19 February 2009

Fables,Myths, and Other Tales XIV

There are too many gun dealers in the U.S.

This refrain often is accompanied by ridiculous comparisons of the number of firearms dealers in the U.S. with the number of gas stations or even with the number of McDonald's hamburger stands. As Shakespeare reminds us, "Comparisons are odious," especially so when they are employed in public policy debate as a substitute for facts.

Reducing the number of dealers, we are told, will decrease illegal gun sales to traffickers. The simple fact is, however, federal law provides strict penalties in cases where a licensed dealer is involved in criminal activity. The law requires dealers to maintain records of every firearm bought or sold. The law requires dealers to present those records to Bureau of Alcohol, Tobacco and Firearms (BATF) agents for purposes of compliance inspections and make the records available to law enforcement authorities engaged in crime investigations. The law requires dealers to inform both the BATF and state or local law enforcement officials whenever an individual buys more than one handgun in a five-day period. (18 U.S.C. 923) Additionally, under federal law it is a crime punishable by 10 years in prison for a dealer knowingly to provide a firearm or ammunition to a prohibited person such as a felon.

Since passage of the Gun Control Act (GCA) in 1968, any person engaged in the business of buying and selling firearms for the purpose of profit is required to have a federal firearms license (FFL). The BATF oversees the issuance of these licenses and regulates the manufacture and commercial sale of firearms in the U.S.

In particular the FFL was created:

to facilitate lawful firearms trade, including for those who lived in remote or rural areas who inordinately were impacted by the GCA's ban on interstate sales

to allow for scrutiny of firearms transactions records to prevent prohibited persons from acquiring firearms through legal means

to allow an individual with an interest in having a business in firearms to lawfully engage in that activity interstate.

For years, those who have sought to reduce the private ownership of firearms have done so by promoting laws to prohibit or delay firearms sales. Having failed more often than not in that effort, they have more recently turned to calling for a reduction in the number of individuals licensed to sell firearms. Their calls increased in volume in the early 1990s. Concern among gun owners over the Clinton/Gore Administration's anti-gun agenda caused an increase in the market for firearms, which, in turn, increased the number of individuals obtaining licenses to sell firearms. By April 1993, the number of federally licensed dealers hit an all-time high of 281,600.1

In August 1993, President Clinton sent a memorandum to the Treasury Secretary, suggesting that pressure be put upon low-volume dealers. "Today there are in excess of 287,000 Federal firearms licensees, and a great number of these persons probably should not be licensed," he said. "[P]robably 40% of the licensees conduct no business at all, and are simply persons who use the license to obtain the benefits of trading interstate and buying guns at wholesale. [Another] 30% of licensees engage in a limited level of business typically out of private residences."2

The Clinton Administration's belief that low-volume dealers should not be allowed to remain in business has no legal basis, however. Indeed, federal law does not require a dealer to sell large quantities of firearms; it merely requires that if a person is "dealing in firearms as a regular course of trade or business with the principal objective of profit through the repetitive purchase and resale of firearms," such person be licensed. [18 U.S.C. §921(a)(21)(C)]

In November 1993, Clinton signed the Brady Act, a provision of which dramatically raised license fees for firearms dealers. Then, in late 1993 and early 1994, BATF increased its regulatory pressure upon dealers. The agency "required applicants to submit fingerprints and photographs of themselves [though fingerprints are not necessary to conduct a records check on an applicant], furnish a diagram of the business premises where their firearms inventories were located, and provide a description of their security system for safeguarding firearm inventories."3

To accomplish the Clinton Administration's goal, BATF used an orchestrated plan of coercion to intimidate dealers into surrendering their licenses. BATF agents denied license renewals for reasons that fall beyond their legitimate purview such as local zoning ordinances and insisting on things that federal law does not provide for, such as requiring a formal storefront. Since 1993, more than two-out-of-three licenses have been eliminated.


1. General Accounting Office, "Issues Related to Use of Force, Dealer Licensing, and Data Restrictions," GAO/T-GDD-96-104, April 3, 1996.

2. General Accounting Office, "Various Factors Have Contributed to the Decline in the Number of Dealers," GAO/GDD-96-78, March 1996, pp. 41-42.

3. General Accounting Office, "Issues Related to Use of Force, Dealer Licensing, and Data Restrictions," GAO/T-GDD-96-104, April 25, 1996.

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