Charles K. Eldred is an attorney in Texas. This post is based on a presentation at our October 2024 conference on the National Firearms Act.
On October 18, 2024, I gave a talk on my paper “The National Firearms Act is an Unconstitutional Tax.” The Wyoming Law Review has accepted it for publication in the Spring 2025 issue and it is currently undergoing the editing process. When a draft is available online, I will add a link here.
An unexamined aspect of the National Firearms Act is that it was adopted in 1934 as an exercise of the Taxing Power, rather than the Commerce Power, which the Supreme Court had not yet expansively interpreted. Examining the Taxing Power aspect of the NFA today calls its constitutionality into doubt.
Although the Supreme Court upheld the National Firearms Act as a valid exercise of the Taxing Power in the 1930s in Sonzinsky and Miller, the reasoning of those cases has been abrogated by Heller and Bruen. Heller’s holding that the right to keep and bear arms is a constitutional right puts the NFA on a collision course with many Supreme Court holdings that the government may not tax the exercise of a constitutional right. Bruen’s holding that firearms regulations without analogous historical precedent dating to 1791 violate the Second Amendment is another problem for the NFA because no arms were taxed before the 1840s.
Second Amendment concerns aside, the Supreme Court’s examination of the limitations of the Taxing Power in Sebelius(the “Obamacare” case) reveals other constitutional problems with the NFA.
First, the Sebelius court reaffirmed the constitutional command that direct taxes must be apportioned among the states, and that unapportioned direct taxes are void. Although the difference between direct and indirect taxes mystified Oliver Wendell Holmes himself, I bravely suggest a workable distinction: direct taxes are capitation taxes, real property taxes, personal property taxes, and taxes that are more similar to those types of taxes than they are to the indirect, unapportioned taxes (duties, excises, imposts, and tonnage) or income taxes, which (whether they are direct or indirect) are also unapportioned. I conclude that the NFA’s occupation taxes (on dealers, manufacturers, and importers) are far more similar to capitation taxes than any other tax, and (although a closer call) the NFA’s making tax is more similar to a personal property tax than any other tax. Therefore, they are direct taxes. Since neither tax is apportioned, they are void.
Second, Sebelius re-affirms that taxes may not impose penalties. A putative tax is really a penalty if it imposes “an exceedingly heavy burden,” if it only penalizes knowing violators, implying an intent to punish, and if it is fcollected by a regulatory agency rather than the IRS. I conclude that the $200 transfer and making taxes are penalties. First, they are far higher than any other sales tax. Second, although in 1971 the Supreme Court held there is no scienter requirement to be found criminally liable for possessing unregistered hand grenades because, supposedly, “one would hardly be surprised to learn that possession of hand grenades is not an innocent act,” that reasoning does not apply to more ordinary firearms regulated by the NFA—especially after the Supreme Court declared the right to keep and bear arms a personal constitutional right in Heller. Third, since 2002, the Bureau of Alcohol, Tobacco, Firearms, and Explosives collects the tax—not the IRS.
Third, Sebelius affirms that taxes must raise revenue, and taxes can only regulate by requiring taxpayers to pay money. I conclude that the NFA’s application processes to transfer or make firearms does not raise revenue. The application requirements are purely regulatory, and therefore not valid exercises of the Taxing Power. I further conclude that the prohibition on importing most firearms, the occupation tax on importers, and the record-keeping requirements do not raise any revenue and are also not valid exercises of the Taxing Power. The importation prohibitions are purely regulatory and do not raise revenue. The few firearms that may be imported under the NFA are those that will never be subject to taxation, so even the NFA’s provisions allowing them to be imported are purely regulatory and do not raise revenue.
A re-examination of the constitutionality of the NFA as an exercise of the Taxing Power is long overdue. Courts conducting the re-examination should conclude that it is an unconstitutional tax.