"Open fire. I've just about had it with those Redtaparian Bureaucrats."Permits would be awesome though. Especially for the bureaucratic nightmare federations. "Do you have your weapons permit? No? Please go get your licensing permit, then find someone to give you a class B item permit, then find some one to give you a class BA-44593 permit, then find some one to get you a D class sanction permit, then find some one to give you a TYPE-B4-GENERIC-GUN permit, then find some one to give you a TYPE-B4-GENERIC-GUN firing permit, then find..."
The nice part of sandboxes is that you can strangle anyone that gets on your nerves. Being cute and/or funny does wonders for your survivability in this type of environment. Being tasty and/or obnoxious doesn't.
The problem I see with the implementation of smuggling is that it's pretty hard to define "illegal" if your universe is basically a balkanized patchwork of small factions interacting with each other. One faction might be a proud warrior race type and trade freely in weapons and slaves, but maybe consider narcotics illegal (since they rot the mind and body of their warriors!). Another faction might be space hedonists who pride themselves to be the suppliers of the finest recreational narcotics within 50 parsecs, but consider slave trade amoral (since the poor enslaved guys can't go and enjoy themselves!).
Realistically, you can only have "illegal goods" per faction, and then you'd probably wonder if the deviants of that faction really pay enough to make smuggling worthwhile. It's also a rather dangerous minefield for a free trader, since he has no way of knowing prior what is illegal in a given system or not.
"What do you mean, scrap iron is dangerous contraband here?"
"Something about their biochemistry. Iron compounds act as a lethal nerve toxin to them."
"Drat. Then I just sold several tons of deadly toxin to a dangerous deviant..."