Approved 2001 Minutes - Wednesday, January 24, 2001


Wednesday, January 24, 2001

The Board met at its offices at 5901 Green Valley Circle, Culver City, at 9:00 a.m. with Chairman Parrish, Vice Chairman Chiang, Mr. Klehs and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

BUSINESS TAXES APPEALS HEARINGS

Marcrest, Inc., SR FH 25-627795; 89000516210
4-1-95 to 3-31-98, $6,024.60 Tax

For Petitioner: Gregory J. Cooper, President
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether petitioner should be relieved of the tax and interest because petitioner relied on written advice from the Board.

Whether the Board is bound by a negotiated settlement between petitioner and the Department.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board accepted the audit results of the first revised audit.

Mr. Andal entered the Boardroom.

Simon Beresford Purll, SR EA 97-193531, -010, 89002073570
7-1-95 to 3-31-98, $11,334.48 Tax, $1,046.40 Penalty, Failure to File

For Petitioner: Michael C. Sagar, Attorney
Simon Purll
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether the true object of petitioner's contract was for nontaxable service or the sale of tangible personal property.

Whether petitioner's allegation that his clients purchased the designs and artwork for incorporation into the manufactured tee shirts warrants relief from the tax.

Whether petitioner received misinformation qualifying for relief from the tax pursuant to Revenue and Taxation Code Section 6596.

Whether relief from the penalty for failure to file returns is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision, granting the petitioner 30 days to submit new documentation, the Department 30 days to review the documentation, and the Appeals Section 30 days thereafter to bring the matter back to the Board with a recommendation.


William Peter Bolotin, SR AP 97-203953; 18589

4-1-94 to 12-31-97, $47,802.03 Tax, $4,990.34 Penalty, Negligence

For Petitioner: No Appearance
For Sales and Use Tax Department: Jeffery Graybill, Counsel

Action: The Board took no action.

Mr. Chiang and Mr. Klehs left the Boardroom.


Acute Care Alternative, Inc., SS AA 99-302874; 89002190930

10-1-93 to 12-31-96, $45,239.08 Tax

For Petitioner: Corazon Licudan, Accounting Manager
For Sales and Use Tax Department: David Levine, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether Med Spec I infusion pumps sold and rented by petitioner qualify as prescription medicines.

Whether intravenous syringes sold by petitioner qualify as prescription medicines.

Whether the evidence shows that the sales and rentals of Med Spec I infusion pumps to health care facilities qualify as nontaxable sales for resale or exempt sales to the U.S. Government.

Alternatively, whether petitioner received and relied upon misinformation qualifying for relief from the tax under Revenue and Taxation Code Section 6596.

Action: Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Andal and Ms. Mandel voting yes, Mr. Chiang and Mr. Klehs absent, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section.

Mr. Chiang and Mr. Klehs entered the Boardroom.

Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section.


Norman S. Gates, SR AC 13-704603; 89000066810
10-1-92 to 9-30-93, $23,604.85 Tax

For Petitioner: No Appearance
For Sales and Use Tax Department: David Levine, Counsel

Action: The Board took no action.

Mr. Chiang left the Boardroom.


Datatape Incorporated, SR AP 17-714674; 89000204590

10-1-97 to 12-31-97, $227,392.00 Tax

For Petitioner: Thomas Kretschmar, CPA
M. S. Millar, President
For Sales and Use Tax Department: Warren Astleford, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether petitioner is entitled to the claimed manufacturer's exemption credit.

Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Chiang absent, the Board ordered that the petition be submitted for decision.


Purchase Leasing Corporation, SY EAA 24-864360; 8900047670
1-1-90 to 6-30-94, $92,544.20 Tax

For Petitioner: No Appearance
For Sales and Use Tax Department: Warren Astleford, Counsel

Action: The Board took no action.

Mr. Chiang entered the Boardroom.


Saad I. Tadros & Odette A. Tadros, SR AB 14-763298; 89000127320

4-1-93 to 9-30-96, $00.00 Tax, $21,640.46 Penalty, Fraud

Tivoly Trading, Inc., SY EA 99-953937; 89002446200

4-1-93 to 9-30-96, $00.00 Tax, $21,640.46 Penalty, Fraud

For Petitioner: Cruz Saavedra, Attorney
Odette A. Tadros
Saad I. Tadros
For Sales and Use Tax Department: Robert Tucker, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether petitioner Odette Tadros qualifies for relief from the tax as an innocent spouse under Revenue and Taxation Code Section 6456.

Whether relief from the fraud penalty is warranted.

Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered that the fraud penalty be reduced to a negligence penalty.

The Board recessed at 11:00 a.m. and reconvened at 11:15 a.m. with Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel present.


Hovsep Nargizyan, SR AC 99-896399; 89002430610

10-1-96 to 12-31-96, $1,160.00 Tax

For Petitioner: No Appearance
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether petitioner's labor charges were nontaxable repair labor.

Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered that the petition be redetermined as recommended by the Appeals Section.


Sal Farah, SR AR 99-456604; 89002264040

7-1-94 to 4-30-97, $14,554.10 Tax, $1,455.42 Penalty, Negligence

For Petitioner: Mahd Baraket, Manager
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether the evidence establishes that the 30.2774% audited markup for taxable merchandise is excessive.

