Approved 2001 Minutes - Wednesday May 9, 2001

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

BUSINESS TAXES APPEALS HEARINGS

Rafik Chichyan, SR AS 11-815554; 37128
7-1-95 to 6-14-98, $5,374.92 Tax, $567.15 Penalty, Negligence
For Petitioner: Rafik Chichyan
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether audited taxable sales were computed in accordance with the facts.
Whether relief is warranted from the 10 percent penalty for negligence.

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.

Jose David Garcia, Sr. & Jose David Garcia, Jr., SR AB 12-743601-010; 16977
4-1-95 to 12-31-97, $4,272.58 Tax, $427.29 Penalty, Negligence
For Petitioner: Jose David Garcia, Sr.
Jose David Garcia, Jr.
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 established that the audited understatement of taxable sales is excessive.
Whether relief from the penalty for negligence is warranted.

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 negligence penalty be deleted.

Mr. Andal moved to reduce the disputed measures by 50%. The motion was seconded by Mr. Parrish but failed to carry, Mr. Parrish and Mr. Andal voting yes, Mr. Chiang, Mr. Klehs and Ms. Mandel voting no.

Mr. Klehs made a substitute motion to take the matter under submission. The motion was seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes.

Norman S. Gates, SR AC 13-704603; 89000066810
10-1-92 to 9-30-93, $23,604.85 Tax
For Petitioner: Richard A. Block, Attorney
Norman S. Gates
Matthew D. Wolfe, CPA
For Sales and Use Tax Department: David H. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether a valid resale certificate issued by the purchaser’s predecessor company may be used by petitioner to relieve him from sales tax liability on sales made to a successor company.

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 granted as to the disputed items.

Raquel’s Mexican Products, Inc., SR AP 14-781581; 16310
5-1-95 to 6-30-98, $79,129.46 Tax, $10,512.21 Penalty
For Petitioner: Raquel Luna, President
Reymond Regalado, 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 disallowed claimed sales for resale were established in accordance with the facts.
Whether relief from the negligence penalty is warranted.
Whether relief from the penalty for failure to timely pay the final determination (finality 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 finality penalty be deleted.

Mr. Andal moved to delete the negligence penalty. The motion was seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel voting yes, Mr. Klehs voting no.

Mr. Andal moved to take the remaining issue under submission. The motion was seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes.

Pulsepoint Communications, SR AR 15-662279; 32801
4-1-95 to 3-31-98, $22,992.22 Tax
For Petitioner: Suzanne Beaudelaire, Representative
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 charges for optional maintenance contracts are subject to sales tax to the extent that the charges are attributable to the repair and maintenance of software.
Alternatively, whether petitioner is entitled to relief based on erroneous written advice from the Board in a prior audit.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Parrish, Mr. Klehs and Mr. Andal voting yes, Mr. Chiang voting no and Ms. Mandel abstaining, the Board ordered that the petition be granted as to the disputed items.

Armen Balkian, SR AC 13-806040; 89000080600
1-1-94 to 6-30-97, $11,672.42 Tax, $1,167.30 Penalty, Negligence
For Petitioner: Abraham Aliari, Accountant
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 supports cost of living adjustments over the audit period.
Whether the third quarter of 1997 should be included in the audit period.
Whether relief from a portion of the interest charge is warranted.
Whether relief from the negligence penalty is warranted.

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.

The Board recessed at 10:20 a.m. and reconvened at 10:40 a.m. with Mr. Parrish, Mr. Chiang, Mr. Andal and Ms. Mandel present.

Docusource, Inc., SR AC 18-740267; 36592
1-1-95 to 12-31-97, $54,324.04 Tax
For Petitioner: James Fier, Partner
Manny Almedia, Senior Manager
Roger Wang, Senior Consultant
For Sales and Use Tax Department: David H. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether petitioner is entitled to a tax-paid purchases resold deduction.

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, directing the Appeals Section to bring the matter back to the Board with a final recommendation at the June Board meeting.

SPECIAL PRESENTATION

On behalf of the Board, a resolution was presented to Marty Dakessian, Legal Counsel, extending its sincere and grateful appreciation for his dedicated service to the State Board of Equalization and the State of California.

