Firearms Merchant Accounts:
Voted the #1 High Risk Merchant Account Provider for three year’s running, Soar Payments is focused on providing retail and online firearms merchant accounts for our clients.
Our goal is to be the undisputed best merchant account provider for FFL or Ammo related companies both for retail, phone and ecommerce payments. To achieve that, we have to understand the unique needs of different firearms related businesses, such as ammunition manufacturers, distributors, resellers of firearms and gun parts, ranges, online & eCommerce sales, etc. For the firearms industry, we’ve created the below “firearms credit card processing cheat sheet”. It’s designed to give weapons related business owners a single place to obtain all the information they’ll need to obtain a retail or online firearm merchant account and have long-term success when accepting credit and debit payments in their firearms company.
Table of Contents
About the Firearms Industry
Getting and Setting Up A Merchant Account
A Note From Our CEO
Adam CarlsonSoar Payments, CEO
It’s a great time to be in the firearms industry.
At least that’s what a few firearms retailers and range owners have told me personally. (One guy I spoke to recently has had his sales grow nearly 15% YoY for the last 3 years.)
OK, maybe it’s not always that good, after all there’s still a lot of hurdles and a lot that can go wrong, particularly with payments, with your firearms business. Things like:
- Getting approved for eCommerce sales not just retail.
- Making sure you get approved via underwriting
- Avoiding ‘Friendly’ chargebacks
The good news is, these problems are all solve-able. It took me about 10 hours of research, but I put together the below “firearms credit card processing cheat sheet” for entrepreneurs in the firearms and ammo industry to help you avoid these pitfalls.
It’s my sincere hope that you find this article useful (because I’ve got a lot of work in it)… and if you need help with firearms credit card processing for your business, I’d love to help you with that, too.
P.S.If you own a firearms business, and want affordable and reliable credit card processing we can help you (in fact, ecommerce firearms and ammo related businesses are one of our specialties). Click here to begin a free online application.
Firearms Industry Profile:
- Domestic (US) average gun production over the last eight years is: 1,425,000 rifles, 777,000 shotguns, 352,000 revolvers, and 889,125 pistols
- There are 35,165 people employed in the gun manufacturing, with significantly larger numbers of individuals involved in the firearms industry more broadly.
- There are approximately 51,000 gun retailers in the United States.
- Approximately 32.0% of U.S. households own a gun.
- Total handguns and long guns shipped, in dollar value is over $5,500,000,000 per year
- Firearms are purchased for a variety of reasons: 60% Personal Safety / Protection, 36% Hunting, 13% Recreation / Sport, 8% Target Shooting.
Categorization of the Firearms Industry:
SIC Code: Businesses in the firearms and ammo industry would generally fall into one of the following SIC codes:
- 5091: Sporting and Recreational Goods and Supplies (for retail ammunition and retail guns sales)
- 3484: Small Arms (for businesses generally manufacturing small arms and accessories having a bore less than 30 mm)
- 348401: Firearm Accessories-Manufacturers
- 348402: Firearms-Manufacturers
- 348403: Small Arms-Manufacturers
- 348404: Ammunition Reloading Equip & Supplies Manufacturers
- 348405: Guns Manufacturers
- 348406: Guns Accessories Manufacturers
- 7999: Amusement and Recreation, NEC (for businesses operating shooting facilities or shooting ranges)
- 799907: Shooting Facilities and Archery Lanes
- 79990703: Shooting Range Operation
- 348406: Guns Accessories Manufacturers
- 3489: Ordnance and Accessories, Not Elsewhere Classified (for businesses manufacturing firearms and accessories having a bore more than 30 mm)
- 5941: Sporting Goods Stores and Bicycle Shops (for businesses retailing firearms and accessories with a sporting / hunting focus)
- 594102: Hunting Equipment
- 59410201: Ammunition
See the entire list of SIC codes here.
NAICS Code: Firearms, ammunition, accessories or other firearms related businesses generally use one of the following NAICS codes:
- 332994: Small Arms, Ordnance, and Ordnance Accessories Manufacturing (typically firearms, ammunition and accessories manufacturers
- 423910: Sporting & Recreational Goods Stores (typically retailers
- 451110: Sporting Goods Stores (typically retailers
- 713990: All Other Amusement and Recreation Industries (typically ranges and shooting establishments)
See the entire list of NAICS codes here.
