Approved 2001 Minutes - Thursday, March 8, 2001

Thursday March 8, 2001

The Board met at its offices at 5901 Green Valley Circle, Culver City, at 9:05 a.m. with Vice Chairman Chiang and Mr. Klehs present, Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

BUSINESS TAXES APPEALS HEARINGS

Cardservice International, Inc., SP UT 82-659153-010; 89001144640

8-31-97, $358,462.50 Tax

For Petitioner: David R. Rennie, Representative

Grey R. Brooks, Vice President of Finance

For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue: Whether petitioner’s use of the aircraft is exempt from use tax on the basis that petitioner leased it to a lessee who used the aircraft as a common carrier of persons or property in accordance with Revenue and Taxation Code section 6366.1.

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 submitted for decision.

Griffith Company, Inc., SZ AA 99-286787; 89002183680

7-1-93 to 6-30-96, $45,589.46 Tax

For Petitioner: Robert P. Molko, Chief Financial Officer

James E. Barnett, Attorney

For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue: Whether the labor charges for crushing rocks constitute charges for taxable fabrication labor or for a nontaxable service.

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 submitted for decision.

Liberty Supplies Company, Inc., SR AA 99-229580; 89002157990

1-1-94 to 6-30-97, $23,091.63 Tax, $00.00 Penalty, Negligence

For Petitioner: No Appearance

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issues: Whether audited unreported taxable shipping charges were established in accordance with the facts.

Whether disallowed claimed sales for resale were established in accordance with the facts.

Whether petitioner’s claim that recorded sales included amounts refunded to customers warrants a reduction in unreported taxable sales.

Whether estimated purchases subject to use tax were established in accordance with the facts.

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 in accordance with the revised recommendation of the Appeals Section.

Michael Keith Easley, SR EH 97-303820; 89002083430

1-1-95 to 6-30-98, $21,310.95 Tax, $00.00 Penalty

For Petitioner: Michael Keith Easley

Teresa J. Rhyne, Attorney

For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issues: Whether petitioner has met his burden of establishing his entitlement to certain deductions for bad debts.

Whether petitioner’s reliance upon (allegedly) erroneous, oral advice from the Board’s staff warrants relief from the applicable tax and interest.

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 submitted for decision, granting the petitioner and the Department 60 days to present and evaluate additional documentation and the Appeals Section 30 days thereafter to bring the matter back to the Board with a final recommendation.

Q.T. Partners, LLC, SB UT 82-663931; 89001149110

3-31-98, $9,909.23 Tax

For Petitioner: R. Michael McBride, Attorney

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issue: Whether there was any consideration related to the transfer of a vessel from Dr. and Mrs. Terry L. Phillips to petitioner.

Action: Mr. Klehs moved that the petition be redetermined. The motion failed for lack of a second.

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 submitted for decision.

The Board recessed at 10:30 a.m. and reconvened at 10:40 a.m. with Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel present.

SWG Enterprises, Inc., SR AC 99-455027; 89002263140

4-1-94 to 6-30-97, $69,267.51 Tax, $18,721.52 Penalty, Negligence

For Petitioner: No Appearance

For Sales and Use Tax Department: Robert Tucker, Counsel

Action: The Board took no action.

Italspain Corporation, SR AP 97-016866; 89002036640

7-1-93 to 12-31-96, $30,886.95 Tax

For Petitioner: No Appearance

For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issue: Whether petitioner qualifies as a successor to Camperos.

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

Mamood Namdar, SP UT 82-660643; 89001146190

SP UT 82-656557; 89001141560

SP UT 82-663137; 89001148560

8-29-95, 7-25-96, 10-10-96, $25,914.06 Tax, $2,591.41 Penalty, Failure to File

For Petitioner: Mamood Namdar

For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issues: Whether the estimated purchase price of one aircraft (SP UT 82-656557) is excessive.

Whether there is sufficient evidence that the two aircraft petitioner purchased outside California (SP UT 82-660643 and SP UT 82-663137) did not enter California within 90 days, thus satisfying the 90-day test under California Code of Regulations, Title 18, section (Regulation) 1620, subdivision (b) (3), for exemption from use tax.

