Approved Minutes – Wednesday, June 28, 2000

The Board met at its offices at 5901 Green Valley Circle, Culver City, at 9:00 a.m. with Chairman Andal, Vice Chairman Parrish, Mr. Klehs and Mr. Chiang present, and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

BUSINESS TAXES HEARINGS

S. D. Engineering Inc., SR FH 25-830290-010; 89000578520
4-1-87 to 9-30-87, $3,727.26
SR FH 25-830290-020; 89000578540
10-1-87 to 3-31-90, $78,445.83
SR FH 25-830290-030; 89000578550
7-1-90 to 6-30-93, $189,600.19
SR FH 25-830290-040; 89000578570
7-1-93 to 6-30-96, $330,215.55

For Petitioner: Robert Marks, Attorney
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issues: Whether the evidence shows that the measure of tax includes exempt transportation charges, exempt construction (sub)contracts, and/or nontaxable rental income.
Whether the circumstances warrant the waiver of interest.

Action: 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 to grant the first issue.

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 to grant the second issue.

Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel abstaining, the Board ordered to grant the third issue.

Mr. Andal moved to grant issue four, seconded by Mr. Parrish but failed to carry, Mr. Andal, Mr. Klehs voting yes, Mr. Parrish, Mr. Chiang and Ms. Mandel voting no.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish and Mr. Andal voting no, the Board ordered to redetermine issue four as recommended by the Appeals Section regarding.

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 to grant any remaining issues.

Wurth California, Inc., SR EH 23-859299-010; 89000428800
4-1-91 to 6-30-94, $193,360.18
Wurth USA, Inc., SS OH 30-696311-010; 89000879470
1-1-88 to 3-31-90, $100,258.24

For Petitioner: Rick Beter, President
Sanjiv Agrawal, Controller
Joseph Vinatieri, Attorney
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issues: Whether the evidence presented is sufficient to show that certain disallowed sales for resale were nontaxable.
Whether credit for returned merchandise is warranted.

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 to approve the revised recommendation by the Legal Appeals staff to delete the failure to file penalty.

Mr. Klehs moved to grant 50 percent and deny 50 percent of the disallowed sales for resale, the motion failed to carry 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 to grant 90 percent of the remaining disputed amount of sales for resale.

Saba Aftim Saba, SR EA 24-874018-010; 89000479140
7-1-94 to 12-31-96, $4,507.55

For Petitioner: Saba Aftim Saba
Simon Rantisi, Witness
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 measure of tax has been established in accordance with the facts.

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 redetermined as recommended by the Appeals Section.

Raymondo Saldana Davila and Francisco Moreno, SR AR 99-750113-010; 89002381450
4-1-95 to 12-31-97, $91,792.67

For Petitioner: Edgar N. Palacios, P.A.
Duane R. Folke, Attorney
For Sales and Use Tax Department: Richard Goodrich, Hearing Representative

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

Issues: Whether the evidence shows that the audited percentage of imported beer sales should be reduced from 26.06 percent to 20 percent of total beer sales.
Whether the evidence shows that petitioner did not have B-Girls, and therefore, all B-Girl sales included in the audit should be deleted.

Action:Upon motion of Mr. Parrish, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered to grant first issue.

Upon motion of Mr. Chiang, 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 submitted for decision.

A-Z Services, Inc., SR EA 24-876316-020; 89000479570
7-1-91 to 3-31-97, $142,862.75
Antonio Zaldumbide, SR EA 97-156000-010; 89002067240
7-1-91 to 3-31-97, $86,635.36

For Petitioner: Antonio J. Zaldumbide, President
Keith L. Chow, E.A.
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issue: Whether applicants deliberately intended to deprive the Board of taxes that were legally due and thus committed fraud.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chaing 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.

Western Gift Distributors, SY EA 24-126319-010; 89000437860
10-1-93 to 9-30-96, $27,837.66

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

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

Issues: Whether title to property sold to Indians and delivered by common carrier passed upon delivery of the property to the carrier or upon delivery at the reservation.
Whether the evidence establishes that the sales of fixed assets at issue are not subject to sales tax.

Action: Upon motion of Mr. Klehs, 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 to redetermine issue one as recommended by the Appeals Section.