Return to Table of Contents
The largest US firearms companies:
The firearms and ammunition industry is led by a few very historical brands, however, it is not dominated by these brands. Rather, there are tens of thousands of smaller independent companies which comprise a significant portion of the manufacturing industry, and an even larger percentage of the retail and eCommerce sales, and shooting / range niches. A few of the largest publicly traded companies are listed below:
- Olin Corporation: OLN, Primarily an ammunition manufacturer, Olin owns the Winchester brand. Headquartered in Clayton Missouri they are valued at $1.7 billion, and a net income of $225 million.
- Vista Outdoor Inc.: VSTO, A designer, manufacturer and marketer of outdoor sports and recreation products. In the firearms industry, they own approximately 30 ammunition and firearms and firearms accessories brands (e.g. Bushnell, Federal Premium, Savage Arms, and RCBS). Vista Outdoor is the largest seller of ammunition in the US with approximately 40% of the ammunition market.
- National Presto Industries, Inc. (NPK), Founded as a small kitchen appliances manufacturer, NPK is now a leading producer of ordnance and ammunition products.
- Smith & Wesson Holding Corporation (SWHC), Based in Springfield Massachusetts, the legendary manufacturer is is one of the highest profit margins in the industry.
- Sturm, Ruger & Company, Inc. (RGR), Based in Southport Connecticut, RGR trades on the NYSE, with a market cap of $735 million. The company is on track to sell over 1,000,000 firearms in a single year, the first company to achieve this threshold. .
- TASER International, Inc. (TASR), A US manufacturer of conducted electrical weapons, body worn cameras and digital evidence management solutions. TASR has a curren market cap of $983 Million and trades at a P/E ratio of 50.83.
- Smith & Wesson Holding Corporation (SWHC), A manufacturer of firearms and related products psych as BB guns, this Springfield Massachusetts based business was founded in 1852, with a current market cap of $1.23 Billion and trading at a 15.72 P/E ratio.
- Allianz Technologies (ATK), Primarily a defense contractor, Alliant’s civilian ammunition business has a number of brands, including Federal Premium ammunition, CCI ammo, Speer bullets, RCBS reloading equipment, Allianz Powder, Champion ammunition, Weaver optics, Eagle Industries, and Blackhawk Industries. The company has a market cap over just over $2.0 billion, and a net income of $292 million.
Return to Table of Contents
Getting a Firearms Merchant Account
How do I get a retail or online firearms merchant account?
Getting a firearms merchant account (particularly if you’re not ecommerce) is not terribly difficult. You simply apply with a merchant services provider that accepts firearms businesses (like us, or our sister brand Tactical Payments).
But before you apply, it’s generally a good idea to first speak to a sales person that knows what they’re talking about, who can tell you pretty quickly whether they’ll be able to approve your business type, and what restrictions they generally impose upon firearms merchant accounts (e.g. ammo sales only, retail transactions only v. ecommerce, etc.). Once you complete a merchant account application, and submit the requested supporting documents (usually copy of the owner’s drivers license, a voided business check, previous credit card processing statements, a firearms dealer license (if applicable)). Then your account will be reviewed by the credit card processor’s underwriting department, and hopefully you’ll get an approval notification along with your merchant ID in a day or two. If your a retail gun dealer, or you own a shooting range, then, as long as you’re talking to payment processors that can support gun merchant accounts, that’s generally going to be your experience. For folks that are looking for online firearms merchant accounts, or the ability to sell via a website or over the phone, the answer is a little more complicated, you’ll need to first find a high risk firearms merchant account provider.
So how do I find an online firearms merchant account provider?
The easiest answer is to Google it, build a list of 3 or 4 companies that advertise that they can offer online / ecommerce firearms merchant accounts, and then start calling. The reason, is that sponsor banks (who ultimately determine what types of businesses their credit card processor can support) frequently change their underwriting guidelines. In fact, they often change faster that webmaster for the credit card processor can keep up with the changes. When you call an online firearms merchant services provider, you’ll want to ask them, “Do you offer ecommerce firearms merchant accounts?”, and when they say “Yes”, say “Are you sure?”. The reason is that you don’t want to go through the application process just because an overzealous salesperson doesn’t know what their current underwriting criteria are.
