Approved Minutes – Wednesday, June 14, 2000

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

RECOGNITION OF BOARD EMPLOYEES

Mr. Andal recognized Board of Equalization employees from various district offices in the audience.

Mr. Chiang entered the Boardroom.

CORRECTION OF BOARD MEETING RECORD

Mr. Klehs directed that the Board meeting record be corrected to reflect that he did not participate in the matter of Olympia Investments, 89001091550,
SP UT 82-588361-010, considered by the Board on May 4, 2000.

BUSINESS TAXES HEARINGS

Tim P. Burke, SP UT 82-65995-010; 8900114580
December 1996, $28,171.25

For Petitioner: No Appearance
For Sales and Use Tax Department: Janice Thurston, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contribution disclosure statement was filed by the taxpayer. No disqualifying contributions were disclosed by the agent.
Issue: Whether petitionerís California use of the aircraft is exempt from tax pursuant to the exemption for aircraft leased to common carriers.
Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish not participating, the Board ordered that the petition be redetermined as recommended by the Appeals Section.

Bishop Acquisition Company, SS KHE 21-846960-010; 89000344680
1-1-95 to 6-30-97, $23,598.21

For Petitioner: John Polimeno, President & CEO
Richard Norby, Controller
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether petitioner is entitled to a credit for sales tax paid on equipment purchased in Canada, pursuant to Revenue and taxation Code section 6406.
Whether relief from a portion of the tax is warranted based on petitionerís allegation that a piece of the equipment purchased ex-tax was never used.
Action: 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.

J & D Auto Sales, Inc., SY EA 14-659132-010, 020; 89000110290, 89000110300
10-1-88 to 3-30-95, $650,603.51

For Petitioner: Dave Layton, Representative
Abe Golomb, Consultant
For Sales and Use Tax Department: Mark Woolston, Hearing Representative

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether petitioner is entitled to additional adjustment for bad debts.
Whether petitioner is entitled to additional adjustments for voided sales, unwound sales, and for repossession losses.
Whether relief from the negligence penalty 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.

Charles T. Fleming, SR DHJ 28-869899-010; 89000787290
4-1-93 to 2-16-96, $21,784.57

For Petitioner: Charles T. Fleming
Daryl J. Fleming
For Sales and Use Tax Department: Mark Woolston, Hearing Representative

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the evidence supports additional credits for tax-paid purchases resold.
Whether petitionerís design fees are nontaxable interior decorator services, and thus, not includable in gross receipts.
Action: Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered a 21 percent reduction of the design fees as recommended by the Appeals Section and submitted the remainder of the petition for decision for further discussion with the taxpayer.

The Board recessed from 10:30 a.m. to 10:35 a.m. and reconvened with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

BUSINESS TAXES HEARINGS

Leon Williams, SR KHH 28-899763-001; 89000788080
1-1-91 to 3-13-92, $7,392.16

For Petitioner: Daniel V. Blackstock, Attorney
Leon Williams. Owner
For Sales and Use Tax Department: Janice Thurston, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the evidence shows that claimant was a partner or a salesman for Ace Auto Sales.
Action: 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 claim for refund be granted.

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

For Petitioner: John Romero
Frederic H. Smith, CPA
For Sales and Use Tax Department: Jackie Woosley, Bookkeeper

For Sales and Use Tax Department: Mark Woolston, Hearing Representative
Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether the audited costs of goods sold were established in accordance with the facts.
Action: Upon motion of Mr. Andal, 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, directed the staff to meet with the taxpayer and provide a recommendation.

Marco Tom De George & Daniel William Harris, SR GH 26-834694-010; 89000693130
10-1-92 to 6-3-95, $1,537.73

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.
Issue: Whether certain disallowed claimed sales for resale are in fact valid nontaxable sales for resale.
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 adopted the Appeals Section recommendation.

Avanti Industries, Inc., SS EH 23-804669-010; 89000417390
10-1-94 to 9-30-97, $65,665.26

For Petitioner: Jordan M. Goodman, Attorney
Beverly Petty
For Sales and Use Tax Department: Warren Astleford, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether relief from the tax is warranted under Revenue and Taxation code Section 6596 for written misinformation allegedly received in the prior audit.
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 granted.

Stavros Kostakis, SR BHA 19-620558-010; 89000258230
1-1-87 to 12-31-93, $163,273.20

For Petitioner: Stavros Kostakis
Greg Antone, Attorney
For Sales and Use Tax Department: Mark Woolston, Hearing Representative

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the measure of tax was computed in accordance with the facts.
Whether relief from the penalty for fraud is warranted.
Action: Upon motion of Mr. Andal, 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 redetermined as recommended by the Appeals Section, reducing the fraud penalty to a negligence penalty.

