In February 2014, one of my businesses received a certified letter from the Colorado State Treasury’s office stating “Our records indicate that your company has never reported unclaimed property.” It also stated “You may think that your organization is not large enough to have unclaimed property, but we have found that even small organizations may accumulate unclaimed property.”
I had heard of the Colorado Unclaimed Property Act but was not aware of the reporting requirement, and frankly, I thought it was for larger companies. The state claims the purpose of the act is to protect the property rights of the owner, relieve holders from liability of the property, and provide economic benefit to “all” citizens of the State of Colorado. Many opponents believe it is a blatant money grab as most of the money is never claimed.
Here is what I found out – Most businesses, including restaurants and bars, are subject to both the reporting requirements and the obligation to turn over abandoned property to the state. The list of types of unclaimed property is lengthy, so I am only listing the most common for restaurants and bars:
- Wages/Payroll – This is probably the most common and will be the most time consuming to reconcile. In the past we did not give much thought to the server who “no-call-no-showed” and had six hours from his or her last shift worked. After deducting payroll taxes (hourly and tips), the net check was just a few dollars; so little that the employee did not take the time to pick up his or her final check. Unfortunately, no matter how small, these unclaimed paychecks must be reported to the state.
- Unpaid (not cashed) Checks – The state believes there are vendors and purveyors who never cashed checks and are entitled to their unclaimed property. I know many of you find this amusing as you have been threatened with C.O.D. by vendors if payment is received just a few days late.
- Gift Certificates/Gift Cards – This is a tough one to understand. If the law requires you to honor a gift card indefinitely, how can you possibly turn it over to the State? If you sell gift cards, they may be reportable as unclaimed property. The good news is that Colorado law provides that if your establishment earns annual gross receipts from the sales or issuance of gift cards totaling $200,000.00 or less, you are not required to report abandoned balances.
Colorado property is generally presumed abandoned five years after the date of last owner-initiated contact. Unpaid payroll obligations (uncashed checks, returned direct deposits, etc.) are considered abandoned after one year. The time limits vary for other types of property.
Colorado allows a deduction per item reported. For some items, you may take as much as 2% of the value of the item; for other items, the maximum amount is $25. You may not deduct more than the value of the property.
As a holder of unclaimed property there are many other procedures you need to be aware of including providing written notification to the presumed owner if known. For additional information please visit www.colorado.gov/treasury/gcp/holderrep.html or call the division at 303-866-6070, or Toll Free 800-825-2111. I found the auditor to be very helpful, and at this time, their intention is to inform owners of the act – not to enforce penalties and interest.
How to Use this information
If you own or operate a restaurant or bar, you know how difficult it is to be in compliance with governmental agencies. Avoid financial surprises such as penalties and interest by getting informed and taking the required steps toward compliance today. Sanborn and Company is a Colorado leader in assisting and representing people buying restaurants, bars, liquor stores and hotels. Our Full Service Success System™ goes beyond completing a successful transaction by helping our clients master operational best practices. We are experienced restaurateurs who have learned the business from the bottom up. Let us know how we can help! Call us today at 303-220-7919 or request an appointment online. We’re here to help.