Just to provide an alternative method that might be more palatable:
--FINDER TAGS:
property unset : 0
property orange : 1
property red : 2
property yellow : 3
property blue : 4
property purple : 5
property green : 6
property grey : 7
tell application "Finder"
repeat with f in selection as alias list
set label index of file f to red
end repeat
end tell
which will take the selected files in Finder and tag them red. The benefit of Shane’s method is you can apply multiple tags to a file; here, you can only assign one tag at a time, and assigned a tag overwrites the existing tags (and, by “tags”, I mean “label colours”).