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 to redetermine issue two as recommended by the Appeals Section.

Lamber Restaurant, SR EA 24-930067-010; 89000493710
7-1-94 to 6-30-97, $49,187.52

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

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

Issue: Whether Mr. Quezada's claim that the restaurant was transferred to him in April 1995 warrants a reduction in tax.
Alternatively, whether the facts show that Mr. Quezada did not purchase the business.
Whether audited taxable measure 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. 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.

Micro Technology, Inc., SY EA 24-757442-010; 89000456460
7-1-90 to 10-7-92, $1,153,074.84
MTI Technology Corporation, SY EA 99-296072-010; 89002187780
10-8-92 to 6-30-94, $570,633.76
MTI Technology Corporation, SY EA 99-296072-020; 89002187790
7-1-90 to 10-7-92, $1,153,074.84

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

Action:The Board took no action.

Trade American Card Corporation, SR EA 24-777525-020; 89000459430
4-1-94 to 3-31-97, $3,075.90

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 JUNE 28, 2000

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 petition of Raymondo Saldana Davila and Francisco Moreno, SR AR 99-750113-010; 89002381450, be redetermined as recommended by the Appeals Section.

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 A-Z Services, Inc., SR EA 24-876316-020; 89000479570, and Antonio Zaldumbide, SR EA 97-156000-010; 89002067240, be redetermined as recommended by the Appeals Section.

The Board recessed at 11:00 a.m. and reconvened at 1:30 p.m. with Mr. Parrish, Mr. Chiang and Ms. Mandel present.

BUSINESS TAXES HEARINGS

Wrights Graphic, Inc., SR AC 99-109941-010; 89002107140
10-1-92 to 12-31-95, $14,073.03

For Petitioner: Elliot Cohen, Vice President
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issues: Whether the disallowed printed matter qualifies for exemption as "printed sales messages" because they were included in the same envelopes of other printed sales messages.
Whether the sales of order forms qualify as exempt printed sales messages.

Mr. Klehs entered the Boardroom during the hearing and then left the Boardroom.

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

Louis Ross, TK MT 44-038918-010; 89000950390
1-1-91 to 12-29-95, $24,054.48
Louis Ross Trust, TK MT 44-038303-010; 89000950170
1-1-96 to 12-31-97, $525.99
Louis Ross Trust, TK MT 44-038634-010; 89000950240
1-1-96 to 12-31-97; $4,166.20

For Petitioner: G. G. Baumen, Attorney
Louis Ross
For Sales and Use Tax Department: Judy Nelson, Counsel

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

Issues: Whether the fee is a type of tax and that it is unconstitutional to impose a tax on the storage of petroleum products.
Whether the State Board of Equalization has authority to administer and collect the Underground Storage Tank Maintenance Fee.
Whether the Board has equity power to receive petitioners of the fee.
Whether relief from the failure to file penalty is warranted.

Mr. Klehs and Mr. Andal entered the Boardroom.

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

Loh Sun International, Inc., CR ET 02-000922-020; 89000004820
1-1-95 to 12-31-96, $46,285.80

For Petitioner: No Appearance
For Sales and Use Tax Department: Judy Nelson, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions forms filed.

Issues: Whether the evidence shows that the disallowed sales qualify as exempt distributions in interstate or foreign commerce.
Whether relief from the tax is warranted on the basis that petitioner received and relied upon misinformation contained in a prior audit.

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 granted as recommended by the Appeals Section.

Michael P. Maher, SA UT 84-002330-001; 89001166060
1-30-99, $1,908.00

For Petitioner: Michael D. Maher, Lieutenant Commander
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue: Whether the State of California is precluded from imposing tax upon claimant's use of the vehicle in this state by the provision of the North Atlantic Treaty Organization (NATO) Status of Forces Agreement.

Action: Mr. Parrish moved to grant the petition, 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.

Mr. Klehs left the Boardroom.

Gerald Joel Fradin, SR EAA 99-116456-010; 89002109910
1-1-95 to 12-31-97, $10,379.80

For Petitioner: Gerald Joel Fradin
Michael P. Fradin, Accountant
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issues: Whether petitioner is entitled to the claimed sales tax-included deduction.
Whether tax was properly imposed on petitioner's sales of cold food from his vending machines.
Whether petitioner is entitled to relief from the tax because the Board did not adequately inform petitioner of the appropriate regulation regarding taxability of food products when sold through vending machines.

