Does someone who has a federal firearms dealer's license automatically owe the NC state firearms dealer's license tax?

Plain-English summary

The AG was asked whether holding a federal firearms permit automatically created liability for North Carolina's dealer license tax under G.S. § 105-80. The answer was no. The State and federal provisions licensed closely similar activity, but the North Carolina legislature had not made federal licensure the legal trigger for the State tax. Revenue could not conclusively treat every federal permit holder as liable without a separate State-law inquiry.

The opinion added an important assessment point. Revenue could, as a general operating policy, regularly issue proposed State assessments to holders of federal firearms dealer permits. Tax assessments were presumed correct under Riggs v. Coble, so a federal permit holder receiving one would bear the burden of showing why the State license did not apply.

Federal law expressly excluded certain occasional sales and personal-collection activity from its "engaged in business" definition, and offered a separate federal collector's license. The AG noted that the State definition was nearly identical but lacked an express hobby-collection exclusion. The opinion did not decide that hobby activity or possession of a federal collector's license was automatically exempt from the State tax. Those facts might be relevant to a separate inquiry; the opinion supplied no categorical defense for them.

Currency note

This opinion compared the State and federal firearms provisions in 1994. Check current G.S. § 105-80, federal licensing law, and current tax procedure before applying it to a present assessment.

Background and statutory framework

G.S. § 105-80 imposed a license tax on persons engaged in selling or offering firearms other than antique firearms. The AG compared its "engaged in business" language with the federal dealer definition and found close conformity but no legal linkage making a federal permit conclusive of State liability.

The opinion distinguished final liability from Revenue's ability to propose an assessment. Federal dealer permit holders could be assessed as a routine operating policy, but the tax assessment's presumption of correctness still left room for the permit holder to establish that the State license did not apply.

Common questions

Does a federal dealer permit automatically establish liability for North Carolina's tax?

No. The AG said a separate inquiry under State law was required.

Could Revenue issue proposed assessments to federal dealer permit holders?

Yes. The opinion said it could do so regularly as an operating policy. Under Riggs, the assessment was presumed correct, and the permit holder bore the burden of showing why the State license was inapplicable.

Did the opinion adopt the federal hobby exclusion for North Carolina law?

No. It expressly said the State definition lacked a matching express exclusion. It did not decide that occasional hobby sales were a State-tax defense.

Did it declare every federal collector licensee exempt from State tax?

No. It mentioned the availability of a federal collector's license while discussing the taxpayer's burden, but did not decide the State-tax status of all collectors.

Citations from the opinion

• N.C. Gen. Stat. § 105-80
• 18 U.S.C. §§ 921(a)(11); 921(a)(13); 921(a)(21)(C); 923(a); 923(b)
• Riggs v. Coble, Sec. of Revenue, 37 N.C. App. 266 (1978)

Source

• Landing page: https://ncdoj.gov/opinions/liability-of-holders-of-federal-firearms-dealers-license/

Original opinion text

From Don Shirley we understand that you have requested our opinion as to the relationship, if any, between the respective state and federal provisions which license firearms. Specifically you inquire whether a holder of a federal permit is automatically liable for the "dealer's" license required by G.S. 105-80.

18 USC §923(a) prohibits any person from "dealing in firearms" unless licensed by the Secretary of Treasury. Section 921(a)(11) in pertinent part defines "dealer" as an individual "engaged in the business of selling firearms at wholesale or retail. . . ." Section 921(a)(21)(C) defines "engaged in business" as: . . .a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms . . . .

Section 923(b) provides separate procedures for an individual wishing to be licensed as a collector. "Collector" is defined as any person "who acquires, holds, or disposes of firearms or ammunition as curios or relics. . . ." Section 921(a)(13).

G.S. 105-80 levies a license tax upon persons engaged in the business of selling or offering for sale firearms, other than antique firearms. "Engaged in business" is defined almost identically as under the federal provisions, but lacks an express exclusion for "hobby" collections.

There is unmistakable conformity between G.S. 105-80 and its federal counterpart. North Carolina licenses the identical activity which the federal government taxes.

Nevertheless, there is no link between the federal act and possible state liability. The legislature has not made federal licensure, per se, the basis for imposition of the privilege tax levied by G.S. 105-80. It would be improper for the Revenue Department to conclusively presume that a holder of a federal permit is automatically liable for the corresponding state license. There must be a separate inquiry as to liability.

But the department may properly assume liability, and as a general operating policy, regularly issue proposed assessments against holders of federal firearms dealer permits. It is fundamental that "tax assessments are presumed correct." Riggs v. Coble, Sec. of Revenue, 37 N.C. App. 266, 271 (1978). Given the presumptions accorded tax assessments, coupled with the availability of a federal collector's license, the burden would fall upon the federal permittee to establish why the state license would not also be applicable.

We hope the foregoing is helpful.

Reginald L. Watkins, Senior Deputy Attorney General

George W. Boylan, Special Deputy Attorney General