Does Soar Payments offer retail and online firearms merchant accounts?
Yes, at Soar Payments we are a second amendment friendly merchant services provider. That means we provide debit and credit card processing services to online ammo, gun, and accessories sales and other firearms related ecommerce businesses. We support a wide variety of transaction types including, retail, mobile (ideal for gun shows), phone, virtual terminal, and recurring billing firearms related businesses, which include ammunition sales, gun, ammo, and accessories manufacturers, distributors, resellers of firearms and gun parts, ranges, and other firearms related businesses. Soar Payments provides businesses, ranging from startups to businesses processing millions of dollars per month, with reliable comprehensive debit and credit card processing, and all other related products and services. Getting started is easy, just complete our 5 minute online application, then we’ll email you a PDF copy which lists all terms and pricing for your electronic signature. And once approved, you can begin processing. We’ll handle setting up your chargeback management tools, gateway, if you need retail swiping equipment we’ll discuss your options and pricing, explaining how everything works, how to read your statement, and any other training you need to make the process easy and simple.
How do I get a higher processing volume limit?
For retail gun merchant accounts, e.g gun ranges, or retail stores, you’ll generally be approved to accept credit cards without any significant monthly limit. That means, if sales go crazy, you can accept $1,000,000 one month, and be right back to your normal $50,000 the next month, without having to do much more than probably field a call from the credit card processor about why your volume is so crazy this month. By contrast, if you have an online firearms merchant account, you’ll probably get approved with a monthly processing volume limit. This means that the firearms merchant account can only transact in total dollars of sales per month up until your processing volume limit (note: there’s usually about 10-15% of extra wiggle room). But in general, if you want to do more in sales per month than you’re volume cap approves you for, you’ll need to figure out how to get additional processing volume. There is unfortunately only one way to achieve this:
- Time: A merchant account is a lot like a line of credit from the firearms credit card processor to you. The reason, is that the credit card processor is often sending you the funds before they’ve gotten paid themselves, and the credit card processor is ultimately liable if your account gets hit with chargebacks or fines and you do not, or are unable to, pay them. Thus, just as with any sort of credit, your track-record of successful credit card processing (which in this context means, few chargebacks, steady volume, paying your bills on time, etc.) over the first 3-6 months will generally enable you to get your account re-reviewed, and get your volume increased.
What is an underwriter looking for when reviewing my firearms merchant account application?
If you’ve spoken to a merchant account salesperson about getting approved for a firearms merchant account, you’ve probably been told that the ultimate decision maker on an individual account is the underwriter. The underwriter’s job at a credit card processor is to make sure that the business is a good risk, reputationally, financially and from a regulatory perspective. When reviewing a firearms merchant account application, that generally means they’re looking for a business with a decent (or at least not bad) reputation, a business that has a sound business model and ideally a regular positive business bank balance, and finally, a business that is fully licensed to conduct the type of transactions that it endeavors to. Obviously, the documentation standards for a small business aren’t the same as for a massive company, but in general, the underwriter is looking for signs of a stable, well organized, legal, and decently well managed company. The better your business checks off those boxes, the more likely it is go get approved, and for a higher amount, and for cheaper terms, and with fewer restrictions (e.g. rolling reserves, volume caps, funding delays, etc.).
Return to Table of Contents
Question? Ask Away. We’re Ready to Help.
If you’ve got a question about a payment gateway, chargeback management tool, merchant account or anything else related to growing a firearms related business, and want some advice, shoot me your question directly: AdamCarlson@soarpay.com.
Ready to Get Started?
Ready to start accepting payments at your firearms business, Click here to begin a free online application.
Reviews of Firearms Payment Gateways
If your firearms company accepts payments over the phone (typically called MoTo payments) or over the internet (called eCommerce) then you’ll need what’s called a payment gateway. That’s because unlike a retail transaction, where the customer physically swipes (or now inserts the chip) of their credit card into a machine, here either the customer (in an ecommerce setting) or the merchant (in a MoTo setting) is typing the card information into the payment gateway. The payment gateway is simply software that then encrypts the cardholder data, and transmits it to the payment processor. There are literally hundreds of payment gateways to choose from, but most FFL / ammo businesses use one of a few, which are briefly highlighted below:
- Authorize.net Payment Gateway: Owned by Visa, simple to setup, simple to integrate with almost any shopping cart, and simple to use, Authorize.net is the default payment gateway for firearms businesses. The benefits are its simplicity and ubiquity. It does, however, have some limitations. Those include that it doesn’t do a good job with recurring billing, it doesn’t do well with transactions with a high potential for customer fraud (which eCommerce weapons / ammo purchases certainly are), and to the extent you end up needing more than one merchant account (e.g. for fast growing ecommerce firearms merchant accounts) authorize.net won’t be able to support more than one merchant ID.
