Tennessee law blocking code for firearms sales just took effect. Here's what it means

5723.

Those four digits have prompted more than a dozen new state laws. Companies affected by those laws say they have created “significant confusion and legal uncertainty.”

What’s all the fuss about?

Here’s what to know.

Merchant category codes are used by credit card companies to classify businesses

That four-digit number is a type of merchant category code (MCC), which credit card companies use to classify businesses by the goods or services they provide. There are unique codes for all sorts of businesses, from stamp and coin stores to welding repair. They do not allow the financial companies to see what was purchased, only where it was purchased.

That specific code would identify gun and ammunition stores. Several states — including Tennessee — have passed laws prohibiting financial institutions from using it.

The code for gun sellers was created in 2022

The International Organization for Standardization, referred to as the ISO, voted to create the MCC 5723 for firearms retailers on Sept. 9, 2022, as a way to detect suspicious gun and ammunition sales and prevent gun violence. Leading credit card companies all announced they would implement the new code, but things were thrown into upheaval within months due to Republican pushback in state legislatures around the country.

Credit card companies reversed course in early 2023, citing state laws

In response to a handful of states passing laws to block or restrict the use of the code for firearms sellers, American Express, Discover, Mastercard and Visa all announced in March 2023 that they were pausing implementation of the new code. West Virginia, Florida, Idaho, Montana and North Dakota were some of the first states to implement these laws.

“These legislative actions disrupt the intent of global standards and create significant confusion and legal uncertainty in the payments ecosystem regarding this code and its use, including with acquirers, issuers, merchants and payment networks,” Visa said in a blog post from March 9, 2023. “We have therefore decided to pause implementation of the MCC at this time.”

Tennessee’s law blocking code for gun retailers takes effect

In 2023, the Tennessee General Assembly passed the “Tennessee Second Amendment Financial Privacy Act,” which blocks financial institutions from using the code for gun retailers and went into effect Monday. The bill says that the “potential for cooperative surveillance” possible thanks to the code “will have a significant chilling effect on citizens wishing to exercise their federal and state constitutional rights to keep and bear arms.”

In a news release from late June, Attorney General Jonathan Skrmetti said he sent a letter to the CEOs of American Express, Visa and Mastercard warning them to comply with the law.

No sign that companies are using code for gun retailers in Tennessee

It doesn’t appear that credit card companies are using the code for gun and ammunition shops in Tennessee. The Tennessean reached out to the three companies contacted by Skrmetti, and Visa and Mastercard both said they are not using the code, except in states where it is required by law. American Express did not reply to a request for comment, but neither it nor Discover have indicated that they have begun widely implementing the code for use.

16 states have laws on the books against the code — two require it

As of publication, 16 states have passed laws that block financial institutions from using the gun retailer code: Texas, Florida, Montana, North Dakota, West Virginia, Mississippi, Idaho, Utah, Wyoming, Indiana, Kentucky, Tennessee, Alabama, Georgia, Iowa and Louisiana. Some have not yet gone into effect.

On the other hand, two states have passed laws requiring financial institutions use the code for firearms stores: California and Colorado.

Gun sellers are currently categorized with sporting goods retailers

Before the ISO’s decision, and currently in most states in the U.S., firearms retailers fell under the code for sporting goods stores or miscellaneous retail.

Gun control activists say the code could prevent violence

Giffords Law Center to Prevent Gun Violence writes that the new code for gun and ammo shops would “allow credit card companies and law enforcement to identify suspicious patterns of gun and ammunition purchases — preempting mass shootings and illegal firearm trafficking.”

The nonprofit Guns Down America said in a published report that a code for firearms sales might have been used to prevent several mass shootings.

“If a system for collecting and flagging suspicious gun and ammunition sales had been in place over the past 15 years, law enforcement officials would have had the opportunity to potentially intervene and prevent multiple mass shootings,” the report states.

Guns Down America identified the 2017 Las Vegas shooting as a tragedy that could have been prevented with such a system. In that case, the shooter spent $95,000 on firearms and firearm related transactions in the year before the shooting, purchasing 33 guns at eight gun stores in California and Nevada in that time frame, according to the report.

Evan Mealins is the justice reporter for The Tennessean. Contact him at emealins@gannett.com or follow him on X, formerly known as Twitter, @EvanMealins.