Action: Upon motion of Mr. Parrish, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, Mr. Chiang voting yes, Ms. Mandel voting no, Mr. Klehs absent, the Board ordered to partially grant the petition as to the tax included issue and redetermine the remainder as recommended by the Appeals Section.

Arman Vakili, ET AL., SR EAA 99-136397-010; 89002118100
4-1-95 to 3-31-98, $10,787.38

For Petitioner: Norman J. Rodich, Attorney
Arman Vakili
Ali Ghomizadeh
Jalal Monshietehadi
For Sales and Use Tax Department: Janice Thurston, Counsel

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

Issues: Whether the materials installed on U.S. Government contracts are exempt from tax.
Whether petitioner received and relied on written misinformation from the Board.

Mr. Klehs entered the Boardroom during the hearing.

Action: Mr. Parrish moved to grant in part and redetermine the remainder, seconded by Mr. Andal but failed for lack of a second, Mr. Parrish voting yes, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.

Upon motion of Mr. Chiang and 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.

Levon Asatourian, ET AL., SR AP 99-146724-010; 89002122470
7-1-93 to 12-31-96, $31,622.77

For Petitioner: W. William Cary, Accountant
Levon Asatourian
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issue: Whether the evidence establishes that the disallowed claimed sales for resale are valid nontaxable sales for resale.

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.

The Board recessed at 3:40 p.m. and reconvened at 3:55 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Stanley A. Nowak, SY EH 53-000300-010, -020; 89000970190, 89000970210
2-25-92 to 11-30-93, $21,183.10
7-1-92 to 3-31-93, $15,468.36

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

Action:The Board took no action.

Lysander Yachting, LTD., SB UT 82-676859-010; 89001159050
8-31-96 to 9-30-96, $451,825

For Petitioner: No Appearance
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

Action:The Board took no action.

FINAL ACTION ON PETITIONS HEARD JUNE 28, 2000

Upon motion of Mr. Chiang, 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 of Louis Ross, TK MT 44-038918-010; 89000950390, and Louis Ross Trust, TK MT 44-038303-010, TK MT 44-038634-010; 89000950170, 89000950240, be redetermined as recommended by the Appeals Section.

BUSINESS TAXES HEARINGS

William M. Mosbrook, SB UT 82-642635-010; 89001124710
3-31-95, $9,619.50

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 evidence establishes that petitioner's purchase of the vessel at issue is exempt from use tax.
Whether relief from the penalty for failure to file a return is warranted.

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

The Board deferred consideration of Michael P. Maher, SY UT 84-002330-001; 89001166060, to the June 29, 2000 Board meeting.

Bowers Companies, SY AB 98-037801-010; 89002093150
10-1-93 to 12-31-96, $2,459.41

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 documentation presented proves that certain purchases of consumable supplies were nonrecurring and should be removed from the test.
Whether a certain sale of splints to an out-of-state purchaser drop shipped to the purchaser's customer in this state was either a nontaxable sale or a sale for resale.
Alternatively, whether the sale was nonrecurring and should be removed from the test.

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

FINAL ACTION ON PETITIONS HEARD JUNE 28, 2000

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish voting no, and Mr. Chiang and Mr. Andal not participating, the Board ordered that the petition of Wrights Graphic, Inc., SR AC 99-109941-010; 89002107140, be redetermined as recommended by the Appeals Section.

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 of Arman Vakili, ET AL., SR EAA 99-136397-010; 89002118100, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang voting yes, Mr. Parrish passing then voting no and Ms. Mandel voting no, the Board ordered that the petition of Levon Asatourian, ET AL., SR AP 99-146724-010; 89002122470, be redetermined as recommended by the Appeals Section.

Mr. Klehs stated for the record that he would have voted no on Gerald Joel Fradin, SR EAA 99-116456-010; 89002109910 if he had been present.

Ms. Newton stated for the record that there were incomplete Contribution Disclosures for Loh Sun International, Inc., CR ET 02-000922-020; 89000004820.

The Board adjourned at 4:00 p.m.

The foregoing minutes are adopted by the Board on September 14, 2000.