Tennessee Attorney General Jonathan Skrmetti sues the ATF over the “engaged in business” rule.

On May 2, 2024, the office of the Tennessee Attorney General announced that Tennessee and 21 other states had filed a federal civil action against the ATF seeking to block the ATF’s new rule which massively redefines “engaged in the business” in such a way as to potentially require hundreds of thousands of individuals and entities to obtain federal firearms licenses or risk federal criminal prosecutions. (Complaint)  [Note; The Tennessee Firearms Association joined as a party-plaintiff in a similar lawsuit that was filed on May 1, 2024, in the Northern District of Texas which lawsuit was led by Texas Attorney General Paxton]

Generally, federal law since 1986 has provided that individuals and entities which make occasional sales or transfers of firearms, commonly known as “casual sales”, are not subject to the federal licensing requirements because they did not meet the definition of “engaged in the business.” Recently, by enacting the Bi-Partisan Safer Communities Act in 2022 (which had the support of many Republicans) Congress made a slight change to the definition of “engaged in the business.” That slight change formed the basis for the ATF to undertake a massive rewrite of the rule in a clear attempt to completely or substantially eliminate the causal sale exemption.

The Complaint contains several paragraphs regarding the harm that the ATF’s actions would impose on the various states. With respect to Tennessee, the Complaint alleges:

1. Plaintiff Tennessee generally charges a flat fee to each vendor that has a booth at gun shows. See T.C.A. § 67-4-710.
2. The Final Rule further conflicts with Tennessee policy governing nonprofits’ participation in gun shows.
3. Plaintiff Tennessee generally provides more favorable treatment to nonprofit gun collectors who engage in the firearms trade, including by exempting them from paying any sales taxes on proceeds at gun shows. T.C.A. § 67-6-310.
4. In addition, Tennessee law generally does not require nonprofit gun collectors to have a license to minimally partake in the sale and showing of firearms; instead, they have fallen into a safe harbor under Tennessee law, as they have not historically qualified as firearms dealers. Id. § 39-17-1316.
5. Such policies aim to avoid onerous fees levied upon organizations that pursue purposes other than purely maximizing profit. See Tenn. Op. Atty. Gen. No. 85-280 (Tenn.A.G.), 1985 WL 193831, at * 4 (1985) (referencing Tennessee’s statutes and Constitution favoring nonprofits and exempting such entities from various expenses).
6. By requiring nonprofit gun collectors providing limited wares at gun shows to acquire federal licenses, ATF’s promulgated rule runs afoul of Tennessee’s legal treatment of nonprofit gun collectors and the State’s policy of exempting nonprofits from burdensome regulations.

1. Second, the Final Rule anticipates a significant increase in the number of individuals becoming federal firearms licensees once the Final Rule takes effect.
2. Some states require additional information or perform their own background analyses prior to executing a sale or transfer of firearms.
3. Plaintiff Tennessee runs background checks and collects data on each licensed firearm transaction within its borders. Tenn. Code Ann.§ 39-17-1316.
4. Plaintiff Tennessee uses the same statutory language as federal law when defining a gun dealer for licensing purposes. Id. The relevant statute, § 39-17-1316, incorporates 18 U.S.C § 921’s definition of a gun dealer, as well as any associated requirements imposed by federal regulation-including all applicable licensing regimes under 18 U.S.C. § 923.
5. Each month, Tennessee evaluates tens of thousands of firearm transactions through a statewide law enforcement agency known as the Tennessee Bureau of Investigation (TBI). In 2023, TBI evaluated well over 500,000 firearm transactions.
6. Tennessee requires that such transactions and background checks be verified immediately so a dealer may be informed how to proceed with a transaction. Tennessee Code Annotated§ 39-17-1316.
7. A dealer is required to send purchaser identification, including social security number, firearm information, and FFL information directly to TBI. Id.
8. Should the identity of a purchaser be in question, TBI may require thumbprints to be collected by the dealer and sent to a law enforcement agency for evaluation. Id.
9. Should a purchaser be denied, especially on grounds related to criminal history information, he has a right to appeal such a determination. Id.
10. If the purchaser and TBI are unable to locate final disposition information within fifteen (15) days, TBI will inform the dealer that they may conditionally proceed with a sale and the federal firearms licensees may transfer the firearm. Id.
11. If it is later found that the firearm transaction was initially properly denied, TBI will take actions to implement the recovery of the wrongfully transferred firearm.
12. Tennessee currently has 25 dedicated employees to providing background check services timely and in accordance with Tennessee Code Annotated§ 39-17-1316.
13. There are currently 3,103 federal firearms licensees in Tennessee. As stated above, Tennessee law requires all applicable transactions that FFLs partake in to be evaluated by TBI.
14. The Final Rule also notes that Plaintiff Tennessee is required to run a background check on every firearm that occurs within the state that involves a federal firearms licensee. 89 Fed. Reg. 29065.
15. The Final Rule expects an increase in background checks and notes that it is state law enforcement agencies in Tennessee that conduct these background checks. 89 Fed. Reg. 29088.
16. This will result in an increase in administrative costs and reallocation oflaw enforcement resources for Plaintiff Tennessee.

As an aside, it is important to note that part of the issue raised by the Tennessee Attorney General pertaining to the fact that the Tennessee Legislature has a tendency, a reckless tendency as this demonstrates, to enact laws that incorporate federal laws and regulations by reference. Such a practice needlessly and careless puts Tennesseans at risk when rogue federal agencies, like the ATF, federal entities like Congress, change or modify the laws that Tennessee’s Legislature has incorporated by reference and then those federal changes automatically have the force of law under those Tennessee statutes. This has been a notable problem particularly with some Republican Tennessee legislators over the last 14 years as it relates to the passage of certain laws which pertain to or impose restrictions on rights protected by the Second Amendment.

Tennessee Firearms Association is pleased to see that Tennessee’s Attorney General Jonathan Skrmetti has joined this action on behalf of Tennesseans. TFA is also hopefully that some of the assertions made in Skrmetti’s complaint regarding the Second Amendment will be communicated to state legislators and executive department heads as a “warning shot” that some of Tennessee’s existing laws and regulations are similarly unconstitutional.

John Harris | Executive Director Tennessee Firearms Association

Joining and supporting TFA is an investment in the fight to restore our constitutional rights and to fight against politicians who are willing to sell their votes and your rights to whichever business interest gives them the most money!