- Soar Pay High Risk Gateway: The Soar Payments High Risk Gateway is the high risk gateway of choice, and as such is used by a lot of eCommerce or phone sales firearms related businesses. It’s a little more difficult to setup, and not every CRM integrates with it. But it allows you very detailed reporting, plus it comes included with significantly stronger fraud prevention features that help you ensure that your customers are who they say they are (and aren’t just using stolen credit cards), which is a real necessity in the world of firearms and ammo online sales. Finally, it allows for multiple login permission levels, so chargeback management services or individual sales person logins can be created for easier accounting where there are multiple sales people taking payments over the phone.
- USAePay Gateway:
Typically the cheapest payment gateway available, it’s a direct competitor to Authorize.net for low risk business (which in the context of firearms sales means those businesses that take the vast majority of payments in person but occasionally will process a phone order, as opposed to businesses with ecommerce sales or a significant percentage of sales over the phone). The features are generally equivalent to Authorize.net with somewhat fewer integration options.
A quick word about pricing: Payment gateways are usually priced with both a monthly fee and a per transaction fee. For example, you might pay an additional $15 per month and $0.10 per transaction to process transactions via a payment gateway. Generally, it’s cheaper to get your payment gateway access via your merchant account provider. Because they sell in such bulk, their buy rates are so significantly cheaper than the retail rate, that their “marked up” version is still generally quite a bit cheaper than the standard retail price. The additional benefit of obtaining your firearms payment gateway from your merchant account provider is that they’ll help you set it up, and make sure its integrated with whatever other services you wish to use (e.g. chargeback alerts).
Return to Table of Contents
Everything a Firearms Business Needs to Know About Chargebacks
Merchants in the firearms industry have to be aware of and manage their chargeback ratio, because, assuming they’ve signed up with a bank that can actually support their industry and transaction type, excessive chargebacks are what causes firearms merchant accounts to get shut down, or not be able to obtain a new one.
What is a Chargeback?
Put simply, a chargeback is when one of your customers calls their issuing bank (the phone number on the back of their credit card) and disputes the charge. In the context of firearms or ammo sales, the customer might dispute the charge because: the merchandise never arrived or arrived late, the merchandise wasn’t what they expected, they don’t recognize the charge on their credit card, etc. The point is, the cardholder can dispute a charge for darn near any reason they want to. Once the customer disputes the charge, your credit card processor is then notified, and the funds are pulled out of your credit card processing account, and held in escrow until the dispute is settled. At that point, you have the right to make your case that the charge was legitimate and therefore should stand. If you win, the funds are returned to you. If you lose, the customer keeps the funds.
But in the context of firearms and ammo sales, while winning the chargeback is certainly important (and we’ll cover later in this article how do that) the first step is minimizing the occurrence of chargebacks in the first place. And the reason, is that if your firearms merchant account exceeds the chargeback ratio threshold, it will be terminated by the credit card processor.
How to Calculate a Chargeback Ratio?
One of the most commonly misunderstood things in payments for eCommerce firearms merchants, is how their chargeback ratio is determined. First to the definition. A business’ chargeback ratio is the number quantity of chargebacks in a given time period (typically a month), divided by the total number of transactions in that same time period. That is to say, if you had 2 chargebacks in May, and 100 sales in May, you had a 2% chargeback ratio for May. Note: Some credit card processors supplement this chargeback ratio with one calculated on a dollar basis. For example, if you had $5 in total transactions that were “charged back” and $100 in total monthly sales, you had a monthly dollar chargeback ratio of 5%.
