The "Stop Militarizing Our Streets Act of 2026" aims to prevent military-grade weapons and ammunition from entering the commercial marketplace and to impose stricter controls on other firearm and ammunition sales. It directly prohibits the Department of Defense (DoD) and government-owned plants from selling military-grade assault weapons and covered ammunition to commercial dealers. Furthermore, the DoD is barred from procuring any items from manufacturers or dealers who engage in such sales. For all other firearms and ammunition, the bill establishes rigorous requirements that commercial dealers must meet for the DoD to engage in sales or procurement with them. These include obtaining appropriate licenses, complying with federal law, and maintaining a low threshold for crime gun traces (no more than 24 traces with a time-to-crime under three years in the past three years). Dealers are also subject to limits on ammunition sales to individuals, specifically 500 rounds of covered ammunition or 1000 rounds of other ammunition within a 30-day period. A key provision is a mandatory minimum code of conduct for dealers, which includes refusing transfers until NICS background checks clear and implementing robust security systems. Dealers must also refuse sales in marketplaces that do not require NICS checks for all firearm sellers and decline transfers to individuals exhibiting signs of intoxication, mental instability, or posing a danger. Enhanced record-keeping for firearms and ammunition, including remotely searchable electronic inventories, is also mandated. The bill requires comprehensive employee training on identifying straw purchasers, illegal activities, and indicators of self-harm or unlawful intent, along with theft prevention. It also mandates annual reporting to Congress by government-owned plants on their commercial sales and by the DoD on its procurement from commercially active dealers. The Attorney General is tasked with creating a new licensing system for ammunition dealers, granting them NICS access, and promulgating regulations to implement these provisions, with authorized appropriations for NICS system upgrades.