Approved 2000 Minutes - Wednesday August 30, 2000

The Board met at its offices at 5901 Green Valley Circle, Culver City, at 9:10 a.m. with Chairman Andal, Vice Chairman Parrish and Mr. Chiang present, and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

BUSINESS TAXES HEARINGS

Anthony Jude Glazier and Mark Bernardo, SN AB 99-118226-010; 89002110560

7-1-92 to 9-3-93, $21,275.54 Tax, $5,318.93 Penalty

Anthony Jude Glazier, SN AB 53-000048-010; 79222

9-4-93 to 12-31-95, $23,645.68 Tax, $0 Penalty

Action:The Board took no action.

Mark Bernardo, SN AB 97-628034-010; 46505

7-1-92 to 9-3-93, $107,425.85 Tax, $26,856.51 Penalty

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

Issues:Whether audited taxable sales were established in accordance with the facts.

Whether petitioner Anthony Jude Glazier, a former partner, can be held responsible for liabilities incurred in periods after the partnership was dissolved.

Whether relief from the penalty for fraud is warranted.

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

Jack Kandel and Lesly Kandel, SB UT 81-012722-010; 89001079560

8/31/94, $3,712.50 Tax, $371.25 Penalty

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

Issue:Whether use tax is owed on $15,000, the actual purchase price of the vessels, or whether it is only owed on a lower market value of the vessels.

Action: Upon motion of Mr. Chiang, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board ordered that the negligence penalty be deleted.

Mr. Klehs entered the Board room.

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 submitted for decision.

Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously

carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board directed the Legal Appeals Staff to review the entire case that comes before the Board, specifically the penalties.

LVA Financial Equipment, SR EH 97-541059-010; 37052

6-12-95 to 12-31-97, $60,202.56 Tax, $0 Penalty

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

Issues:Whether a petitioner was engaged in business in this state during the audit period, thereby incurring a use tax collection obligation in connection with its sales of tangible personal property to consumers in this state.

Whether the tax liability may be relieved based upon petitioner’s reliance upon written advice received from the Board.

Whether relief from the tax is warranted based on the Appeals Section’s failure to respond to a deadline imposed by petitioner in a letter.

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.

Ann Marie Ryan dba Pacific Industrial, SR AR 97-001292-010; 89002032100

7-1-93 to 11-30-96, $5,049.00 Tax, $504.90 Penalty

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

Issues:Whether petitioner is liable as a successor.

Alternatively, if petitioner is liable as a successor, whether a notice of determination issued against the predecessor account, First Step Industrial & Filter Co., Inc. (First Step), for the final sale of fixtures and equipment is excessive.

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.

Michael J. Dietrick and Galen R. Hamilton, SP UT 82-655115-010; 89001139540

7-31-97, $7,975.00 Tax, $0 Penalty

Michael J. Dietrick, MD, SP UT 82-656704-010; 89001141740

12-31-97, $3,588.10 Tax, $358.81 Penalty

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD

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 of Jack Kandel and Lesly Kandel, SB UT 81-012722-010; 89001079560, be redetermined as recommended by the Appeals Section.

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 of LVA Financial Equipment, SR EH 97-541059-010; 37052, be redetermined as recommended by the Appeals Section.

Upon motion of 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 Ann Marie Ryan dba Pacific Industrial, SR AR 97-001292-010; 89002032100, be redetermined as recommended by the Appeals Section.

The Board recessed at 10:20 a.m. and reconvened at 1:35 with Mr. Andal,

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

BUSINESS TAXES APPEALS HEARINGS

Robert Hatfield and Jean M. Hatfield dba Arnold’s Hardware & Gift,

SR AP 99-958725-010; 89002447500

4-1-96 to 8-1-96 $3,274.35 Tax, $0 Penalty

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

Issue:Whether petitioners are liable as a successor to Arnold’s Hardware and Gifts, Inc. (Arnold’s).

Mr. Andal announced the public hearing of Sales and Use Tax regulation

1620, Interstate & Foreign Commerce.

