Tax-Exempt and Tax-Free Sales
of Firearms, Shells and Cartridges
Firearms and Ammunition Excise Taxpayers and Others Concerned:
Purpose. This circular gives general guidance to firearms and
ammunition excise taxpayers about making tax-exempt or tax-free sales
of firearms, and shells and cartridges (ammunition).
Background. Under certain conditions, a manufacturer or importer
may sell firearms and ammunition tax exempt or tax-free. A chart at
the end of this Industry Circular highlights some important aspects
of tax-exempt and tax-free sales.
Tax-Exempt Sales. Manufacturers and importers may sell firearms
or ammunition without the payment of tax (1) when the $200 or $5
transfer tax imposed by 26 U.S.C. 5811 on firearms subject to the
National Firearms Act (e.g., machineguns and short barreled rifles or
shotguns) has been paid on the sale or (2) the firearms or ammunition
were purchased with funds appropriated for the Army, Navy, Marines,
or Air Force or by the United States Coast Guard. When sales are
made to such a Government agency, the manufacturer or importer must
sell directly to the agency pursuant to a Government purchase order
or contract signed by an authorized official. Manufacturers and
importers must maintain a copy of the purchase order or contract
to show that the sale was exempt from tax.
Tax-Free Sales. Manufacturers and importers may sell firearms or
ammunition without payment of excise tax for specific purposes or
uses by the purchaser: (1) use by the purchaser for further
manufacture; (2) resale by the purchaser to a second purchaser for
use by such second purchaser in further manufacture; (3) for export;
(4) resale by the purchaser to a second purchaser for export; (5) use
by the purchaser as supplies for vessels or aircraft; (6) a State or
local government for the exclusive use of a State or local
government; and (7) a nonprofit educational organization for its
exclusive use. Generally, tax-free sales may be made only if the
manufacturer or importer and purchaser(s) are registered with ATF or
the Internal Revenue Service and if the purchaser has executed an
Other Requirements for Tax-Free Sales.. Specific requirements
that must be met for tax-free sales are discussed below. Refer to
the chart at the end of this Industry Circular for specific
information about these requirements.
- Except for sales for export or for further manufacture, the
manufacturer or importer must sell directly to the person or
entity whose use is tax-free.
- All tax-free sales require that the manufacturer or importer
inform the purchaser that the firearms or ammunition are being
sold tax-free and that the purchaser is obtaining these articles
tax-free for an exempt purpose under an exemption certificate or
- When a manufacturer or importer sells firearms or ammunition
tax-free, the exempt purpose or use must precede any other use of
the article by the manufacturer, importer, or tax-free purchaser.
For example, if a manufacturer or importer uses a firearm for
display to solicit sales, then the manufacturer or importer
cannot sell the firearm tax-free.
- The purchase for further manufacture by a second purchaser,
for export by the manufacturer or by a second purchaser will be
tax-free only if the manufacturer or importer receives proof that
the article has been resold for use in further manufacture or
exported. The proof must be received within 6 months after the
manufacturer or importer sells or ships the firearms or
- The manufacturer or importer must have an approved
Certificate of Tax-Free Registry (IRS Form 637 or ATF Form
5300.26) to make most types of tax-free sales. The first
purchaser and the second purchaser, if any, may also be required
to have an approved Certificate of Tax-Free Registry to purchase
firearms or ammunition tax-free.
- Manufacturers and importers must maintain records to support
all tax-free sales.
Manufacturer or Importer Liable for Tax When Requirements of
Tax-Exempt or Tax-Free Sale Are Not Met. In general, the
manufacturer or importer will be liable for all taxes, including
interest and any applicable penalties, if all the requirements of the
tax-exempt or tax-free sale are not met.
Questions. Any questions concerning this circular should refer
to its number and can be addressed to any ATF regional office.
Attachment (219 KB)