BUSINESS TAXES APPEALS HEARINGS

Saengam Garmsupsin, SR AS 99-191719; 57316
1-1-96 to 12-31-98, $24,360.93 Tax, $2,424.18 Penalty, Failure to File
For Petitioner: David Naftalin, Attorney
Dhanakorn Bunnag, Witness
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether audited taxable sales were computed in accordance with the facts.
Whether relief from the penalty for failure to file returns is warranted.

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 denied. The Board further directed staff to explain the Offer-in-Compromise process to the petitioner. If the Offer-in-Compromise Claim is denied, staff is to provide petitioner with a generous payment plan.

American Datamed, SR EAA 24-901509; 89000486100
1-1-94 to 12-31-96, $10,561.07 Tax, $00.00 Penalty
For Petitioner: No Appearance
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 has met the statutory requirements in order to receive a refund/credit of excess tax reimbursement. Whether relief from the additional district tax measure, due to alleged erroneous written advice, is warranted pursuant to Revenue and Taxation Code section 6596.

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 granted as to issue 1, as recommended by the Appeals Section.

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 granted as to issue 2, in accordance with the revised recommendation of the Appeals Section.

FINAL ACTION ON PETITIONS HEARD MAY 9, 2001

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 of Rafik Chichyan, SR AS 11-815554; 37128, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board ordered that the petition of Jose David Garcia, Sr. & Jose David Garcia, Jr., SR AB 12-743601-010; 16977, be redetermined as recommended by the Appeals Section.

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 of Raquel’s Mexican Products, Inc., SR AP 14-781581; 16310, 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 Armen Balkian, SR AC 13-806040; 89000080600, be redetermined as recommended by the Appeals Section.

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

BUSINESS TAXES APPEALS HEARINGS

Jack Geozian, TK MT 44-039419; 17496, 47386
11-1-96 to 6-30-98, $20,525.78, $00.00 Penalty
For Petitioner: Jack Geozian, Owner
Rosalie Corley, Daughter
For Sales and Use Tax Department: Janet Vining, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether petitioner should have to pay the fees when he had no knowledge of them.

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.

Leroy & Bettye J. Adams, TK MT 44-011951; 15683, 51170
1-1-91 to 3-31-91, $2,230.10 Tax, $223.01 Penalty, Failure to File
10-1-91 to 9-30-99, $80,155.24 Tax, $8,015.53 Penalty, Failure to File
For Petitioner: Leroy Adams
For Sales and Use Tax Department: Janet Vining, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether petitioners, rather than their lessee, are liable for payment of the Underground Storage Tank Maintenance Fee. Whether the 10 percent penalty for late payments, imposed under the authority of Revenue and Taxation Code section 50112, should be waived.

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 Failure to File penalty be deleted.

Mr. Chiang moved to take the matter under submission. The motion was seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes.

Roger Wagner Publishing, Inc., SR FH 25-781996; 89000557470, 89000557480
1-1-95 to 12-31-97, $69,039.17 tax
For Petitioner: Appearance Waived
For Sales and Use Tax Department: Warren L. Astleford, Counsel

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.

Bernard Gregory Ross & Ronald Eric McMillan, SR AS 11-813619; 89000035410
10-1-94 to 12-31-96, $43,985.62, $00.00 Penalty
For Petitioner: No Appearance
For Sales and Use Tax Department: Jeffery Graybill, Counsel
Action: The Board took no action.
Mounir S. Salame & Hoda Mounir Salame, SR EH 99-728221; 15552
7-1-95 to 9-30-98, $1,614.07 Tax
For Petitioner: Mounir S. Salame
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 supports an increase in the audited cost of exempt food sales.
Whether the recorded amounts of taxable sales for 1996 are overstated.

Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Mr. Andal voting yes, Ms. Mandel abstaining, the Board ordered that the taxable measures be reduced by 10%.

Mr. Andal moved to take the remaining issue under submission. The motion was seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel voting yes.

Irene F. & Nasario Macias, SR AC 13-849477; 89000090020
7-1-94 to 3-31-98, $5,328.58, $00.00 Penalty
For Petitioner: Barry Entous, Representative
Jose Arias
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 establishes that the observation test was representative of petitioners’ business operations.

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 granted in accordance with the revised recommendation of the Appeals Section.

