Colorado tax lien certificate

The transfer of a business through the assignment of a certificate of purchase to a limited partnership from a lender who had foreclosed on the original owner was within the definition of a sale and, therefore, was subject to Colorado sales and use tax.

The original owner delivered a supplemental wraparound advance deed of trust, assignment of rents, security agreement, and financing statement to the lender and, upon the subsequent default, the lender received a certificate of purchase from the public trustee. The lender then assigned the certificate, and each of the debt and security instruments, to a limited partnership. The Colorado Department of Revenue determined that the limited partnership had purchased an ongoing business and assessed sales tax on the furniture, fixtures, equipment, and supplies acquired by the limited partnership.

The limited partnership maintained that no sale had occurred because the transaction involved the transfer of intangible personal property and because it acquired the personal property as a lienholder in foreclosure. Although the property being transferred was first acquired in a foreclosure in which the lender already had a security interest, the limited partnership, as purchaser of the assignment of the certificate of purchase, had no mortgage or lien interest in the property prior to the transaction. Therefore, the transaction was a sale of tangible property and not intangible property because the certificate of purchase was merely evidence of title to the personal property and the nature of the interest transferred. (Telluride Resort and Spa, L.P., Colorado Court of Appeals, No. 99CA0034, July 20, 2000.)

Copyright Commerce Clearing House, Inc. Aug 21, 2000
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