Whether relief from the 10% penalties for failure to file returns is warranted.

Action: Upon motion of Mr. Andal, 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 petition be submitted for decision.

Shirley Samuels Kraft, SR AC 99-625832; 89002333370

12-1-94 to 12-31-96, $5,536.14 Tax, $553.63 Penalty, Negligence

For Petitioner: No Appearance

For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD MARCH 7, 2001

Mr. Klehs moved to redetermine the petition of Michael Doria, SR AC 13-825281; 89000084350. The motion was seconded by Mr. Andal but failed to carry, Mr. Klehs and Mr. Andal voting yes, Mr. Parrish and Mr. Chiang voting no, and Ms. Mandel abstaining.

Ms. Mandel made a substitute motion to reduce taxable measure and remove the negligence penalty. The motion was seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs and Mr. Andal voting no.

Mr. Klehs stated for the record, that he would have voted with the majority regarding the petition of Italspain Corporation, SR AP 97-016866; 89002036640.

FINAL ACTION ON PETITIONS HEARD MARCH 8, 2001

Action: (Motion Expunged)

Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered that the petition of Griffith Company, Inc., SZ AA 99-286787; 89002183680, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered that the petition of Q.T. Partners, LLC, SB UT 82-663931; 89001149110, be redetermined as recommended by the Appeals Section.

Mr. Andal moved to expunge the previous motion to redetermine the petition of Cardservice International, Inc., SP UT 82-659153-010; 89001144640. The motion was seconded by Mr. Parrish and unanimously carried Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes.

Upon motion of Mr. Andal seconded by Mr. Klehs and duly carried, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered the petition be redetermined as recommended by the Appeals Section.

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 of Mamood Namdar, SP UT 82-660643; 89001146190, SP UT 82-656557; 89001141560, SP UT 82-663137; 89001148560, be redetermined as recommended by the Appeals Section.

BUSINESS TAXES APPEALS HEARINGS

Roberto Manuel Sandoval, SR AC 13-848769; 89000089770

1-1-90 to 6-30-97, $69,575.98 Tax, $17,394.09 Penalty, Fraud

For Petitioner: William Feinstein, Attorney

Roberto Sandoval

For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue: Whether relief from the 25% penalty for fraud is warranted.

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

Judith Zane, SR AC 13-841959-010; 89000088260

7-1-93 to 12-31-97, $54,661.60 Tax, $13,665.48 Penalty, Fraud

For Petitioner: Kenneth Sisco, Attorney

Judith Zane

For Sales and Use Tax Department: Robert Tucker, Counsel

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

Issues: Whether the audited understatement of total sales, if any, was computed in accordance with the facts,

Whether relief from the fraud penalty is warranted.

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

The Board recessed at 12:00 p.m. and reconvened at 1:55 p.m. with Mr. Parrish, Mr. Klehs and Ms. Mandel present.

William D. Barschdorf & Robert J. Marino, SR AC 52-006735; 48093

Altered Anatomy, Inc., SR AC 99-935079; 89002441090

1-1-92 to 12-31-97, $15,357.38 Tax, $4,648.14 Penalty, Failure to File

$5,630.69 Penalty, Finality

For Petitioner: No Appearance

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issues: Whether taxpayers’ transfers of props are not subject to sales tax because taxpayers transferred them incidental to the performance of qualified motion picture production services.

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

Whether relief from the interest is warranted.

Whether relief from the penalty for failure to timely pay the determination (finality penalty) is warranted.

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

CSC Outsourcing, Inc., SV FH 12-740943; 89000055460

1-1-94 to 3-31-97, $109,842.66

For Petitioner: No Appearance

For Sales and Use Tax Department: Robert Tucker, Counsel

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

Issues: Whether the audited measure of tax with respect to petitioner’s purchase of a universal power system from DP Hardware, Inc. (DP) is excessive.

Whether the second extension to the waiver of limitations is invalid, thereby barring the statute for periods to July 1, 1995.

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

Ronald L. & Rena Rae Ford, SR EH 23-774357-010; 89000412760

1-1-94 to 6-30-96, $15,550.70 Tax, $1,555.07 Penalty, negligence

For Petitioner: Gustavo Gonzalez, CPA

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issues: Whether petitioner’s sales of antiques qualify either as exempt occasional sales or nontaxable sales for resale.