Note 2: It is possible to win or lose a chargeback dispute. Even if you win, however, the mere fact that the customer initiated the dispute is sufficient to count as a “chargeback” for the purposes of your chargeback ratio. That is to say, win, lose, or draw, if a customer calls their issuing bank to dispute a charge, you can add another chargeback onto your chargeback ratio, and it doesn’t fall off even if you win.
Why does a processor care what my chargeback ratio is?
Your credit card processor cares a lot about your chargeback ratio, in fact, they’ll shut off your account if your ratio exceeds 2%. The reasons they care are threefold: first, your credit card processor can face Visa and MasterCard fines by permitting you to continue processing outside of their permissible ratios. Second, high levels of chargebacks are an early sign that there are future problems coming. And thirdly, the credit card processor works closely with a sponsoring bank, and sponsoring banks do not like to see processors whose overall portfolio has a high chargeback ratio. Thus, the key for any ammo or gun business, and this is especially true of ecommerce gun merchant accounts, is to make sure that your chargeback ratio stays below 2%.
Why do firearms businesses get lots of chargebacks?
In the retail setting, generally they don’t. In the eCommerce setting, however, firearms sales are particularly prone to high chargeback rates for a few reasons:
- eCommerce transactions, are by their very nature subject to higher levels of chargebacks. That’s because scammers will often purchase on the black market stolen credit cards and try to use them in an eCommerce setting to purchase goods that they can later resell or pawn. Given the robust secondary market for ammo, accessories and weapons, it makes sense that eCommerce firearms merchant accounts would be the target of this type of scam.
- In the highly specialized world of firearms related goods, customers who receive a product with very minor shipping damage or with minor discrepancies from the manner in which the good was described online, will often resort to a chargeback
- With any good or product, delays in shipping lead to high levels of chargebacks.
- Many merchants new to the online ammo, accessories or gun sales business do not send out detailed electronic receipts when a product is ordered, along with tracking information. This leads some customers to forget that they ordered the product when it comes time to review their credit card receipt, or feel spooked that the product will never arrive, and therefore preemptively charge the transaction back.
- Typically, a gun, accessory or ammunition purchase is a relatively large expense on a person’s monthly credit card statement. These large ticket items are significant enough that customers who are in a cashflow crunch may resort to initiating a chargeback dispute simply so they can free up the funds for 60 days while the dispute takes place.
- Many online gun accessory and ammo sales merchants do not understand that an initiated chargeback, no matter whether won or lost, counts against the merchant’s chargeback ratio. Thus, when confronted with an unreasonable customer who wants a full refund, they often welcome the chargeback dispute as a means of proving themselves correct, not realizing that they may lose their ability to accept credit cards altogether in the process.
- Many ammo, accessory and gun merchant accounts are setup by new business owners who are unaware of chargeback mitigation tools that exist, and to the extent they are aware do not bother to integrate them into their payment acceptance process. Note: At Soar Payments, our online firearms merchant accounts come pre-integrated with chargeback armor, which can dramatically reduce chargeback rates without a ton of hassle
How do I keep my chargeback ratio low?
In the firearms industry, you unfortunately have to deal with the full trifecta of fraud and chargeback risk including stolen cards, ‘friendly chargebacks’, and customers who may be dissatisfied with the product. So, you have to take a three-part approach to managing your chargeback ratio. Because unfortunately, the fact that you’re getting hammered with fraud or stolen credit cards that have nothing to do with you, isn’t going to be an excuse that your firearms merchant account provider is going to be very sympathetic to. Rather, they only care that you maintain a 2% chargeback ratio or below. So, there are a few things that you can do, to make sure that you’re keeping your chargeback ratio low:
- Send confirmation and customer satisfaction emails: When you take a credit card payment in person, you are printing out a copy of the receipt for the customer to sign (and you to keep) and then giving the customer a copy. Make sure that you’re doing the same thing in the MoTo (phone sales) or eCommerce environment. Make sure that you send an electronic receipt, which includes the firearms business’ contact information, customer service number, what items the customer ordered, how much the bill will be, what their credit card descriptor will show on their credit card statement, and ideally integrate a shipping tracking link in the receipt. Finally, consider sending out a customer satisfaction email, asking the customer whether they were pleased with their ordering experience, and if not, to call or email you so you can make it right. Generally, we recommend sending these out within 24 hours after the service was provided (for service businesses), or within 24 hours of the product arriving (which is the case with most ecommerce firearms sales). That way, the customer has ample opportunity to complain to you, as opposed to their card issuer (which results in a chargeback) if something is wrong with the order. As an aside, the feedback you get from these customer surveys can be used (with proper disclosures of course) as recommendations that you can add to your website, or as early identifiers of problems or friction points in the your sales process.
