Approved 2001 Minutes - Wednesday, March 28, 2001

Wednesday March 28, 2001

The Board met at its offices at 450 N Street, Sacramento, at 10:45 a.m. with Chairman Parrish, Vice Chairman Chiang, Mr. Klehs and Mr. Andal present, Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

RETIREMENT RESOLUTION

On behalf of the Board, a retirement resolution was presented to Ms. Billie Hegglin, Associate Governmental Program Analyst, Forms and Publications Section, extending its sincere and grateful appreciation for her dedicated service to the State Board of Equalization and the State of California.

CORPORATE FRANCHISE AND PERSONAL INCOME TAXES HEARINGS

Georgette Stepner, 99A-0094; 89002458610

1990, $133,331.00 Assessment

For Appellant: No Appearance

For Franchise Tax Board: Mark McEvilly, Tax Counsel

Action: The Board took no action.

Michael & Melanie Cervi, 87230

1996, $1,915.00 Assessment

For Appellant: No Appearance

For Franchise Tax Board: Christie Mitchell, Tax Counsel

Action: The Board took no action.

Thomas & Megan Moyer, 57333

1988, $ 17,090.00 Assessment, $4,273.00 Penalty, Failure to File

1989, $296,151.00 Assessment

For Appellant: No Appearance

For Franchise Tax Board: Ken Kinyon, Tax Counsel

Action: The Board took no action.

Sergio Raddavero, 55260

1991, $768.00 Assessment

1992, $866.00 Assessment

For Appellant: Sergio Raddavero

For Franchise Tax Board: Jean Cramer, Tax Counsel

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

Issue: Whether appellant has shown that the proposed assessments for 1991 and 1992, based on federal audit determinations, were erroneous.

Appellant’s Exhibit: Calculation sheet, Tax Court transcript (Exhibit 3.7)

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered the action of the Franchise Tax Board be modified.

Exhibits to these minutes are incorporated by reference.

Harold & Lillian Harvey (Deceased), 27981

1979, $3,538.00 Assessment

1982, $4,038.00 Assessment

1983, $6,520.00 Assessment

For Appellant: No Appearance

For Franchise Tax Board: Kent Summers, Tax Counsel

Action: The Board took no action.

The Board recessed at 11:10 a.m. and reconvened at 1:30 p.m. with

Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel present.

PUBLIC HEARINGS

PROPOSED AMENDMENT OF SALES AND USE TAX REGULATION 1525.2, MANUFACTURING EQUIPMENT

Mr. Parrish announced the public hearing of Sales and Use Tax Regulation 1525.2, Manufacturing Equipment.

Warren Astleford, Legal Counsel, reported that Regulation 1525.2, is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6377. Amendments are proposed to delete the $250.00 threshold; to provide that the qualified manufacturer’s treatment of property for income tax purposes as having a useful life of less than one year provides a rebuttable presumption that said property qualifies as "consumables" for the purpose of this regulation; that a retailer who accepts an exemption certificate from a qualified person and who has no direct knowledge that the person is not using the property in specified activities accepts the certificate in good faith, and to correct clerical errors.

Speakers: Speakers were invited to address the Board, but there were none.

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 to adopt the amendments to Regulation 1525.2, Manufacturing Equipment, as published (Exhibit 3.8).

PROPOSED AMENDMENT OF SALES AND USE TAX REGULATION 1620, INTERSTATE AND FOREIGN COMMERCE

Mr. Parrish announced the public hearing of Sales and Use Tax Regulation 1620, Interstate and Foreign Commerce.

Warren Astleford, Legal Counsel, reported that Regulation 1620, Interstate and Foreign Commerce, is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6352. Amendments are proposed to provide that intermodal cargo containers will be regarded as also being first functionally used outside of this state if specified conditions are met, and to correct clerical errors

Speakers: Speakers were invited to address the Board, but there were none.

Action: Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Parrish abstaining, Mr. Klehs absent, the Board ordered to adopt the amendments to Regulation 1620, Interstate and Foreign Commerce, as published (Exhibit 3.9).

PROPOSED AMENDMENT OF SALES AND USE TAX REGULATION 1668, RESALE CERTIFICATES

Mr. Parrish announced the public hearing of Sales and Use Tax Regulation 1668, Resale Certificates.

Warren Astleford, Legal Counsel, reported that Regulation 1668, Resale Certificates, is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6091. Amendments are proposed to incorporate (1) a suggested specific resale certificate for auto body repair and paint shops, and (2) a warning statement regarding the improper use of a resale certificate into the general resale certificate.

Speakers: Abe Golomb, Associated Sales Tax Consultants

California Resale Certificate (Exhibit 3.10)

Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered to change the wording of the resale certificate for auto body repair and paint shops, from "Warning" to "For Your Information".

Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes, the Board ordered to change the wording of the general resale certificate from "Warning" to "For Your Information".

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 abstaining, the Board ordered to adopt amendments to Regulation 1668, Resale Certificates, as published with the modification of the previous vote (Exhibit 3.11).

PROPOSED ADOPTION OF REGUALTIONS 2240, 2241, 2242, 2250 AND 2255, OIL SPILL RESPONSE, PREVENTION AND ADMINISTRATIVE FEE LAW

Mr. Parrish announced the public hearing of Regulations 2240, 2241, 2242, 2250 and 2255, Oil Spill Response, Prevention and Administrative Fee Law.