Whether the evidence establishes that the audited cost of taxable goods sold is excessive.

Whether relief from the penalty for negligence is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section.

FINAL ACTION ON PETITIONS HEARD - JANUARY 24, 2001

Upon motion of Ms. Mandel, seconded by Mr. Andal and duly carried, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Chiang not participating, the Board ordered that the petition of Datatape Incorporated, SR AP 17-714674; 89000204590, be redetermined as recommended by the Appeals Section.

The Board recessed at 11:20 a.m. and reconvened at 1:35 p.m. with Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel present.

BUSINESS TAXES APPEALS HEARINGS

Union Oil Company of California, SZ EAA 98-001147; 89002085070

1-1-90 to 12-31-92, $498,031.02 Claim for Refund

For Petitioner: No Appearance
For Sales and Use Tax Department: Sharon Jarvis, Counsel

Action: The Board took no action.


Raymond C. & Sissy M. Shieh, SR AP 17-725754; 89000205880

1-1-93 to 12-31-96, $4,499.19 Tax

For Petitioner: Raymond Shieh, President
For Sales and Use Tax Department: Warren Astleford, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether petitioner has shown that the disallowed sales transactions were nontaxable sales for resale or uncollectible.

Whether petitioner is liable for the tax on the retail selling price of products sold to out-of-state customers and drop-shipped to consumers in this state.

Whether petitioner's two set-up charges related to preparing the silkscreens are includable in the gross receipts of petitioner's sales.

Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish absent, the Board ordered to reduce the disputed measure of tax; otherwise redetermine as recommended by the Appeals Section.

Mr. Parrish entered the Boardroom.


GT Bicycles Inc., SR EA 24-949936; 89000499770

7-1-94 to 6-30-97, $34,448.13 Tax, $5,003.42 Penalty, Negligence

Riteway Distributors Inc., SR EA 24-960261; 89000503070

7-1-94 to 6-30-97, $82,195.88 Tax, $8,329.62 Penalty, Negligence

For Petitioner: David Blasi, Controller
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether the test of paid bills and projection of the test results were representative of petitioner's operations.

Whether petitioners provided sufficient evidence to show that certain inventory withdrawals were for demonstration and display purposes only.

Whether the amount subject to tax should be measured by the cost of materials used to manufacture tangible personal property rather than the cost of inventory transferred from the related company.

Whether relief from the negligence penalty is warranted.

Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered to reduce the cost of unreported purchases of consumable supplies and to delete the negligence penalty in the petition of GT Bicycles.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered to delete the penalty; otherwise redetermine as recommended by the Appeals Section in the petition of Riteway Distributors Inc.


Joe & Walters, Inc.; SY AS 99-547473; 89002302960

7-1-94 to 6-30-97, $37,922.59 Tax, $00.00 Penalty, Negligence

For Petitioner: Walter A. Butcher, Partner
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether the taxable markup used in the audit is excessive.

Whether disallowed claimed sales for resale were valid resales.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered to reduce the audited markup to 20%; otherwise redetermine as recommended by the Appeals Section.

Mr. Klehs announced that he would not be participating in East Hills Automotive, Inc., SR EA 99-765304; 26537 and left the Boardroom.


East Hills Automotive, Inc., SR EA 99-765304; 26537

4-1-91 to 3-31-94, $35,068.98 Tax, $3,506.91 Penalty, Negligence

$3,506.90 Penalty, Failure to Pay

For Petitioner: Robert V. Klems, Jr., CPA
David Caulfield, President
For Sales and Use Tax Department: Robert Tucker, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: A disqualifying contribution to Mr. Klehs was disclosed.

Issues: Whether petitioner is liable as a successor for the sales tax liability of CEI, Account No. SR EA 24-926002.

Whether relief from the penalties imposed upon CEI pursuant to California Code of Regulations, Title 18, Section 1702 is warranted.

Action: Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs not participating, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section.

Mr. Klehs entered the Boardroom.

Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs not participating, the Board ordered that the petition be submitted for decision.


IBJTC Leasing Corporation, SS OH 30-679337, 89000857190

1-1-94 to 9-30-97, $415,017.74 Tax

For Petitioner: No Appearance
For Sales and Use Tax Department: David Levine, Counsel

Action: The Board took no action.


Manuel Aburto Fabris, SR AP 99-444591; 89002257690

1-1-94 to 12-31-96, $10,249.21 Tax, $2,722.56 Penalty, Negligence

For Petitioner: Manuel Aburto Fabris
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issues: Whether the audit liability established by use of the markup method is excessive.

Whether relief from the negligence penalty is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered that the petition be redetermined as recommended by the Appeals Section.

FINAL ACTION ON PETITIONS HEARD JANUARY 24, 2001

Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs not participating, the Board ordered that the petition of East Hills Automotive, Inc., SR EA 99-765304; 26537, be redetermined as recommended by the Appeals Section.


The Board adjourned at 2:50 p.m.



The foregoing minutes are adopted by the Board on April 19, 2000.