Pick the pairing
The first decision is the combination. The two guides this page builds on cover each part in depth: the FFL application guide and the Class 3 SOT guide.
| Plan | FFL | SOT |
|---|---|---|
| Sell suppressors and SBRs, do transfers, stock NFA inventory | 01 | Class 3 |
| Pawn shop that also sells NFA items | 02 | Class 3 |
| Build suppressors, SBRs or machine guns for sale or samples | 07 | Class 2 |
| Import NFA items | 08 | Class 1 |
Two questions settle most cases.
Will you ever make an NFA item? Building suppressors, cutting barrels under 16 inches, or converting firearms for customers all count. If the answer is yes or maybe, choose the 07 with a Class 2. The Class 2 at the reduced rate costs the same $500 as a Class 3 for most small businesses, and it includes dealing privileges.
Is your zoning friendly to manufacturing? A Type 07 at a home address is sometimes harder to clear with a zoning office than a dealer’s office. If manufacturing is a someday plan and your zoning is tight, starting with an 01 and Class 3 is reasonable.
Order of operations
- Settle zoning for the activity you will actually conduct, and mention manufacturing if it applies.
- Form the business entity and get an EIN. The same entity name goes on the FFL and the SOT.
- Register for state sales tax and any local business license.
- Prepare and file Form 5310.12 for the FFL, with prints and photos for every responsible person and a copy to your CLEO.
- Tell the investigator about your NFA plans during the qualification interview. They can walk through NFA recordkeeping with you then.
- Receive the FFL.
- File Form 5630.7 for the SOT with your new license number and pay the prorated tax.
- Wait for SOT confirmation before acquiring NFA items. Distributors and manufacturers will want to see your SOT status.
- Open NFA-capable distributor accounts and set up an eForms account for transfers.
- Make your first NFA acquisition on Form 3.
You cannot pay the SOT before you have a license number, so steps 7 and 8 always come after the FFL.
A first-year budget
Numbers below are for a small home-based or single-location business. Insurance in particular varies a lot.
| Item | 01 + Class 3 | 07 + Class 2 (reduced rate) |
|---|---|---|
| FFL (covers three years) | $200 | $150 |
| SOT (annual, prorated in year one) | up to $500 | up to $500 |
| Fingerprints and photos | $20 to $60 per person | $20 to $60 per person |
| Safe or vault storage | $1,500 to $5,000 | $1,500 to $5,000 |
| Alarm and monitoring | $200 to $600 | $200 to $600 |
| Liability insurance | $800 to $2,500 | $1,500 to $5,000 |
| Records software | $0 to $600 | $0 to $800 |
| Manufacturing equipment | none | wide range |
| Accountant for excise tax | not usually needed | recommended |
Manufacturers should also budget for the Firearms and Ammunition Excise Tax on sales, filed with TTB, and for marking equipment. An engraver is a larger purchase than most people expect.
Timing the SOT
Because the SOT is prorated from the month you start, and the full year is due every July 1, when your license arrives changes your first-year cost.
- License arrives in August: you pay roughly eleven months of tax now, and the full amount again the next July.
- License arrives in May: you pay about two months of tax now, and the full amount in July.
There is no penalty for starting late in the tax year; you simply pay less up front. But don’t hold off on paying the SOT while doing NFA business. The tax is owed from the month you engage in NFA activity, not from when you get around to filing.
Realistic timeline
| Weeks from start | Milestone |
|---|---|
| 0 to 4 | Zoning confirmed, entity formed, tax registrations filed |
| 4 to 5 | FFL application mailed, CLEO copy sent |
| 7 to 11 | Qualification interview |
| 9 to 13 | FFL received |
| 10 to 14 | SOT filed and paid |
| 12 to 17 | SOT confirmed, NFA distributor accounts open |
| after that | First NFA acquisitions and customer transfers |
These are typical ranges. A clean application with good fingerprints and settled zoning lands at the fast end.
Compliance calendar
Once you are licensed and paying the SOT, these dates repeat:
| When | What |
|---|---|
| July 1, every year | SOT due for the coming tax year |
| Every three years | FFL renewal; file before the license expires |
| Quarterly (07 holders) | Excise tax returns to TTB, unless exempt |
| Close of next business day | Record acquisitions in your A&D book |
| Within 7 days | Record dispositions |
| Day of the second sale | Multiple handgun sales report, when triggered |
| Within 48 hours of discovery | Theft or loss report to ATF and local police |
| Before any move | Amended license application, at least 30 days ahead |
| Monthly (good practice) | Reconcile physical inventory against the A&D book and NFA records |
Mistakes specific to NFA businesses
- Receiving an NFA item before your SOT is in place. A licensee without the SOT cannot lawfully acquire NFA items the way an SOT dealer can.
- Letting the SOT lapse while still holding post-1986 samples.
- Collecting law letters with no intent to demonstrate. Agencies write them, but ATF looks at whether demonstrations actually happen.
- Doing manufacturing work on a Class 3. Shortening a customer’s barrel, even once, is making an NFA firearm.
- Mixing personal and business NFA items. Items registered to the business are not your personal collection. Keep ownership clear in the records.