Selling SBRs: A Process Overview

If you don’t currently sell short barreled rifles, here’s what you need to know about how the process works.

Selling SBRs: A Process Overview

This BAD (Battle Arms Development) lower receiver was first purchased as a rifle and later SBR'ed via a Form 1 Registration.

Concerning SBRs (short barreled rifles), ATF regulations are that a firearm or any firearm configuration with a barrel under 16 inches with a rifle stock attached is considered an ATF-regulated SBR. SBRs require appropriate approved ATF tax stamp paperwork to import, sell, make or possess. Despite (or perhaps because of) the many 2A threats and the advent of the pistol brace, SBR sales and Form 1 applications have been at an all-time high. In fact, the ATF is processing more than four times the number of SBR and Form 1 applications than they were just seven years ago. SBR-related sales are incredibly hot, and dealers have an opportunity to capitalize on this trend in many ways, including just being informed on the process when selling pistols, rifles and stripped lower receivers.

For dealers that want to start selling SBRs, suppressors and AOWs (any other weapon), most current FFL dealers in good standing can add an Special Occupancy Tax (SOT) license allowing processing and sales of ATF-controlled items with very little work and a relatively small SOT license application fee.


Two Paths to SBRs

Although there is a special class of SOT status for FFL holders to also allow manufacturing of their own branded and ATF-regulated items, this is a less common license type for most FFL dealers. From a customer perspective, ATF tax stamp SBRs are purchased or built in one of two ways: direct sales of factory SBRs through an SOT, or purchase of a receiver only or pistol that owners then ATF eFile and register to “make an SBR.” If a customer purchases a factory SBR model, they should expect at least a one-year delay in taking home the purchase while waiting for their tax stamp to be issued. Notably, even if a customer has a home-built firearm based on the popular 80% lower receivers, if they intend to build or configure an SBR, they still need to apply for the SBR first, just like any other receiver.

For customers who want to buy braced pistols or build their own SBR with components, the process can be a bit less frustrating. That delay is worth mentioning and is a good sales point for dealers to potentially encourage purchasing of the same exact SBR firearm in pistol format now so the customer can enjoy the firearm while waiting for a Form 1 application to finalize. For the DIY AR builders, dealers should be stocking some higher-tier options such as Aero Precision’s M4E1 enhanced lowers and even a few options from the artisan tier of receivers from American Defense Manufacturing and Battle Arms Development. Customers who are going through all the trouble of the SBR registration are likely to be happiest long-term with that decision if they have invested in something very nice instead of being stuck with whatever Mil-Spec receiver the dealer was selling.


Selling Factory SBRs 

Some customers prefer to purchase factory SBRs. Typical rationale for purchasing factory SBRs is assurance of reliability with warranty coverage of a now very expensive and difficult-to-transfer firearm. In other cases, the firearm is only available as a factory SBR, such as the FN PS90 or IWI Tavor SBR models. In either case, it is important for the customer to understand that there is a long wait before they can take the SBR home. Some of the more creative dealers will offer on-site cerakoting for SBRs so that when the customer does take home their SBR, they have a very customized gun. Dealers with gun ranges attached can offer courtesy on-site shooting of ATF-controlled items by the purchasing owner as long as there is direct dealer supervision and the item does not leave the premise without being accompanied by the dealer. As long wait times have increased, it’s become common practice to allow the owner to get a bit of shooting enjoyment on-site with the SBR during the nearly year-long paperwork processing period. Customers have termed this practice “ATF Visitation Rights.”

The paperwork process is similar for factory SBRs as with the Form 1 eForm Applications discussed with converting braced pistols to SBRs noted below. The customer purchases and pays for the SBR, plus the $200 required tax stamp application fee to the ATF. The SOT dealer will complete the paperwork, which now includes LEO notification, attaching fingerprint cards, and purchaser information. The paperwork is submitted and the wait for the SBR tax stamp issuance begins. Generally, six to 12 months later, the ATF sends the tax stamp, then the dealer notifies the customer the tax stamp has been received and they can come take home their new purchase. Experienced SOT dealers will make an extra copy of the tax stamp and recommend that the customer store the original tax stamp in a safe and carry a copy with the SBR.


