1976, July, Pg. 942. Tax Tips.

5 Colo.Law. 942

Colorado Lawyer

1976.

1976, July, Pg. 942.

Tax Tips

942Vol. 5, No. 7, Pg. 942Tax TipsEnforcement of State Personal Property Tax Liens Against the Businessman

The scene is the law office of a busy general practitioner who has just received a phone call from one of his favorite (always pays his attorney's fees quickly) business clients.

Client: "I just went by the Taco-Tomato Restaurant and it's locked up with a piece of paper on the door that looked very official. I was told by a passer-by that they had failed to pay $1,000 in state sales taxes and the state had placed a tax lien on all of the restaurant's property, which he believes totals $15,000. I sold the Taco-Tomato $5,000 worth of equipment for which I received $1,000 in cash and took back a security agreement in the amount of $4,000. He owes me $3,000, and the equipment is still worth $3,000. Since I have a security agreement, which I filed as you advised, I want you to immediately get my property back.

Lawyer: "You really do have a problem. I've got another phone call holding (i.e., I better do some quick research) and I will get back to you later."

What is a tax lien? What has happened, and what can the lawyer do for his client? This article attempts to provide some answers to tax lien problems in the area of state tax liens on personal property. Federal and local tax liens and tax liens on real property are matters of separate concern and will be either briefly touched upon or not covered by this article.

The LienSimply stated, a tax lien is a claim against the taxpayer's property (either real or personal) for payment of delinquent taxes. In Colorado, the Department of Revenue is assigned the duty to levy and collect taxes.(fn1) The Department of Revenue contains a Division of Enforcement which has, among its powers, the authority to collect delinquent taxes.(fn2) The legislature has authorized the Department of Revenue to collect taxes, through the use, inter alia, of distraint and sale.(fn3)

The Department of Revenue principally exercises its distraint and sale powers when the taxpayer (employer) fails to pay employee withholding taxes,(fn4) Regional Transportation District (R.T.D.) sales taxes,(fn5) and sales taxes.(fn6) The Federal Government most often imposes tax liens against the taxpayer (employer) for failure to pay employee withholding taxes, social security taxes (F. I. C. A.) and unemployment taxes (F. U. T. A.).

The means by which the Department of Revenue can collect delinquent taxes is governed strictly by statute.(fn7) The law provides that if a taxpayer fails to pay any tax within 30 days after notice of demand for the same, the Enforcement Division of the Department of Revenue may collect taxes owing, together with interest "and other amounts as are required by law," by use of distraint and sale of personal property including goods, stocks, chattels, bank accounts, securities, and evidences of debt, subject to exemption from attachment laws of the state of Colorado.(fn8) The law provides that after distraint, the Department of Revenue shall serve the owner and possessor of the distrained property a notice of the items distrained, along with the total amount of tax, interest and penalty due, as well as the time and place where the sale is to occur, the minimum price, if any, at which the property will be sold.(fn9) The law further provides for the publication of the notice.(fn10) After a sale of distrained property, the Department of Revenue issues a certificate of sale transferring all rights...