Key Considerations for Firearms Merchant Account Compliance

It can be challenging to own and operate a firearms business. The last thing you want is payment processing headaches on top of that.

But here’s the hard truth: unless you get compliance right, you won’t be able to accept credit cards.

Firearms dealers lose merchant accounts every day due to poor compliance. Once you’re blacklisted by a processor, re-approval will be extremely difficult. The good news is that most common compliance issues are 100% preventable.

Let’s walk through what you need to know.

What You Will Learn:

• Why Firearms Merchant Accounts Fail
• Federal Licensing Requirements
• State Level Compliance Issues
• Chargebacks and How to Prevent Them
• Documentation Requirements

Why Firearms Businesses Face Payment Processing Challenges

Fun fact about firearms businesses:

No matter how good your credit is, how long you’ve been in business, or your track record – your firearms business is automatically high risk for payment processors.

This isn’t a judgement call on your business. It’s just the way it is.

PayPal, Square, Stripe – none of these traditional processors will work with firearms merchants. And many won’t work with you in general because you’re “high-risk”. They’ve made a business out of low risk, low overhead processing for a reason and they’re not going to change their business models for your industry. 2020 saw record levels of firearm sales with nearly 40 million dollars in transactions and yet banks and credit unions still won’t touch the industry. That means you’re stuck with high-risk processors right out of the gate.

But being a high-risk business creates its own challenges. One of the Most Common Reasons Firearms Merchant Accounts Get Declined is because the merchant can’t show proof of compliance during the application process. Processors want to see that you know the federal rules, keep proper records, and have procedures in place to minimize chargebacks. If you can’t provide evidence of these things during the application process, it’s unlikely your account will be approved.

The firearms industry is held to a higher standard on a number of levels. Complex federal regulations, political scrutiny, and higher-than-average fraud potential all contribute to what the payment industry sees as unacceptable levels of risk.

Your Federal Firearms License Is Just The First Step

Stop right there.

Your FFL is not a “get out of jail free card” when it comes to compliance.

Your Federal Firearms License is required to process any firearms transactions, but processors want to see more than just an FFL certificate. Current FFL status, proof of business insurance, NICS-compliant background check procedures, and ATF compliant bound book records are all verification points processors will look for.

Processors verify that you have an active FFL through the ATF. Any time your application doesn’t match ATF records, your application will be denied flat out.

State Regulations Create A Compliance Minefield

Let’s dive into the hard part.

Firearms regulations can be vastly different from state to state. California for example passed laws mandating the use of specific merchant category codes by May 2025 but other states have outright banned those same codes. This whiplash in regulations makes compliance a serious headache.

Shipping products out of state means you need to be aware of regulations in all of the states where you conduct business, not just where you are located. Your processor needs to see proof that you have systems in place to ensure you are in compliance with all of those jurisdictions.

Chargebacks and How To Prevent Them Destroying Your Business

You are not in the card-not-present business.

Chargebacks are your merchant account’s worst enemy.

High-dollar firearms transactions represent a significant amount of risk for chargebacks. Typical firearms sales fall between $500-$2,500 per transaction and with that dollar amount comes fraud, buyer’s remorse, and shipping issues.

The absolute worst situation is when a prohibited person uses another person’s credit card to purchase firearms. This event is discovered during the background check process, which is a worst-case scenario. When it happens you not only get hit with a chargeback but legal liability as well.

Keep a record of everything. Have strict verification in place to include ID verification, AVS, and CVV checks, shipping confirmation, and background checks. If you can avoid chargebacks and keep your chargeback ratio low, your account is safe.

Documentation Requirements You Can Never Skip

The number 1 reason firearms merchant accounts get issues is due to poor documentation.

Processors are going to ask for a ton of documentation before approving firearms merchants. Current FFL certificate, proof of business insurance, bank statements, processing statements from prior processors if applicable, business plan. All of this needs to be provided as part of the application process and the more complete and thorough this documentation is the more likely your account will be approved.

Documentation does not end when your account is approved. The bound book needs to be maintained with perfect records of every firearm acquired and disposition made. You need to keep copies of all form 4473’s filed and organized.

Technology And Compliance Are Not Optional

POS systems for firearms retailers take a lot of the pain away when it comes to compliance.

Firearms POS systems include ATF-compliant bound book functionality as part of the sales process. This is a huge advantage because all of the information you need to maintain your records are recorded automatically and you don’t need to worry about human error.

Gateway selection also matters. You need a gateway that is setup for high risk accounts and has the fraud screening tools necessary to protect your account.

Website needs to communicate compliance clearly as well. Display your FFL prominently and explain your shipping restrictions.

Partnering With The Right Processor Is Critical

This is a secret most dealers aren’t aware of.

High risk doesn’t mean all processors know firearms businesses.

A lot of high-risk processors will approve you and then fleece you. Fees will be out of control, reserves too high, and customer support non-existent when something comes up.

You need to work with a processor that has specific experience in the firearms industry. You need a processor that knows FFL requirements, state regulations, and can provide chargeback guidance.

The right processor should be your partner in compliance. They help you avoid issues ahead of time and offer guidance when regulations change.

Staying Compliant As Regulations Change

As much as you might like it, firearms regulations don’t stay static. New laws get proposed every month, merchant category code requirements get added and subtracted, and background check systems get updated.

Stay on top of ATF announcements and subscribe to industry associations that track firearms regulations. Make friends with other firearms merchants who understand the challenges. Review your compliance requirements every year because what worked last year may not meet this year’s requirements.

Conclusion

Firearms merchant account compliance isn’t a suggestion or “nice to have”. It’s non-negotiable.

Focus areas for firearms merchant account compliance include:

• Maintaining up-to-date FFL documentation
• Staying aware of state specific regulations
• Robust chargeback prevention procedures
• Keeping meticulous records
• Partnering with an experienced high risk processor

Compliance is a pain and it adds complexity to your operations. Accepting credit cards is a big win for your firearms business. Operating without the ability to accept credit cards means closing the door on most of your customers.