Whether petitioner has shown that the discrepancy between total sales reported on its sales and use tax returns and gross receipts reflected on its income tax returns is due to a difference in accounting methods.

Whether relief from the penalty for negligence is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Klehs, and Ms. Mandel voting yes, Mr. Chiang and Mr. Andal absent, the Board ordered that the negligence penalty be deleted.

The Board ordered the petitioner and Appeals Section to discuss the matter further and return to the Boardroom with its recommendation.

Eun Hee Choi, SR AB 99-205700; 89002146780, -790

Sang Chul Choi, SR AB 97-656878; 51181, 56023

1-1-93 to 9-1-97, $104,571.42 Tax; $20,857.30 Penalty, Fraud

$2,114.26 Penalty, Negligence

$8,342.88 Penalty, Failure to Pay

For Petitioner: Sang Chul Choi

For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issues: Whether relief from the fraud penalty is warranted.

Whether audited taxable sales were established in accordance with the facts.

Whether dual determinations issued against Sang Chul Choi should be deleted because he was not an owner of the business.

Action: Mr. Parrish moved to delete all the penalties. The motion failed for lack of a second.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Chiang not participating, Mr. Andal absent, the Board ordered that the petition redetermined as recommended by the Appeals Section.

Charles R. Matulik, Robert G. Matulik, Jr., & Donald W. McDaniels

SR EH 23-718070-020; 89000406750

10-1-92 to 3-31-95, $101,503.66 Tax, $10,227.88 Penalty, Negligence

For Petitioner: Howard Borenstein, Representative

For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issues: Whether taxpayer has presented sufficient evidence to establish that the audited understatement of taxable sales is excessive.

Whether relief from the negligence penalty is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition be deferred to the May Culver City Board meeting.

New Wave Converting, Inc., SR EH 23-780057; 8900041360

10-1-94 to 9-30-97, $19,925.66 Tax

For Petitioner: No Appearance

For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issues: Whether the purchases of either ethyl acetate or propyl alcohol are nontaxable because they are incorporated into the manufactured product and may therefore be purchased for resale.

Whether petitioner meets the requirements for relief under Revenue and Taxation Code section 6596 with respect to petitioner’s alleged reliance on advice the Sales & Use Tax Department purportedly provided in a prior audit.

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

Purchase Leasing Corporation, SY EAA 24-864360; 89000476970, -990

1-1-90 to 12-31-97, $352,260.37 Tax

For Petitioner: Appearance Waived

For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issue: Whether the reported lease receipts represent the fair rental value of the aircraft at issue.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition be granted as to the disputed measure.

Sidney L. & Michiko Soffer, SR EAA 24-926310; 89000492790

4-1-93 to 4-30-96, $172,398.64 Tax, $17,239.89 Penalty, Negligence

For Petitioner: No Appearance

For Sales and Use Tax Department: Warren Astleford, Counsel

Action: The Board took no action.

Harry Soukiassian, SY AB 12-715059; 89000049350

7-1-93 to 6-30-96, $29,882.20 Tax, $2,988.22 Penalty, Negligence

For Petitioner: No Appearance

For Sales and Use Tax Department: Warren Astleford, Counsel

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD MARCH 8, 2001

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Andal absent, the Board ordered that the petition of Roberto Manuel Sandoval, SR AC 13-848769; 89000089770, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Andal absent, the Board ordered that the petition of Judith Zane, SR AC 13-841959-010; 89000088260, be redetermined as recommended by the Appeals Section.

The Board recessed at 2:40 p.m. and reconvened at 2:45 p.m. with Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel present.

FINAL ACTION ON PETITIONS HEARD MARCH 8, 2001

Upon motion of Mr. Chiang, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered the petition of Ronald L. & Rena Rae Ford, SR EH 23-774357-010; 89000412760, be redetermined in accordance with the revised recommendation of the Appeals Section.

The Board adjourned at 2:50 p.m.

The foregoing minutes are adopted by the Board on May 31, 2001.