Meeting Minutes - Wednesday, March 15, 2000

Wednesday, March 15, 2000

The Board met at its offices at 450 N Street, Sacramento, at 9:30 a.m. with Chairman Andal, Mr. Klehs and Mr. Chiang present, and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

Mr. Parrish entered the Boardroom.

BUSINESS TAXES HEARINGS

John, Helen & Louis (deceased) Munguia and Dorothy Riedel, SR BH 19-746859-010, 89000281030
4-1-94 to 3-31-97, $35,586.59
For Petitioner: Helen Munguia

For Appellant: John Munguia
Dorothy Riedel
James Winzler, Consultant
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the evidence shows that the audit allowance for self-consumption should be increased.
Whether the evidence shows that the audited markup is excessive.
Whether relief from the negligence penalty is warranted.
Action: Mr. Parrish moved to reduce the measure of tax by 25% and delete the penalty. The motion was seconded by Mr. Andal but failed to carry, Mr. Andal and
Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.
Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be submitted for decision.

Dawson E. McNew & Leigh A. Kielty, SR KHJ 99-137430-010, 89002118520
7-1-93 to 6-30-96, $8,533.11

For Petitioner: Leigh Ann Kielty
Dawson E. McNew
For Sales and Use Tax Department: Sharon Jarvis, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether The Clipper is an exempt printed sales message.
Whether the tax on purchases from Herald Printing is the sole liability of petitioner.
Whether petitioner is entitled to relief from the liability for payment of sales and use taxes and interest due to reliance of oral advice from Board employees.
Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be submitted for decision

Livingstone’s Restaurant & Pub, SR DH 22-843598-010, 89000394040
4-1-94 to 12-31-96, $25,798.82

For Petitioner: Steven R. Lipari, Petitioner
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the evidence proves that the audited liquor pour size of 1.5 ounces is insufficient.
Action: Mr. Klehs moved to adopt the staff’s revised recommendation that the pour size be increased to 1.75. The motion was seconded by Mr. Parrish but was not voted on.
Upon motion of Mr. Parrish, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be granted.

Eliezer Shaul, SR BH 19-757638-010, 89000284810
7-1-91 to 12-31-96, $246,240.84

For Petitioner: Eliezer Shaul
Derrick Quan, Accountant
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 tax is warranted based on petitioner’s allegation that the difference between sales reported on sales and use tax returns and sales reported on the 1993 Federal Income Tax Return (FITR) is due to bank transfers and other similar transactions.
Whether the disallowed claimed exempt and nontaxable deductions were established in accordance with the facts.
Whether the disallowed claimed exempt and nontaxable deductions were established in accordance with the facts.
Whether relief from the tax is warranted based on petitioner’s allegation that the difference between reported sales and the bank deposit analysis is due to bank transfers and other similar transactions.
Whether relief from the 25% penalty for fraud is warranted.
Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be submitted for decision.

The Board recessed at 10:35 a.m. and reconvened at 10:40 a.m. with Mr. Andal, Mr. Parrish and Mr. Klehs present

Quinton R. Willingham, SR JH 27-834623-010, 89000735690
1-1-92 to 12-31-94, $2,398.38

For Petitioner: Quinton Willingham
For Sales and Use Tax Department: Janice Thurston, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the difference between total gross receipts reported and total gross receipts per the sales contracts provided are taxable.
Whether the evidence shows that certain sales are valid sales for resale, or sales in interstate commerce.

Mr. Chiang and Ms. Mandel entered the Boardroom.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that Issue #1 of the petition be redetermined in accordance with the revised recommendation of the Appeals Section.
Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that Issue #2 of the petition be redetermined as recommended by the Appeals Section regarding the sales to Bruce and Shelly Burrows.
Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that Issue #2 of the petition be granted regarding the sale to Chris Thompson.
Mr. Klehs moved to redetermine the petition regarding the sale to Lee Sievers with respect to Issue #2. The motion failed for lack of a second.
Mr. Andal moved to grant the petition regarding the sale to Lee Sievers with respect to Issue #2. The motion was seconded by Mr. Parrish but failed to carry,
Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.
Upon motion of Ms. Mandel, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that Issue #2 of the petition be submitted for decision regarding the sale to Lee Sievers. The Board directed the staff to provide the taxpayer with a 2-year payment plan.

John E. Laffitte, SS KH 28-820930-010, 89000766780
4-1-91 to 6-30-93, $18,439.56

For Petitioner: No Appearance
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosure forms were filed.
Issue: Whether the measure of tax was established in accordance with the facts.
Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr Andal, Mr Klehs and Ms. Mandel voting yes, Mr. Parrish and Mr. Chiang not participating, the Board ordered that the petition be redetermined as recommended by the Appeals Section.

Edwardo Ruggieri, SY AC 99-731270-010, 89002374870
1-1-92 to 12-31-94, $34,994.94

For Petitioner: No Appearance
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Action: The Board took no action.

John Romero, SY JH 27-773579-010, 89000718810
1-1-94 to 12-31-96, $38,326.98

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 15, 2000

Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried,

Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang voting no, the Board ordered that the petition of John, Helen, & Louis (deceased) Munguia and Dorothy Riedel, SR BH 19-746859-010; 89000281030, be redetermined as recommended by the Appeals Section.

Next, upon motion of Ms. Mandel, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered that the negligence penalty be deleted.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish abstaining, the Board ordered that the petition of Dawson E. McNew & Leigh A. Kielty, SR KHJ 99-137430-010; 89002118520, be redetermined as recommended by the Appeals Section.

