Approved 2000 Minutes - Wednesday September 13, 2000

The Board met at its offices at 450 N Street, Sacramento, at 10:55 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. Ms. Jean Alexander was present and observing on behalf of Mr. Klehs.

PETITION FOR SEIZED PROPERTY

DOOD ENTERPRISES, CR ET 02-001227; 82949

For Petitioner: Dawood N. Shalomi
William J. Portanuia, Attorney
For Sales and Use Tax Department: Janet Vining Counsel

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

Issue:Whether the Department properly seized the 388 cartons of cigarettes.

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 petition be submitted for decision.

BUSINESS TAXES APPEALS HEARINGS

Michael Alan Morales dba Jewelry by Michael Alan, SR DHH 99-208531-010; 89002148370

10-1-94 to 12-31-97, $3,282.82 Tax

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.

Issue:Whether the evidence shows that the source of the "other income" on petitionerís 1996 federal income tax return was from insurance proceeds, rather than revenue from taxable sales.

Action: The Board took no action.

Gary L. Bongarzone & Alan R. Cresta, dba Crestaís 2211 Club, SR BH 19-785974-010; 89000295580

1/1/95 to 12/31/97, $4,445.31

For Petitioner: Gary Bongarzone, Partner
Alan Cresta, Partner
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 the audited taxable sales were established in accordance with the facts.

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 petition be submitted for decision.

Abdul Manna Obad, dba Abdulís Market, SR CHB 99-707371-010; 89002366640

10-1-89 to 5-14-95, $12,500.00

For Petitioner: Zack Saliba, Accountant
Abdul Manna Obad, Owner
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue:Whether petitioner is liable as a successor for the predecessorís liability to the extent of the purchase price of the grocery store.

Action: Upon motion of Mr. Parrish, 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.

Design Concepts Aluminum Fabricating, Inc., SR KH 28-874983-010; 89000780340

4-1-94 to 3-31-97, $28,195.17 Tax, $6,657.98 Penalty

For Petitioner: John L. Burghardt, Attorney
Lola Neff, Vice President
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issues:Whether certain sales (6 transactions) included in the audited understatement of reported taxable rigging and dealer preparation charges qualify as nontaxable sales.

Whether certain sales (3 transactions) should be deleted from the audited overstatement of claimed nontaxable sales for resale.

Whether sufficient evidence was provided to show that certain sales

(12 transactions) qualify as exempt sales in interstate commerce.

Whether petitioner is entitled to relief from the tax under Revenue and Taxation Code Section 6596.

Whether relief from the negligence penalty is warranted.

Action: Upon motion of Mr. Parrish, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board ordered the measure of tax be reduced by the sale of Michael Mouliot and Charles Bussey.

Upon motion of Mr. Parrish, seconded by Mr. Andal 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.

Upon motion of Mr. Parrish, 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 remainder of the petition be submitted for decision.

Steve Padis Jewelry Plus Enterprises, SX BH 21-695104-010, Ė020; 89000319070; 89000319080

10-01-93 to 9-30-94,-010, $9,556.22 Tax, $1,119.51 Penalty

10-01-94 to 12-31-96,-020, $27,204.76 Tax, $3,140.93 Penalty

For Petitioner: Joseph Micallef, Consultant
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issues:Whether the Sales and Use Tax Department (Department) correctly imposed liability against petitioner for collection of use tax on petitionerís sale of property that petitioner claims was shipped to a point outside this state.

Whether relief from the 10 percent penalty for negligence is warranted.

Action: Upon motion of Mr. Parrish, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal not participating, and Mr. Klehs absent, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section.

FINAL ACTION ON PETITIONS HEARD SEPTEMBER 13, 2000

Upon motion of Ms. Mandel, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs absent, the Board ordered that the petition of DOOD ENTERPRISES, CR ET 02-001227; 82949, be redetermined as recommended by the Appeals Section.

Upon motion of Ms. Mandel, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs absent, the Board ordered that the petition of Gary L. Bongarzone & Alan R. Cresta, dba Crestaís 2211 Club, SR BH 19-785974-010; 89000295580, be redetermined as recommended by the Appeals Section.

Ms. Mandel moved the petition be granted. The motion was seconded by Mr. Parrish but failed to carry, Mr. Parrish and Ms. Mandel voting yes, Mr. Andal and Mr. Chiang voting no, Mr. Klehs absent, on petition of Abdul Manna Obad, dba Abdulís Market, SR CHB 99-707371-010; 89002366640.

Upon motion of Mr. Andal, 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 its previous motion be reconsidered.

Upon motion of Mr. Parrish, seconded by Ms. Mandel and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, and Mr. Chiang voting no, Mr. Klehs absent, the Board ordered that the petition be granted.

Upon motion of Mr. Parrish, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs absent the Board ordered that the remaining petition of Design Concepts Aluminum Fabricating, Inc., SR KH 28-874983-010; 89000780340, be redetermined as recommended by the Appeals Section.

The Board recessed at 12:05 p.m. and reconvened at 1:35 p.m. with Mr. Andal, Mr. Parrish, Mr. Chiang, and Ms. Mandel present.

PROPERTY TAXES HEARINGS

Pacific Gas & Electric Company (135), SAU 00-018; 75859

2000, $13,542,150,713.00

For Petitioner: No Appearance
For Property Taxes Department: Robert Lambert, Counsel

Issue:Whether or not the petitioner has taxable possessory interests in certain hydroelectric projects of: (1) the Merced Irrigation District; (2) the Yuba County Water Agency; (3) the Placer County Water Agency; (4) the Nevada Irrigation District; and the (5) the Oroville-Wyandotte Irrigation District.