David Levine, Acting Assistant Chief Counsel, Business Taxes, reported

that Regulation 1620 is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6201. Amendments are proposed to specify the criteria under which aircraft used in interstate commerce will be regarded as being purchased for use in California, to clarify that the recent amendments regarding purchases of trucks and buses for use in this state do not supersede the general rules applicable to the determination of when property in general is regarded as purchased for use in California, and to correct clerical errors.

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

Upon motion of Mr. Chiang, seconded by Mr. Parrish and unanimously

carried, Mr. Andal, Mr. Parrish and Mr. Chiang voting yes, Ms. Mandel not participating, Mr. Klehs absent, the Board adopted Sales and Use Tax Regulation 1620 as published.

Parts and Equipment Supply Company, SR AR 99-619311-010; 89002330840

1-1-95 to 12-31-97, $5,820.27 Tax

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

Issue:Whether the evidence establishes that certain tractors that petitioner leased ex-tax to its customers were acquired tax-paid, such that the leases were not subject to use tax measured by the lease receipts.

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

Mr. Klehs entered the Board room.

Ariana Rugs & Kilims Collection, Inc., SR AS 99-258876-010; 89002170890

7-1-94 to 9-30-96, $9,953.43 Tax

Oriental Rugs & Art, SR AS 99-778528-010; 89002391020

1-1-96 to 3-31-96, $9,747.18 Tax, $0 Penalty

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

Issues:Whether the evidence shows that petitioner consigned the rugs at issue to another dealer who became the retailer of the rugs.

. Whether the evidence establishes that petitioner is liable for sales tax reimbursement collected but not reported or paid on its sales of rugs at the Santa Barbara auction.

Action: 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 penalty be deleted in the matter of Oriental Rugs & Art, SR AS 99-778528-010,89002391020.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously

carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel carried, the Board ordered that the petitions be submitted for decision.

Harbhajan Singh Mundi, SR DH 99-345605-010; 89002210760

7-1-94 to 7-9-96, $3,478.25 Tax

Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosures forms were filed.

Issues:Whether petitioner’s allegation that he was previously audited for the period at issue warrants relief from the liability.

Whether the estimated taxable markup used in the audit is excessive.

Whether a larger allowance for food stamp sales is warranted.

Whether relief from interest is warranted.

Carlos Alberto Galvez, SR AP 99-437412-010; 89002254410

1-1-94 to 3-31-97, $4,315.59 Tax, $426.63 Penalty

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

Issue:Whether the test period is representative of the audit period.

Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang voting no, the Board ordered to reduce the disputed measure of tax by 50% and the negligence penalty be deleted.

Abdul Samad Noori dba Club Liquor and Deli, SR EH 99-461439-010; 89002265970

1-1-95 to 12-31-97, $8,151.87 Tax

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

Issues:Whether the evidence shows that the audited taxable sales are excessive.

Whether the evidence shows that the petitioner should be allowed more than one percent for pilferage.

Action: Upon motion of Mr. Parrish, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang voting no, the Board ordered to reduce the measure of tax by 10%.

ADV Mouldings Technologies, Inc., SR AP 99-689905-010, -001; 89002360150, 56238

1-3-95 to 6-30-98, $2,152.46 Tax

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

Issue:Whether petitioner overpaid its tax liability on certain transactions in the audit for which either the tax was not due, or the tax was erroneously paid to the Board.

Action: 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 adopted the revised appeals recommendation.

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 remaining disputed measure be submitted for decision.

Phyllis Ann Lee dba B. J. Peppers, SR AA 99-224568-010; 89002155730

4-1-94 to 12-31-96, $13,082.07 Tax, $1,308.21 Penalty

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

Issues:Whether the evidence establishes that the audited measure of tax was established in accordance with the facts.

Whether relief from the tax is warranted based on petitioner’s allegation that she was not involved in the business during the audit period.

Action: 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 be submitted for decision.