Ron Sanchez, SR EH 99-191467; 89002139820
1-1-93 to 3-31-96, $131,893.98 Tax, $12,689.41 Penalty, Negligence
For Petitioner: Marshall W. Taylor, Attorney
Jeffrey Rattner, Attorney
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 measure of tax was established in accordance with the facts.
Whether relief from the negligence penalty is warranted.

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 Department 60 days to review the additional documentation submitted by the Petitioner and allowing the Petitioner 30 days to discuss any proposed adjustments with the Department. Thereafter, the Appeals Section is allowed 30 days to bring the matter back to the Board with a final recommendation.

Hassan Jalali & Gholam Hossein Jalali, SR AC 99-446628; 89002258660
1-1-93 to 12-31-97, $68,008.83 Tax, $17,002.32 Penalty, Fraud
For Petitioner: No Appearance
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Action: The Board took no action.

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: Shirley Samuels Kraft
Ken Kraft, Husband
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 supports further reductions to the tax assessment. 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 submitted for decision.

Juan L., Estela M. & Manuel Bustamante, SR AC 13-870285; 55385
4-1-88 to 6-30-91, $18,202.86 Tax, $8,614.37 Penalty, Knowingly Operating without a Permit.
$1,722.87 Penalty, Failure to File
For Petitioner: Juan L. Bustamante
Richard Garber, Attorney
Thomas Cano, Attorney
For Sales and Use Tax Department: Carla Caruso, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether petitioner’s claim that a request to be included in the settlement program was not acted upon warrants relief from the tax. Whether petitioner’s claim that this Board agrees to accept $3,278.10 as full and final payment of petitioner’s liabilities warrants relief from the unpaid tax liability. Whether relief from the 50 percent penalty for knowingly operating without a seller’s permit is warranted. Alternatively, whether the 50 percent penalty rate is excessive. Whether relief from the 10 percent penalty for failure to file returns is warranted.

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

The Board recessed at 3:10 p.m. and reconvened at 3:20 p.m. with Mr. Chiang, Mr. Klehs, Mr. Andal and Ms. Mandel present.

United States Sales Corporation, SY AC 11-606294; 89000010340
7-1-93 to 9-30-98, $2,689,551.14 Tax
For Petitioner: George Isaacson, Attorney
David Bertoni, Attorney
For Sales and Use Tax Department: David H. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.
Issues: Whether the evidence establishes that ex-tax purchases of color separations, packing lists, and shipping labels are subject to use tax. Whether the evidence establishes that ex-tax purchases of exterior envelopes and promotional materials are subject to use tax.

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 granted as to the disputed items in issue 2.

Mr. Andal moved to draft a memorandum opinion as to issue 2. The motion was seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Mr. Andal voting yes, Ms. Mandel abstaining.

Mr. Klehs moved to grant issue 1. The motion was seconded by Mr. Andal and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Mr. Andal voting yes, Ms. Mandel abstaining.

Carlos H. O’Con, SR EH 52-007363; 89000426740
2-1-91 to 5-31-96, $211,113.93 Tax, $73,313.30 Penalty, Fraud
$ 3,892.51 Penalty, Failure to File
FP HQ 98-500241; 89000426750
10-1-92 to 3-31-95, $118,443.78 Tax, $29,611.90 Penalty, Fraud
$ 2,111.94 Penalty, Failure to File
For Petitioner: No Appearance
For Sales and Use Tax Department: Janet Vining, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the measure of tax was established in accordance with the facts. Whether relief from the penalty for fraud or intent to evade the tax is warranted.Whether relief from the penalty 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 redetermined as recommended by the Appeals Section.

FINAL ACTION ON PETITIONS HEARD MAY 10, 2001

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 of Leroy & Bettye J. Adams, TK MT 44-011951; 15683, 51170, be redetermined as recommended by the Appeals Section.

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 of Jack Geozian, TK MT 44-039419; 17496, 47386, 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 Mounir S. Salame & Hoda Mounir Salame, SR EH 99-728221; 15552, 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 Shirley Samuels Kraft, SR AC 99-625832; 89002333370, be redetermined as recommended by the Appeals Section.

The Board adjourned at 3:55 p.m.
The foregoing minutes are adopted by the Board on August 1, 2001.