Ok, first off, there’s really no such thing as a “Class 3 License.”

Instead, someone who has a Federal Firearms License, must become a Special Occupational Taxpayer (SOT) in order to deal, manufacture, or import a certain category of firearms called NFA Firearms/Title II firearms.  This special category of firearms includes Silencers (suppressors), Short Barreled Rifles (SBRs), Short Barreled Shotguns (SBS), Full-Auto Machine Guns, and “Any Other Weapons” (AOWs).

What is an SOT?

An SOT is a taxpayer (entity) with an FFL that has registered with the federal government and paid an annual tax.  The status as an SOT applies to the entity (business).  This means that a business can get more than one FFL and it can rely on its status as the same SOT.

The SOT tax must be paid every year by July 1st, and the cost of the FFL and SOT registration varies per FFL Type and, in some cases, by annual sales.  Unfortunately, if you decide to become an SOT on June 1st, you’ll either need to pay again for the next year on July 1st or you’ll need to wait until July 1st to start the next SOT tax year.

SOT Classes

Depending on the activity the FFL wants to engage in with NFA Firearms, they must become one of 3 classes of SOT and have a certain type of FFL.

Activity Class of SOT FFL Types
 Buy/Sell  3  1, 2, 9
 Make  2  7, 10
 Import  1  8, 11

This is why your local gun shop which sells NFA firearms is sometimes called a “Class 3 Dealer.”  They don’t have a “Class 3 license,” but rather are likely a Type 1 FFL who has become a Class 3 SOT.

There’s really no such thing as a “Class 3” firearm either.

Yes, an FFL must be a Class 3 dealer (is a Class 3 SOT) in order to sell NFA firearms.  However, the NFA firearms themselves aren’t “Class 3.”  As you can see in the above chart, every NFA Firearm was either imported by a Class 1 Importer (is a Class 1 SOT) or it was made by a Class 2 Manufacturer (is a Class 2 SOT).  Therefore, the same NFA firearm likely passes through different Classes of SOTs.

How to Become a Class 3 Dealer

The first step is to become a Federal Firearm Licensee.  In another article we’ve broken down how to get your FFL in 4 easy steps and we offer classes which help you get your FFL.

After you have your FFL, you’re ready to register as an SOT and pay the appropriate tax:

Step 1 – Ensure that You Have the Correct FFL/Business Structure

You must ensure that you set your business up properly and got the correct type of FFL.  If you took our course, don’t worry – you’re all set!

If you want to be a dealer, you may use a Type 7 manufacturer’s license.  The opposite isn’t true – a Type 1 dealer may not manufacture firearms.

NFA firearms will be registered to the entity.  We recommend using an actual business entity (a corporation or LLC) for liability purposes, but being a sole proprietor does have one benefit for some.  If you decide to go out of business and give up your FFL, then all of the firearms, including NFA firearms (except post-1986 machine guns), can transfer freely (no transfer tax) to you as an individual.  This is because the NFA firearms are registered to the SOT (the entity) and not the FFL license.

Step 2 – Select Your Class of SOT and Tax-rate

As we covered above, the Class of SOT you must become depends on the activity you want to engage in.  Once you’ve determined that Class of SOT you need to become, you must then figure out your tax rate.  For some FFLs, the SOT tax rate changes depending on whether your total sales are over or under $500,000 annually.

FFL Type SOT Class under $500k over $500k
 1 3  $500 $500
 2 3  $500 $500
 7 2  $500 $1,000
 8 1  $500 $1,000
 9 3  $500 $1,000
10 2 $500 $1,000
11 1 $500 $1,000

 

Step 3 – Take an Online SOT Registration Course

The actual process of getting your FFL License and registering as an SOT can be difficult. However, thanks to online SOT certification courses, it’s never been easier.

However, it’s incredibly important that you take the right one.

When choosing an SOT Registration course, you should look to make sure that you are getting: legal advice from an actual firearms attorney that has the appropriate certifications

  • legal advice from an actual firearms attorney that has the appropriate certification guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the ATF
  • guidance from a true industry insider/professional who knows the ins-and-outs of both the firearms industry and the ATFprofessional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees
  • professional software that helps you track your progress automatically notifies you of any updates in the law and provides follow-on training and certifications for both you and your employees

There are currently only a few Online SOT Registration Courses. To figure out which one is the best for you, here is a comparison chart breaking down the two:

 

Others RocketFFL
Online Course
Step-by-step Instructions
Satisfaction Guarantee
Created and Taught by Firearms Attorney X
Hours of Video in Lessons X
Free Compliance Tools
One-on-One Legal Counsel Available X
Follow-on Advanced Training Available X
Course Certifications X
Discounts on Software and Services
Automatic Notifications on Changes in Laws X
Employee-Level Training Available X
Donates Portion of Profits to Military Charities X

 

Step 4 – Apply for and Register as an SOT

Upon ensuring you have the correct FFL and business type, have chosen the right Class of SOT, and taken your course, you’re finally ready to apply for your SOT registration to become a Class 3 dealer, a Class 2 Manufacturer, or a Class 1 Importer.

Now, the steps to this can be very difficult and may require multiple forms and extra steps depending on your situation.

However, if you took the Rocket FFL course, you’ll have every detail and access to all the necessary forms in order to become an SOT.

Becoming an SOT

So, there you have it. In four simple steps, you can become a licensed firearm manufacturer, dealer, and/or international arms exporter or importer of NFA firearms as a Class, 1, 2, or 3 special occupational taxpayer (SOT).

I’m looking forward to having you in our industry,

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