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One eyed fatman is correct if the guns are from the military. But there are departments that did buy their own M16's with full auto capability back in the 70's and 80's. It was not as common as it is today, but it did happen. Then as now, the fear of terrorism was the motivating factor. The difference was the terrorist organizations. Back then it was the Weather Underground, the SLA, the Red Army Faction, the Red Brigade, the Baader-Meinhof Gang, and other similar places instead of the al Qaeda and the like.

I would assume the dealer receiving the weapon would check to make sure the forms are legal and you can get the firearm. If not, you have committed no crime and might have a valid claim for the money (including the transfer fees and taxes) against the selling city. You might also have a claim against the dealer but I think the city would be the one most at fault.