Can a Lien Be Put on a Liquor License?

In many states, a liquor license is a valuable commodity, worth hundreds of thousands of dollars. For restaurant and bar owners in these states, the license is their most valuable asset, in part because some states restrict the number of licenses available and allow licencees to buy and sell them. It is at times used as collateral for loans. Whether a lien can be attached to a liquor license is a matter of state law, which can, at times, be complicated by federal bankruptcy law.

LIens are legal claims to property. They can be levied by creditors or taxing entities for money owed. In some cases, a lien might be placed on a property as a condition of a loan, as is often the case when a lender offers a mortgage. In some cases, a lien prevents an an owner from transferring property until the lien is paid off, or requires the owner to pay the lien with proceeds of a sale. In other cases, a lien might empower a creditor to auction property as in a foreclosure sale.

While in many states, the liquor license is an asset, other states view holding a license as a privilege. Licensees might be subject to background checks, and people of poor moral character might be barred from the privilege of holding these licenses. No matter how much they are worth, these states might forbid creditors from placing liens on liquor licenses. Even states that view the licenses as property might require background checks, so consult a lawyer. States that consider liquor licenses to be privileges might consider them to be intangible property.

Whether your state views a license as a privilege or an asset, the Internal Revenue Service has different views. If a person owes back taxes, the IRS considers whether the licensee has rights under state law. Therefore, the IRS might be able to place a lien on a liquor license even if state taxing authorities and business creditors cannot.

Federal bankruptcy courts might also supersede state law when determining claims to a liquor licenses. Until 2004, for example, New Jersey forbade loans on a liquor license. But when a licensee declared bankruptcy, the judge in the case ruled that a general lien on intangible property applied to the liquor license.