Consignment sales are common in gun stores — a customer brings in a firearm, the dealer sells it on their behalf, and takes a commission. The compliance requirements for consignment transactions are straightforward but distinct from standard retail sales, and errors here are common.
The Acquisition Entry
When you take a firearm on consignment, you must enter it as an acquisition in your bound book. Even though the consignor still owns the firearm and you are acting as their agent, the firearm is on your licensed premises under your control — which makes it your acquisition for bound book purposes. The entry should note the nature of the transaction (consignment) and the consignor's information.
Taking possession without an acquisition entry is a violation. A firearm sitting in your display case on consignment that is not in your bound book is a compliance problem regardless of the ownership arrangement. The regulatory trigger for acquisition entries is taking possession, not taking title.
The Disposition Entry and Form 4473
When a consignment firearm is sold, the transaction is treated exactly like any other retail sale for Form 4473 and NICS purposes. The buyer completes a Form 4473, a NICS background check is conducted, and a disposal entry is made in your bound book. The fact that the proceeds belong to the consignor rather than you does not change the 4473 requirements.
When Consignment Items Are Returned
If a consignment item is not sold and is returned to the consignor, this is a disposal from your bound book — a return to the original owner. The disposal entry should reflect the nature of the return. A Form 4473 is generally not required for the return of a consignment item to the original owner, since the consignor is not purchasing the firearm from you — they are reclaiming their own property.
Document the return clearly. The disposal entry for a returned consignment item should clearly indicate it was returned to the consignor. This creates a clean audit trail and prevents questions about why a disposal entry has no corresponding Form 4473.
Consignor Background Check Considerations
Dealers are not required to conduct a NICS background check on a consignor simply because they are leaving a firearm with you. However, you should verify the consignor's identity and retain their information in connection with the acquisition entry. If there are visible red flags suggesting the consignor may not be legally permitted to possess the firearm, that is a different situation that warrants careful consideration.
Pricing and Paperwork
Keep your consignment paperwork — the agreement with the consignor, pricing instructions, commission terms — organized and separate from your ATF-required records. While consignment agreements are not ATF-required documents, they are important for your business operations and can be relevant if disputes arise with consignors.
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