This is usually done when someone buys an item and it is transferred from a dealer in one state to a dealer in the buyer’s state to facilitate the approval/filing process.
• ATF Form 4 – Tax paid to/from individual form – used when a NFA item is transferred TO or FROM an individual. Even if the individual transfers the said item to a SOT holder/dealer, there still is a $200 transfer tax. Once the SOT has it, they can transfer it back out to another SOT holder tax free (Form 3) or directly to another individual in their state on a tax paid (Form 4).
• ATF Form 5 – Used to transfer NFA items to police departments for official use – tax fee transfer.
There are two ways to purchase NFA items: individual tax stamp or an NFA Trust.
• Individual tax stamp requirements:
• Complete (2) included BATFE Form 4s (5320.2) and sign in blue or black ink
• Obtain (2) passport photos and affix one to each Form 4; do NOT staple
• Make (1) photocopy of your completed Form 4 with passport photo affixed
• Complete (2) FBI Form FD-258s in blue or black ink
• Identify your local Chief Law Enforcement Officer (CLEO)
• Write a $200 check to the BATFE
• The device cannot be loaned to anyone else or stored at any other address. If any other person uses the device, the owner must be present.

NFA trust requirements:
• Complete (2) BATFE Form 4s (5320.2) and sign in blue or black ink
• Make (1) photocopy of your completed Form 4
• Make (1) photocopy of your trust documentation
• Identify ALL responsible persons (including yourself) and per person:
• Complete (1) BATFE Form 5320.23 and sign in blue or black ink for each responsible person
• Obtain and affix to Form 5320.23 (do NOT staple) for each responsible person
• Make (1) photocopy of your completed Form 5320.23, with passport photo affixed, for each responsible person
• Complete (2) FBI Form FD-258s in blue or black ink for each responsible person
• Identify your local Chief Law Enforcement Officer (CLEO)
• Write a $200 check to the BATFE
• You can have several members in the trust, allowing the device(s) to be shared, loaned, and stored at any of the trustee’s addresses.
• If one trustee passes away, the other trustees still retain ownership of the device(s) listed in the trust.

Gun and Tax Lawyer Utah

When you need a gun lawyer and tax lawyer, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506