- Integrate Customer Dispute Alerts: Remember that when one of your customers calls the phone number on the back of their credit card to complain about a charge, they have initiated a chargeback, regardless of whether that dispute has any merit. The only exception to that, is when you have customer dispute alerts (aka chargeback alerts) enabled. Chargeback alerts provide you, the firearms merchant, with approximately 72 hours in which you can choose to issue the customer a full refund, and if you choose to do so, you’ll avoid the chargeback altogether. That’s a no-brainer in situations where the product never got shipped, or the shipping was delayed dramatically, or other situations in which clearly you were the one at fault. And for small orders of, say, $20 or less, sometimes it makes sense to just issue the refund to avoid the chargeback even though you weren’t at fault, just because the fees your processor will levy against you for a chargeback ($25 – $75) will outweigh the cost of just issuing the refund. At Soar Payments, we have integrated chargeback alerts into our high risk payment gateway, so unless you don’t want to receive them, you’ll get them automatically (which is highly recommended for eCommerce and phone sales ammo, accessory and gun merchant accounts).
- Train customer service folks to start with a refund: Customers can be unreasonable. Unfortunately, when they pay with a credit card, the balance of power is in their favor, because they have the power to initiate a chargeback which will ding your firearms merchant account regardless of whether that dispute has any merit. So, make sure that your customer service agents understand that if a customer has a complaint that looks even remotely legitimate, to strongly consider issuing a refund, rather than trying to argue with the customer about how your firearms business is “in the right”. And then, once the full refund has been issued, you can deal with either providing a replacement product or otherwise trying to resolve the issue, and assuming that fix works, only then rebilling the customer. That way, the customer cannot chargeback the original purchase (which no matter what they tell you, they will).
- Maintain high transaction counts: Your chargeback ratio is calculated based on the number of chargebacks divided by the number of transactions. So, while keeping your chargeback count (the numerator) as low as possible is the most important consideration, you can make an equal dent in your chargeback ratio by increasing the number of transactions (the denominator). That means, if you have a string of chargebacks in a given month, don’t stop accepting credit cards for that month, instead do the opposite, encourage more of your customers to pay with credit.
Return to Table of Contents
Gun Dealer Laws and Regulations
The sale of firearms, ammunition, and accessories is a highly regulated field, in which federal, state and local laws govern the activities of dealers both on a retail, MoTo, and eCommerce setting. Below is a non-exhaustive list of links to some of the laws and regulations applicable to the sale of firearms in the US.
- The Gun Control Act (GCA) of 1968 makes it unlawful for certain categories of persons to ship, transport, receive, or possess firearms, and makes transfers of firearms to any such prohibited persons are also unlawful.
- The Arms Export Control Act (AECA) of 1976 is part of a larger law about protecting US sensitive military and weapons data from foreign governments, but in the context of firearms dealers, the Act also places certain restrictions on American arms traders and manufacturers. Specifically, it prohibits them from the sale of certain sensitive technologies to certain parties and requires thorough documentation of such trades to trusted parties.
- 18 U.S.C. 922(o): Prohibits the transfer or possession of a machine-gun
- 18 USC 922(p): Prohibits the manufacture, importation, sale, or possession of any firearm not detectable by airport security devices
- 26 USC 5861(d): Prohibits the transfer (sale) of a firearm which is not registered as required by the National Firearms Act
- National Firearms Act of 1934This Act provides for the taxation of manufacturers, importers, and dealers in certain firearms and machine guns, to tax the sale or other disposal of such weapons, and to restrict importation and regulate interstate transportation thereof.
- FFL Dealer License Information Information promulgated the the ATF on obtaining an Federal Firearms License (FFL) license
Return to Table of Contents
Need Firearms Merchant Services?
We’ve Got You Covered.
Soar Payments provides ACH, debit and credit card processing services to firearms businesses, ranging from new startups accepting only retail to eCommerce firearms businesses processing millions of dollars a month. So when you’re ready, we’re ready.