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May 29, 2018

Death, Taxes and ATF Inspections


By Wally Nelson, NSSF Compliance Consultant Team Member

Benjamin Franklin once said, “Nothing in this world is as certain as death and taxes.” For federal firearms licensees (FFLs), we can add “ATF inspections” to the list of things that are certain.

The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), whose mission is enforcement of federal firearms laws and regulations, has a goal of inspecting every FFL business at least once every five years; 9,790 inspections were completed in 2016. If you haven’t been inspected recently, it’s likely your time is on the horizon. But there’s no need to be overly concerned by the thought of an inspection if you are prepared for it.

The March 2009 issue of “SHOT Business” contained an article entitled “How to Pass an ATF Inspection with Flying Colors,” which I wrote as an update to a March 2005 article of the same title. Since almost nine years have elapsed since that second article, NSSF asked me to provide another update.

What ATF is Looking For

During an ATF inspection of an FFL, ATF Industry Operations Investigators (IOIs) work to determine whether an FFL’s records and conduct of business is in compliance with the Gun Control Act (GCA) and regulations found at Chapter 27, Code of Federal Regulations Part 478. These are found in ATF Publication 5300.4, Federal Firearms Regulations Reference Guide — 2014 (the White Book).

Much of the inspection will involve the examination of records. That means the IOIs are going to review:

  • The firearms Acquisition and Disposition (A&D) records (both electronic and physical bound books).
  • ATF Forms 4473 files (Firearms Transaction Records).
  • ATF Forms 3310.4, Report of Multiple Sale and Other Disposition of Pistols and Revolvers, which should be attached to the relevant Form 4473s. (In Texas, New Mexico, Arizona, and California, ATF Forms 3310.12, Report of Multiple Sale or Other Disposition of Certain Rifles, will also be inspected.)
  • ATF Forms 3310.11, Federal Firearms Licensee Inventory Theft/Loss Report.

Before these records are examined and verified, the firearms inventory is also going to be inspected to determine that all firearms on hand are properly recorded in the required A&D record and that all dispositions have been properly entered. It is ATF’s current policy that IOIs will conduct a 100-percent inventory verification during compliance inspections. If the FFL is not in compliance with regulations or cannot account for all of its firearms inventory, the ATF IOI will issue a Report of Violations, ATF Form 5030.5, which becomes part of the FFL’s record. ATF policy is for IOIs to cite all violations disclosed by the inspection.

ATF Inspections - Filling out 4473
Your FFL must have policies and processes in place to ensure Form 4473s are filled out correctly and signed by both counter salespeople and their customers.

What Are the Most Commonly Cited Violations?

ATF has posted information on the 10 most frequently cited violations in 2017, as follows:

  1. Transferee did not properly complete Section A, F 4473 — 27 CFR 124(c)(1)
  2. Failure to timely record entries in bound record (Acquisition and Disposition Book) — 27 CFR 478.125e
  3. Failure to complete forms as indicated in instructions (this violation is often cited when the licensee failed to properly complete a form, but there is not a separate regulatory citation addressing the omitted or mis-documented item) — 27 CFR 478.21 (a)-(b)
  4. Licensee did not record on F 4473 the date on which NICS was contacted — 27 CFR478.124 (c)(3)(iv)
  5. Licensee did not sign and date F 4473 — 27 CFR 478.124 (c)(5)
  6. Licensee failed to obtain and/or document purchaser’s identification document — 27 CFR 478.124(c)(3)(i)
  7. Licensee failed to report multiple handgun sales — 27 CFR 478.126a
  8. Licensee failed to properly identify firearm on F 4473 — 27 CFR 124(c)(4)
  9. Licensee failed to contact NICS and wait stipulated time prior to transfer of firearm — 27 CFR 478.102(a)
  10. Licensee failed to record the type, model, caliber or gauge, and serial number of each complete firearm manufactured or otherwise acquired — 27 CFR 478.123(a)

How Can NSSF Help Me Prepare for an ATF Inspection?

In 2007, I began conducting onsite ATF compliance consultations at retailers as a member of NSSF’s Compliance Consultant Team. Since then, I have conducted hundreds of onsite compliance consultations, with the goal of helping FFLs to be in compliance during their ATF inspection.

Based on the very favorable reception by the early participants, NSSF expanded these consultations into a highly successful, national compliance consultation program for its member firearms retailers. To accomplish that, NSSF has retained an expanded staff of independent consultants consisting of retired ATF personnel with hundreds of years of combined experience, as well as other experienced industry personnel.

In working with our member FFLs, our compliance consultations entail a full day’s visit at the FFL premises by the consultant. During that visit, the consultant will review inventory practices, records, recordkeeping practices and all related procedures for the firearms business. A confidential report is prepared for the FFL after the consultation.

The cost for this one-time consultation is much lower than what a store would spend to hire an independent consultant, as the NSSF generously picks up a majority of the tab for these visits. For those who are accepted into the Premium Retail Membership program, the initial onsite consultation is provided free of charge, and future visits are heavily discounted. I’ll cover more on NSSF’s Premium Retailer benefits in the second part of this article, “ATF Inspection Perfection,” as well as the top three things you can do to avoid compliance violations.

You may also be interested in: ATF News, Links and Resources