Approved 2000 Minutes – Wednesday, August 9, 2000

The Board met at its offices at 450 N Street, Sacramento, at 10:50 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 APPEALS HEARINGS

Eliezer & Shoshana Benaroya, dba The Waterfront Deli, SR CH 21-832221-020; 89000340940
7-1-94 to 9-30-97, $11,836.85

For Petitioner: Eliezer Benaroya
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 audited taxable sales are excessive.

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 with a 25% reduction in the disputed measure.

Zapp's Park, Inc., SR ARF 22-779902-020; 89000377130
7-1-96 to 2-28-98, $3,668.23

For Petitioner: Tom Boyajian
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative
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Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether documentation presented shows that recorded sales were correct, and the Board does not have authority to establish sales on a markup basis.
Whether petitioner's argument that the use of make-up method without prior notification denies petitioner "due process" warrants a reduction in the tax.
Whether documentation presented warrants an adjustment to the shelf test.
Whether petitioner's allegation that the audited understatement of taxable sales represents over pouring of liquor by bartenders warrants a reduction in the tax.

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 pilferage allowance be increased to 1%, otherwise redetermine as recommended by staff.

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 remainder of the petition be submitted for decision.

Roberto J. Pena, SR CHB 99-599517-010/-001; 16479/18202
1-1-96 to 12-31-98, $88,751.99

For Petitioner: Roberto J. Pena and Toni Turner
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue: Whether petitioner presented evidence to support a reduction to the audit liability.

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 that the petition be redetermined with a 20% reduction in the disputed measure.

FINAL ACTION ON PETITIONS HEARD AUGUST 9, 2000

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 remainder of the petition of Zapp's Park, Inc., SR ARF 22-779902-020; 89000377130, be redetermined as recommended by the Appeals Section.

The Board recessed at 11:30 a.m. and reconvened 1:40 p.m. with Mr. Andal, Mr. Parrish, Mr. Chiang, and Dr. Connell present.

PROPERTY TAXES HEARINGS

Pacific Gas & Electric Company (135), SAU 00-018; 75859
2000, $13,542,150,713

For Petitioner: Appearance Waived
For Property Taxes Department: Robert Lambert, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: Disqualifying contributions to Mr. Chiang were disclosed. No other disqualifying contributions were disclosed.

Issue: Whether or not 100 percent of deferred income taxes should be deducted from HCLD value indicators due to the economics obsolescence caused by regulatory restrictions.

Action: Upon motion of Mr. Parrish, seconded by Dr. Connell, unanimously carried, Mr. Andal, Mr. Parrish, and Dr. Connell voting yes, Mr. Chiang not participating in accordance with Government Code Section 15626, Mr. Klehs absent, the Board ordered that the petition be granted with regards to the DFIT issue and that the Possessory Interest issue be decided by the Board at the next Board Hearing.

Dr. Connell left the Boardroom and Ms. Mandel entered.

BUSINESS TAXES APPEALS HEARINGS

Durst Office Design, Inc., SR KHE 28-773817-010; 89000758490
1-1-94 to 12-31-96, $5,207.35

For Petitioner: Dan Durst
Paul Nelson, Consultant
For Sales and Use Tax Department: Janice Thurston, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed. An incomplete disclosure form was completed for the party.

Issue: Whether petitioner's gross receipts from charges for the assembly of modular office furniture is includable in petitioner's taxable gross receipts.
Whether relief from the protested tax is warranted based on misinformation contained in a prior audit.

Mr. Klehs entered Boardroom during the discussion of this petition.

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 granted.

Owen Healthcare, Inc. SR OHC 97-505244-010, 020: 31906, 31908
1-1-87 to 12-31-94, $1,515,654.99

For Petitioner: No Appearance
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 based on petitioner's allegation that it acted as an agent for a number of hospitals which engaged petitioner to purchase hospital supplies at favorable prices.
Whether the taxable fees at issue are in fact nontaxable services because the "true object" of petitioner's agreement with the hospitals is to perform a service.
Whether a portion of the taxable fees at issue are nontaxable services unrelated to the sale of hospital supplies.
Whether taxable hospital employee sales include sales of exempt prescription medicines, and thus, are overstated.

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 redetermined in accordance with the revised recommendation by the Appeals Section. Department agrees that Owen is subject to tax measured only by 13.02 percent of the assessed amounts for audit items B, E and F.

Mr. Klehs stated that it was his intention to have voted with the majority on Item 7, Pacific Gas & Electric Company (135), SAU 00-018; 75859.

Leslie Hennessy, Jr., SR BH 19-653110-010, 020; 89000262110, 89000262120
4-1-93 to 12-31-95, $23,000.12
Leslie A. Hennessy, Inc., SR BH 97-255794-010; 47952
11-3-95 to 12-31-95, $1,556.47

For Petitioner: Leslie Hennessy
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issue: Whether petitioner collected excess tax reimbursement from out-of-state customers.
Whether relief from the penalty for negligence is warranted.

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 the negligence penalty be deleted.

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 2:25 p.m. and reconvened at 2:30 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang, and Ms. Mandel present.

FINAL ACTION ON PETITIONS HEARD AUGUST 10, 2000

Mr. Andal moved to delete the $1,100.00 increase in tax in the petition of Leslie Hennessy, Jr., SR BH 19-653110-010, 020; 89000262110, 89000262120, Leslie A. Hennessy, Inc., SR BH 97-255794-010; 47952. 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 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 that the remainder of the petition be redetermined as recommended by the Appeals Section.

Hobas Pipe USA, Inc., SC OH 99-246530-010, 89002165670
1-1-93 through 12-31-95

For Petitioner: Hearing Request Withdrawn

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

Issue: Whether certain transportation charges are subject to tax.

Action: Upon motion of Ms. Mandel, 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

The Board adjourned at 2:35 p.m.

The foregoing minutes are adopted by the Board on November 2, 2000.