If you’re a Federal Firearms License (FFL) holder considering working with National Firearms Act (NFA) regulated items like suppressors or machine guns, understanding the Special Occupational Taxpayer (SOT) license, who needs it, and how it impacts your business is essential. Whether you’ve recently obtained an SOT or are looking to prioritize long-term compliance, FFLGuard can help you meet ATF regulations every step of the way.
SOT License Overview: What It Is and Who Needs One
A SOT license is a federal tax registration that allows FFL holders to legally engage in business involving NFA firearms. While an FFL authorizes the general sale and transfer of firearms, it doesn’t cover NFA-regulated items like silencers, short barreled rifles (SBRs), or machine guns. That’s where the SOT comes in.
To deal, manufacture, or import NFA items, an FFL must be registered as an SOT. Even if you are only planning to manufacture or maintain NFA items on premises, an SOT is required.
Types of SOT Licenses
Whether you operate as a sole proprietor or business entity, there are three (3) classes of SOT registrations. You must obtain the SOT Class that corresponds to your FFL(s):
- Class 1: Importers of NFA items, bringing in NFA weapons for resale.
- Required for Type 08 and Type 11 FFLs.
- Class 2: Manufacturers of NFA items, producing machine gun samples for law enforcement or military contracts.
- Required for Type 07 and Type 10 FFLs.
- Class 3: Dealers of firearms.
- Required for Type 01, Type 02, and Type 09 FFLs.selling suppressors and SBRs to qualified customers.
Each class allows for different NFA-related activities. For example, a Class 3 SOT can buy and sell suppressors, while a Class 2 SOT can manufacture them. The registration fee amounts vary depending on gross receipts and business classification.
SOT registration expands your business capabilities and is required to legally engage in any type of business handling highly regulated NFA items.
Maintaining Your SOT License: Requirements and Renewal Guidelines
SOT status must be renewed annually. The license term runs from July 1 through June 30, regardless of when you first registered. Here’s what you need to know:
- Annual Filing with ATF Form 5630.7: Renewal is done using this form, along with payment of the special occupational tax.
- Tax Rates:
- $500/year for many small businesses (under $500,000 in gross receipts)
- $1,000/year for larger businesses AND certain SOT types
- Tied to Your FFL: Your SOT registration is only valid as long as your FFL is active.
NFA Firearms That Require an SOT
SOT registration enables you to handle and transfer the following NFA-regulated items:
- Suppressors/Silencers
- Short barreled rifles (SBRs)
- Short barreled shotguns (SBSs)
- Machine guns (all varieties, including samples and pre-ban)
- Destructive devices (e.g., grenade launchers)
- Any Other Weapons (AOWs) (e.g., pen guns, cane guns)
Each of these categories comes with its own set of transfer and documentation rules, which SOT holders must follow precisely to stay compliant.
Common SOT Compliance Mistakes
Even experienced federal firearms licensees can make errors that jeopardize their license. Common mistakes include:
- Missing the July 1 renewal deadline
- Filing the wrong ATF forms for transfers (Form 4 instead of Form 3, etc.)
- Inaccurate or incomplete NFA recordkeeping
- Transferring NFA items across state lines
- Improper handling of demo letters/forms for law enforcement sales
- Missing background check documentation or transfer tax payments
These missteps can result in fines, audits, or even license revocation. In rare cases, criminal charges are filed. Staying ahead of deadlines and using the correct forms is critical for any NFA activities associated with your firearms business.
Benefits of Becoming an SOT
Holding an SOT license opens doors to new revenue streams and business opportunities:
- Expand your inventory to include high-demand NFA items
- Faster transfers between SOT holders using Form 3
- Serve specialized markets, such as law enforcement and military buyers
- Stand out from competitors who don’t offer NFA weapons
- Potential access to manufacturer programs for dealer samples
For many FFLs, whether operating as a sole proprietor or incorporated business, the annual registration fee is a small price to pay for access to a growing and loyal customer base.
How FFLGuard Helps You Maintain SOT Compliance
FFLGuard offers legal protection and compliance solutions specifically tailored to FFLs with SOT status. As a client, you gain:
- Direct access to firearms-specific attorneys with deep knowledge of ATF regulations
- Year-round compliance support with document templates, checklists, FAQs, and more
- Representation in the event of an ATF audit or investigation
- Peace of mind knowing you have an expert team behind you
Don’t risk noncompliance when navigating NFA transfers. Whether you’re a new SOT or managing renewals, FFLGuard is your trusted partner in SOT compliance, providing the legal protection and guidance you need. Learn more about our FFLGuard plans, including options designed for FFLs operating in the NFA space.
FAQs
No. You must have a valid FFL before you can register as an SOT.
Most FFLs pay a registration fee and an annual fee of $500 to $1,000. This cost depends on business size, gross receipts, and planned activities.
SOTs are a true tax payment and are associated with your EIN. However, you MUST pay the registration fee for each FFL type and location even if they are operating under the same EIN.
ATF Form 3 is used for tax-free transfers between SOT holders. ATF Form 4 is used for transfers to non-licensees and requires a $200 transfer tax at this time.
Federal regulations do not consider whether there is a store-front for the FFL. However, state or local authorities might regulate this type of activity, including zoning designation for your FFL location.