Mr. Parrish moved to reduce the fraud penalty to a negligence penalty in the petition of Eliezer Shaul, SR BH 19-757638-010; 89000284810. The motion was seconded by Mr. Andal but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.

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

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried,

Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, the Board ordered that Issue #2 of the petition of Quinton R. Willingham, SR JH 27-834623-010; 89000735690, be redetermined as recommended by the Appeals Section regarding the sale to Lee Sievers.

The Board recessed at 11:10 a.m. and reconvened at 1:40 p.m. with Mr. Andal, Mr. Parrish, Mr. Chiang and Dr. Connell present.

APPEALS MATTERS

Liberty Life Assurance Company, IT ET 34-001792-010, 020, 89000900290, 89000900300
1985, $60,212.44
1986, $69,048.43
1987, $75,355.17
1988, $80,674.75
1989, $99,471.67
Considered by the Board: February 23, 2000
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Action: Mr. Andal moved to grant the petition. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Chiang and
Dr. Connell voting no, Mr. Klehs absent.
Mr. Chiang moved that the petition be redetermined, the motion was seconded by Dr. Connell but failed to carry, Dr. Connell and Mr. Chiang voting yes,
Mr. Parrish and Mr. Andal voting no, Mr. Klehs absent.
Mr. Andal stated when Mr. Klehs returns we will open the roll again.

BUSINESS TAXES HEARINGS

Old Republic National Title Insurance Company, IT ET 34-001644-030; 89000899520
1989 (020), $2,010,947.72
1994 (030), $1,413,074.30

For Petitioner: No Appearance
For Special Taxes Department: David H. Levine, Counsel

David K. Okumura, Sr., Insurance Examiner,
Department of Insurance
Carlito Ramos, Assoc. Insurance Examiner,
Department of Insurance
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether petitioner is subject to "retaliatory tax" for 1994.
Action: Upon motion of Mr. Chiang, seconded by Dr. Connell and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Dr. Connell voting yes, Mr. Klehs absent, the Board ordered that the petition be granted as revised and recommended by the Appeals Section.
Dr. Connell left the Boardroom and Ms. Mandel entered.

Jerome H. Peña, SR GH 99-144234-010; 89002121410
10-1-93 to 12-31-96, $11,051.22

For Petitioner: Jerome Peña
For Special Taxes Department: Sharon Jarvis, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the customer’s property that petitioner engraved was considered used property.
Whether the block sample used to establish the error rate was the proper method to compute the measure.
Mr. Klehs entered the Board room during the hearing.
Action: Upon motion of Mr. Chiang, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be submitted for decision.

Kamal Ismail Hamed, SR DHD 99-209619-010; 89002148990
4-1-93 to 3-31-96, $26,227.13

For Petitioner: Kamal Hamed
George Fakhouri, CPA
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the evidence shows that the cost of goods sold as computed in the audit is excessive.
Action: Mr. Andal moved to delete the negligence penalty, Mr. Parrish seconded but the motion failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs,
Mr. Chiang and Ms. Mandel voting no.
Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be submitted for decision.

Hubert Peer, SR BH 99-362710-010; 89002217860
7-1-94 to 6-30-97, $5,915.04

For Petitioner: Hubert Peer
For Special Taxes Department: Kevin Hanks, Hearing Representative

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether petitioner has provided any evidence to warrant a reduction of the tax.
Whether an inability to pay the tax should result in an adjustment.
Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the tax be reduced by 50 percent and directed staff to provide taxpayer with a payment plan.
Mr. Klehs made a substitute motion to grant the petition. The motion was seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs,
Mr. Chiang and Ms. Mandel voting yes.

The Board recessed at 2:15 p.m. and reconvened at 2:25 p.m. with
Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Hewlett Packard Company, SY GH 98-039144-003, 004; 89002094240; 89002094250
1-1-89 to 10-31-91, $Unstated

For Claimant: Joseph A. Vinatieri, Attorney
Dan Kostenbauder, General Tax Counsel
For Sales and Use Tax Department: Janice Thurston, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether claimant’s allegation that it did not make a taxable use of property in this State because title in the donated property passed to the donees out of state warrants a refund of the tax previously self-reported on such property.
Whether the imposition of use tax on property gifted to out-of-state donees violates the Commerce Clause.
Action: Mr. Klehs moved that the petition be submitted for decision. The motion failed for lack of a second.
Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,
Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered that the claims for refund be granted.
Mr. Andal moved that a memorandum opinion be published. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.

Roger Mertz, SI UT 83-028521-010; 89001164200
4-30-98, $662.97

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

Action: The Board took no action.

The Mead Corporation, SY OH 30-672863-002; 89000849940
1-1-90 to 12-31-92, $48,690.00

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 15, 2000

Upon motion of Ms. Mandel, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition of Jerome H. Peña, SR GH 99-144234-010; 89002121410, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and duly carried,

Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel voting no, the Board ordered that the petition of Kamal Ismail Hamed, SR DHD 99-209619-010; 89002148990, be redetermined as recommended by the Appeals Section and that the penalty be deleted.

Ms. Newton stated the roll is still open on Item A, the Appeals adjudicatory calendar. Mr. Klehs stated that his vote is yes to deny the petition of Liberty Life Assurance Company of Boston, IT ET 34-001792 – 010, 020, 89000900290, 89000900300. Dr. Connell was not present. [The Board will consider this petition at the April 5, 2000 Board meeting.]

Mr. Klehs stated that had he been present for the hearing of Old Republic National Title Insurance Company, IT ET 34-001644-030; 89000899520, his vote to grant the petition would have been yes.

The Board adjourned at 3:25 p.m.


The foregoing minutes are adopted by the Board on May 4, 2000.