Trust vs Individual Purchaser

A customer can purchase an ATF-regulated item typically in two ways: individually or via a trust. Both have advantages and disadvantages. Prior to some more recent changes, trust purchases were less paperwork and generally viewed as faster, however, now that has flip-flopped and the individual purchases seem to process through the ATF a few months faster. Individual purchases are just that — the customer makes a personal purchase of the item just like any other FFL item. There are some notable limitations of an individual-based sale: The ATF item is forever tied to the individual with the exception of a resale or Form 5 Tax Free death transfer; possession and use is limited to the individual and cannot easily transfer or make the item available for use by another individual; if you move to a state which prohibits ATF-regulated items, you cannot move those items into the state, so you will need to sell those regulated items or re-register them into a trust, which is another $200 tax stamp per item plus another wait. Currently, the advantage of the individual purchase is that it is faster, however, from my perspective, the trust is worth the extra few months of waiting.

Trust-based purchases require establishing a legal trust, which is creating a legal entity allowing the primary settler trustee and potentially others to manage, possess and use items in the trust. If a customer already has a legal trust for land or other purposes, it is recommended that a separate gun trust be created to ensure other items in the trust are not impacted with legal changes to ATF-regulated items. Trustees use the trust legal entity to purchase ATF-regulated items for use and possession by the trustees and theoretically can have ownership of an unlimited number of ATF-regulated items. There are quick online trusts, however, most local gun-friendly lawyers have some type of $500 trust package they can provide. A trust’s huge advantage is flexibility. Once an item has been purchased via the trust, it can overcome many of the limitations of individual-based sales. Regardless of an individual or trust-based purchase, customers should consider and understand each before their first ATF item purchase.


Braced Pistols Are Driving SBR Registrations

Interestingly, the significant trend is for customers to purchase braced pistol models and enjoy the gun immediately while waiting for their tax stamp to process. It appears that a higher-than-historical-average number of customers are then sending in Form 1 “Application to Make and Register a Firearm” tax stamp application to later legally add a stock.

According to most manufacturers, SBR sales have seen solid increases as the number of net new firearm owners increases, but that alone is not driving the huge SBR sales and application increases. For about the last decade, braces made by Sig, SB Tactical and other companies have had a lot of back and forth with the ATF on pistol brace legality; however, according to ATF statistics matched to brace introductions, braces appear to drive a huge number of sales for braced pistols and as a starting base for a large amount of SBR Form 1 applications. The SB Tactical/Sig Brace hit the market in 2013, and the Form 1 applications exploded from about 5,000 annually with steady growth to over 22,000 right after the SB Tactical brace was introduced.

The Form 1 “Make a Firearm” application process is simple for firearm formats that are non-braced or braced, and the ATF has made it much easier with their eForms application process with similar documentation, as noted above.

Many FFL SOT Class 3 dealers selling primarily ATF-regulated items such as suppressors, machine guns and SBRs still note that they stock heavily on braced pistols to support higher inventory turns. Customers purchase the pistol format, apply for the SBR tax stamp, and shoot and enjoy their pistol while they wait for their tax stamp to arrive. These same dealers note that once the customer gets the first application completed, they normally see customers returning to purchase factory SBRs, suppressors and other regulated items.


Becoming a Class 3 SOT

A dealer who has the ability to commercially sell ATF-regulated items is typically referred to a Class 3 or SOT dealer, however, neither is actually correct. SOT is a status for FFL dealers with three specific Class levels. Class 1 SOT allows importation, Class 2 SOT allows manufacturing, and a Class 3 SOT just covers reselling and is the most common. The slang has become “An SOT” or “Class 3 dealer” even when technically referring to a Type 1 or Type 2 FFL dealer with Class 3 SOT status allowing sales of ATF-regulated items. Once the SOT Class 3 status is approved, the FFL dealer can sell myriad ATF-controlled items ranging from SBRs, suppressors, machine guns and AOW - Any Other Weapons.

An FFL License is required to obtain any SOT status. As an existing FFL dealer, the application process to add a SOT status is neither difficult nor expensive, with a form and a $500 or $1,000 license fee, depending on if you have SOT-related sales over or under $500,000 yearly.


Final Thoughts

The current political climate will drive a huge number of braced pistol format and SBR sales, so dealers would be wise to add an SOT license to take advantage of sales from NFA-regulated and potentially newly regulated firearms. If there suddenly are new BATFE regulation mandates, some of those mandates could require regular firearms dealers to suddenly become SOT licensed as well, and there will assuredly be a backlog to complete that approval.


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