Suresh & Bharti Parmar, CR HQ 02-001166-010; 89000005050
1-1-82 to 10-13-95, $9,708.40
CP HQ 50-000886-010; 89000959540
2-1-89 to 10-13-95, $586.29

For Petitioner: Kaushik Dattani, CPA
For Sales and Use Tax Department: Monica Brisbane, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the evidence shows that petitioner made taxable distributions of cigarettes and tobacco products.
Whether relief from the 25% penalty for fraud or intent to evade the tax is warranted.
Whether relief from the 10% penalty for failure to file returns is warranted.
Action: Mr. Parrish moved that the fraud penalty be removed on item number 1. The motion failed for lack of a second.
Mr. Parrish moved that the 25 percent fraud penalty be deleted. The motion was seconded by Mr. Andal but failed to carry, Mr. Parrish voting yes, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.
Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered that the petition be redetermined as recommended by the Appeals Section.

The Board recessed from 12:00 p.m. to 1:40 p.m. and reconvened with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

PUBLIC HEARINGS

PROPOSED AMENDMENTS TO SALES AND USE TAX

REGULATION 1506, MISCELLANEOUS SERVICE ENTERPRISES

David H. Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1506 is being amended to add provisions explaining the application of tax to transactions by architects and other persons who render architectural services.

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. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang, Ms. Mandel voting yes, the Board adopted the amendments to Sales and Use Tax Regulation 1506, Miscellaneous Service Enterprises, as published. A copy of the rule as amended is incorporated in these minutes by reference (Exhibit 6.1).

TIMBER HARVEST VALUES

Revenue and Taxation Code Section 38204(a) requires that the Board shall estimate the immediate harvest value and adopt schedules for each species or subclassification of timber harvested between July 1 and December 31, 2000.

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

Upon motion of Mr. Chiang, seconded by Mr. Andal and unanimously carried, Mr. Klehs, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, the Board adopted the Timber Harvest Values (Exhibit 6.2).

BUSINESS TAXES HEARINGS

SMCI, Inc., SR CHB 99-109681-010; 89002107050
1-1-93 to 3-31-96, $41,728.01

For Petitioner: Matt Sadati, President
Thomas W. Cain, Attorney
Parivash Azimi, Witness
Lida Baradaran, Translator
For Sales and Use Tax Department: Sharon Jarvis, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether relief from the tax is warranted based on the fact that another party (Ms. Parivash Azimi) was the concessionaire/retailer for the restaurant operations at issue, and therefore, is liable for the tax.
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 granted, referring the matter to the Business Taxes Committee.

Technichem, Inc., HF EF 38-000316-001, 002, 003, 004; 89000925740, 50, 60, 70
001, 2nd prepayment for 1996, $7,205.00
002, 1st prepayment for 1997, $3,602.50
003, 2nd prepayment for 1997, plus interest & penalty for 1st prepayment, $5,764.10
004, 2nd prepayment for 1998, $5,497.00

For Claimant: Mark J. Ng, President
For Sales and Use Tax Department: Janet Vining, Counsel
Dennis Mahoney, Department of Toxics
Nancy Long, Department of Toxics

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether claimant was required to pay the facility fees for which claimant seeks a refund.
Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered that the claim for refund be denied due to lack of jurisdiction.

Mr. Klehs left the Boardroom.

Mr. Parrish moved that the penalty be deleted. The motion failed for lack of a second.

Upon motion of Mr. Andal, seconded by Mr. Chiang and duly carried, Mr. Andal, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Klehs absent, the Board ordered that the request for relief of penalty be denied.

Mr. Klehs entered the Boardroom.

Data Devices, Inc., SC OH 30-688955-010; 89000869740
7-1-94 to 12-31-96, $4,110.12

For Petitioner: Cale Harvey, President
For Sales and Use Tax Department: Warren Astleford, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the sending of repairmen by petitioner into California for the purpose of repairing and installing computer network systems for their California customers qualifies as nexus with the State of California sufficient for the Board to require petitioner to collect use tax from its in-state customers.
Whether the Board has the authority to hold a corporate officer liable for any unpaid taxes upon the termination, dissolution or abandonment of a corporation.
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.

FINAL ACTION ON PETITIONS HEARD JUNE 14, 2000

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 the petition of Bishop Acquisition Company, SS DHH 21-846960-010; 89000344680, be redetermined as recommended by the Appeals Section.

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 the petition of J & D Auto Sales, Inc., SY EA 14-659132-010, 020; 89000110290, 89000110300, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Parrish, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition of Charles T. Fleming, SR DHJ 28-896899-010; 89000787290, be redetermined as recommended by the Appeals Section, reducing the measure of tax to $142,612.

Upon motion of Mr. Parrish, 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 John Romero, SY JH 27-773579-010; 89000718810, be deferred for 30 days.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition of Data Devices, Inc., SC OH 30-688955-010; 89000869740, be redetermined as recommended by the Appeals Section.

The Board adjourned at 2:55 p.m.


The foregoing minutes are adopted by the Board on July 26, 2000.