from Michael Bane’s site, here’s an “unofficial” NRA Office of Legislative Counsel’s summary of the ATFE vs. gunsmiths situation. Excerpt:
The Firearms and Ammunition Excise Tax (FAET) is a tax imposed by Chapter 32 of the Internal Revenue Code (26 U.S.C. 4181) on the sale of firearms and ammunition by manufacturers, producers, and importers. The present situation has arisen due to a possible misinterpretation of the term “manufactured†by the ATF. It has been difficult in the past for gunsmiths to determine exactly which services performed by gunsmiths were “manufacturing†and thus subject to FAET. Generally, gunsmiths are not subject to the FAET, unless the gunsmith has title to the firearm and his work materially changes the firearm so that a different taxable article results. See Rev. Rulings 58-586, 64-202 and 69-325.
Which specific acts (mounting a scope, re-stocking, checkering, engraving, etc.) count as “manufacturing†has been difficult to determine and inconsistently applied by ATF in the past.
To address this problem, on October 1, 2005, 26 U.S.C. Section 4182 was amended to also exempt any pistol, revolver, or firearm from FAET if it was manufactured, produced or imported by a person who manufactures, produces or imports less than an aggregate of 50 such articles during the calendar year. This allows gunsmiths to operate (for fewer than 50 guns per year) without worry that a particular act would be considered “manufacture†or not.
The 50 guns per year change, however, is not retroactive (despite our efforts to make it so). Recently gunsmiths have been aggressively investigated by ATF, and their back records examined for FAET compliance. This investigation is legal and proper, however, there is concern that ATF is again misinterpreting “manufacture†and including transactions under FAET that should properly be excluded.
The NRA’s on the case! Good to see it.
This should make it clear, by the way: the ATFE’s action is not an example of an ex post facto law or regulation. The law was already in place, but was inconsistently enforced.
This whole issue is also an example of how the classic “iron triangle” of Washington power I learned about in college — Congress, lobbyists, and the bureaucracy networking to enact policy without a hell of a lot of regard for the presidency — isn’t really in effect any more. The policy network still exists — Congress, NRA and ATFE are obviously going to be dealing with each other on this issue at some level — but it’s obviously broken, with ATFE in open defiance of Congress’ legislative intent here.