Action: The Board took no action.

PUBLIC HEARING

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

1661, Mobile Transportation Equipment.

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

Regulation 1661 is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6023. The regulation is proposed to be amended to provide that houseboats over 30 feet in length are deemed to be MTE, and to incorporate the list contained in the statute of the types of items that qualify as MTE into the regulation.

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, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board approved the staff recommendation to amend Regulation 1661 as published.

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

Regulation 1706, Drop Shipments.

David Levine, Acting Assistant Chief Counsel, Business Taxes, reported Regulation 1706, is proposed to provide, operative January 1, 2001, that the retail selling price of the property drop shipped is, in the absence of direct evidence, presumed to be cost plus 10%, except that a mark-up developed by audit must be used in specified circumstances; and the drop shipper may take a resale certificate from the customer if that person has a California sellerís permit.

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

Upon motion of Mr. Andal, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board approved the staff recommendation to adopt Regulation 1706 as published.

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

1803.5, Long term Leases of Motor Vehicles.

David Levine, Acting Assistant Chief Counsel, Business Taxes, reported Regulation 1803.5, is proposed to interpret, implement and make specific Revenue and Taxation Code section 7205.1, enacted operative January 1, 1996 (SB602, Stats. 1995, Ch. 676) and amended operative January 1, 1999 (AB 1946, Stats. 1998, Ch. 140).

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, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board approved the staff recommendation to amend Regulation 1803.5 as published.

Mr. Andal announced the public hearing of Regulation 8000 through

8016, Public Access to Records Pertaining to Tax and Fee Programs.

Jean Ogrod, Assistant Chief Counsel, Settlement and Administration, reported Regulations 8000 through 8016 are proposed to list the types of records that are currently available at the Board and the manner in which those records may be requested.

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, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board approved the staff recommendation to adopt Regulations 8000 through 8016.

BUSINESS TAXES APPEALS HEARINGS

WSF Financial, Inc., SR ARB 52-009479-001; 56535

1-1-96 to 12-31-99, $0

For Claimant: Richard Nielsen, Attorney
Peter Larsen, Attorney
For Sales and Use Tax Department: Janice Thurston, Counsel

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

Issue:Whether claimant is entitled to a refund or entitled to claim bad debt deductions under Revenue and Taxation Code Section 6055 and Title 18, California Code of Regulations, Section 1642.

Action: Upon motion of Ms. Mandel, 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 petition be submitted for decision.

Antonio B. and Elsa Secapure, TK MT 44-036081-010; 89000949490

4-1-95 to 6-30-98, $30,814.47. Penalty $3,081.46

For Petitioner: Antonio B. Secapure
Alberto S. Nunez, Representative
For Sales and Use Tax Department: Janet Vining, Counsel

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

Issues:Whether petitioner is liable for payment of the underground storage tank maintenance fee.

Whether the 10 percent penalty for failure to pay the fee due within the time prescribed should be abated.

Action: Mr. Andal moved that the petition be redetermined and delete the penalty. The motion was seconded by Mr. Parrish, but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Chiang and Ms. Mandel voting no, Mr. Klehs absent.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs absent, the Board ordered that the petition be held until November 1, 2000, to be redetermined, after application of a payment of $2,656.00 by Mr. Dhillon, unless Mr. Dhillon files a timely claim for refund before that date.

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

Mike David and Kimberly A. Tomasetti, SR ARF 99-861580-010; 89002420010

4-1-93 to 6-30-96, $25,110.00 Tax

For Petitioner: No Appearance
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 shows that the purchase of certain cotton harvesting equipment is subject to sales tax rather than use tax.

Whether the evidence shows that the purchase of a water truck is subject to sales tax rather than use tax.

Alternatively, whether the sale of the water truck was an occasional sale.

Action: The Board took no action.

James R. Gossett dba Quincy Auto Company, SR KH 28-849130-010; 36688

4-4-91 to 3-31-99, $2,421.14 Tax

For Petitioner: Barry Gossett, Partner
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue:Whether the sales of three vehicles delivered to the out-of-state purchasers in this state qualify as sales in interstate commerce.

Action: Upon motion of Mr. Parrish, 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.

Edward Jack Sandel, SR CH 21-807823-010, -020; 89000335440, 89000335460

4-1-90 to 6-30-90, $1,407.31 Tax

7-1-89 to 6-30-92, $33,032.11 Tax

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 the evidence shows that the audited amounts of cost of goods sold are excessive.

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

Whether the evidence shows that the audited markup is excessive.

Action: Board took no action.

The Board recessed at 2:25 p.m. and reconvened at 3:50 p.m. with Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel present, Mr. Klehs absent.

FINAL ACTION ON PETITIONS HEARD SEPTEMBER 13, 2000

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish, and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs absent, the Board ordered that the petition of WSF Financial, Inc., SR ARB 52-009479-001; 56535, be granted.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, and Mr. Parrish voting yes, Mr. Chiang voting no, Ms. Mandel abstaining, Mr. Klehs absent, the Board ordered a memorandum opinion be published.

Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish voting yes, Mr. Chiang voting no, Ms. Mandel abstaining, Mr. Klehs absent, the Board ordered that the petition of James R. Gossett dba Quincy Auto Company, SR KH 28-849130-010; 36688, be redetermined as recommended by the Appeals Section.

The Board adjourned at 2:45 p.m.

The foregoing minutes are adopted by the Board on January 4, 2001.