Warren Astleford, Legal Counsel, reported that the Oil Spill Response, Prevention, and Administration Fees Regulations 2240, 2241, 2242, are proposed to add definitions of "petroleum products", "barrel of crude oil" and "barrel of petroleum products" clarifying references in the law. Regulation 2250 clarifies and interprets the relief from liability for tax when the feepayer has relied upon written advice of the Board of Equalization and Regulation 2255 clarifies and interprets the record keeping provisions in the law.

Speakers: Speakers were invited to address the Board, but there were none.

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 to adopt the amendments to Regulations 2240, 2241, 2242, 2250 and 2255, Oil Spill Response, Prevention and Administrative Fees Law, as published (Exhibit 3.12).

Mr. Klehs stated, for the record, that he would have voted with the majority regarding Regulation 1525.2, Manufacturing Equipment and Regulation 1620, Interstate and Foreign Commerce.

BUSINESS TAXES APPEALS HEARINGS

Donald Bruce & Debra Ann Clarke, SX GH 99-701679; 89002364830

7-1-94 to 5-31-95, $15,500.00 Tax, $1,550.00 Penalty, Finality

For Petitioner: Donald Bruce Clarke

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issues: Whether petitioners are responsible as a successor for the liability at issue.

Alternatively, whether the selling price of the fixtures and equipment is overstated.

Whether relief from the finality penalty is warranted.

Action: Mr. Klehs moved to redetermine as recommended by Appeals Section. The motion was seconded by Mr. Andal but failed to carry, Mr. Klehs and Mr. Andal voting yes, Mr. Chiang and Mr. Parrish voting no, Ms. Mandel abstaining.

Upon motion of Mr. Parrish, 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.

Casmalia Disposal, HF HQ 38-000151; 89000924710

7-1-90 to 6-30-91, $00.00 Fee

For Petitioner: No Appearance

For Sales and Use Tax Department: Janet Vining, Counsel

Action: The Board took no action.

Ietje Signorita Duncan, SR KHA 97-272932; 37887

1-1-96 to 6-30-98, $35,114.87 Tax, $6,838.68 Penalty

For Petitioner: Ietje S. Duncan

Freo W. Harbott, Husband

For Sales and Use Tax Department: Jeffery Graybill, Counsel

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

Issue: Whether petitioner purchased a business or stock of goods within the meaning of Revenue and Taxation Code section 6812.

Action: Upon motion of Dr. Connell, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Dr. Connell voting yes, the Board ordered that the petition be redetermined with adjustments.

The Board recessed at 2:30 p.m. and reconvened at 2:35 p.m. with Mr. Parrish, Mr. Chiang and Mr. Andal present, Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

David J. Eid, SR BHA 19-768139; 89000288430

4-1-95 to 12-31-97, $16,508.74 Tax, $1,678.11 Penalty, Negligence

For Petitioner: No Appearance

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

Action: The Board took no action.

Prudence Scofield Brown, SR JH 99-352898; 89002213690

7-1-94 to 12-31-96, $8,972.68 Tax, $00.00 Penalty

For Petitioner: Prudence Scofield Brown

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 differences between recorded and reported taxable sales are subject to tax.

Whether additional sales established by markup are subject to tax.

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.

The Board recessed at 2:50 p.m. and reconvened at 3:00 p.m. with Mr. Parrish, Mr. Chiang, Mr. Klehs and Mr. Andal present, Mr. Chivaro present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

Community TV of Southern California, SR AS 11-607696; 89000010510

10-1-93 to 12-31-96, $87,106.88 Tax

For Petitioner: Frederick A. Richman, Attorney

Susan Reardon, Senior Vice President

Debra A. Hinton, Executive Vice 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’s sales of assets used in its Call Center qualifies as an exempt occasional sale, because the assets were not held in the course of activities for which petitioner was required to hold a seller’s permit.

Alternatively, whether relief from the tax is warranted because the consideration petitioner received was not attributable to the transfer of assets at issue.

Action: Mr. Andal moved to grant the petition with respect to the call center, there was no second. Mr. Klehs made a substitute motion to grant the petition. The motion was seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Mr. Chivaro voting yes, Mr. Andal abstaining.

Mr. Chivaro left the Boardroom and Ms. Mandel entered present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

Jack B. Titus & Doreen F. Titus, SP UT 82-655857; 89001140640

1-31-97, $3,441.00 Tax, $00.00 Penalty

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 petitioners’ purchase of the aircraft is subject to use tax.

Whether the estimated sales price of the aircraft is excessive.

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

FINAL ACTION ON PETITIONS HEARD MARCH 28, 2001

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 Donald Bruce & Debra Ann Clarke, SX GH 99-701679; 89002364830, be redetermined as recommended by the Appeals Section.

Mr. Andal stated for the record that he would like his vote recorded as a yes, in the petition of Community TV of Southern California.

Mr. Klehs stated for the record that he would like his vote recorded as a no, in the petition of Prudence Scofield Brown.

The Board adjourned at 3:40 p.m.

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