The Board recessed at 3:00 p.m. and reconvened at 3:05 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Royal Gourmet, Inc., SR EA 99-694194-010; 89002361850

7-1-89 to 10-31-94 $52,083.33 Tax, $5,050.02 Penalties

Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosure forms were filed.

Issues:Whether petitioner is liable as a successor to McGlawn.

Whether McGlawn’s bankruptcy discharge of his personal tax liability eliminates petitioner’s successor’s liability.

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

Holzheu’s El Rancho Market, Inc., dba El-Rancho Market, SR AR 15-610715-010; 89000134960

1-1-94 to 12-31-96, $53,978.71 Tax

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

Issues:Whether petitioner’s allegations that all sales were properly reported from petitioner’s electronic scanner system warrants relief from the tax.

Whether the evidence shows that the audited markup is excessive.

Action: Upon motion of Mr. Parrish, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered the reduction of the audited markup to 24.57%, which results in a reduction of audited taxable measure.

Bryn Duque Martin and Theresa Marie Martin dba Bay Café & Santa Barbara Fish Market, SR AR 97-144080-10; 89002065260

4-1-94 to 3-31-97, $10,812.69 Tax, $0 Penalty

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

Issues:Whether audited taxable sales are overstated.

Whether an additional allowance for self-consumption and pilferage are warranted.

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD AUGUST 30, 2000

Mr. Andal moved to grant the petition. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voted yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no, in the petition of Parts and Equipment Supply Company, SR AR 99-619311-010; 89002330840.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried,

Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board ordered that the petition be redetermined as recommended by the Appeals Section and staff is to established a payment plan.

Mr. Andal moved to grant the petition. 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, in the petition of Ariana Rugs & Kilims Collection, Inc., SR AS 99-258876-010; 89002170890.

Upon motion of Mr. Chiang, seconded by Ms. Mandel and duly carried,

Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, Mr. Parrish abstaining, the Board ordered that the petition be redetermined 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 that the petition of Oriental Rugs & Art, SR AS 99-778528-010; 89002391020, 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 Phyllis Ann Lee dba B. J. Peppers, SR AA 99-224568-010; 89002155730, be granted based upon innocent spouse.

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 of ADV Mouldings Technologies, Inc., SR AP 99-689905-010, -001; 89002360150, 56238, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Klehs, seconded by Mr. Chiang 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 Robert Hatfield and Jean M. Hatfield dba Arnold’s Hardware & Gift, SR AP 99-958725-010; 89002447500, be redetermined as recommended by the Appeals Section.

For Petitioner:	Dennis N. Brager, Attorney Mark Bernardo
For Sales and Use Tax Department:	Jeffrey Graybill, Counsel

For Petitioner:	Jack Kandel
For Sales and Use Tax Department:	Jeffrey Graybill, Counsel

For Petitioner:	Leo Altschuler, Owner
For Sales and Use Tax Department:	Jeffrey Graybill, Counsel

For Petitioner:	Ann Marie Ryan John R. Read, III, Attorney
For Sales and Use Tax Department:	Warren Astleford, Counsel

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

For Petitioner:	Robert Hatfield Scott W. Carlson, Attorney Gerald J. Kastner, CPA
For Sales and Use Tax Department:	Janice Thurston, Counsel

For Petitioner:	Paul A. Schrock, President Matthew E. Brast, Secretary
For Sales and Use Tax Department:	Janice Thurston, Counsel

For Petitioner:	Tony Ghaffari, CPA
For Sales and Use Tax Department:	Janice Thurston, Counsel

For Petitioner:	Carlos Alberto Galvez Michael J. Vega, CPA
For Sales and Use Tax Department:	Kevin Hanks, Hearing Representative

For Petitioner:	Abdul Samad Noori
For Sales and Use Tax Department:	Kevin Hanks, Hearing Representative

For Petitioner:	Peter D. Aston, EA
For Sales and Use Tax Department:	Janice Thurston, Counsel

For Petitioner:	Phyllis Ann Lee
For Sales and Use Tax Department:	Kevin Hanks, Hearing Representative

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Approved 2000 Minutes - Wednesday August 30, 2000