Approved 2000 Minutes - Wednesday November 1, 2000

The Board met at its offices at 450 N Street, Sacramento, at 9:30 a.m. with Chairman Andal, Vice Chairman Parrish, Mr. Klehs and Mr. Chiang present.

BUSINESS TAXES APPEALS HEARINGS

Donald M. & Carmen L. Wehr, SR JH 97-173219-010, -020; 89002070390, -400

1-1-87 to 12-31-94, $357,508.30 Tax, $89,377.20 Penalty

For Petitioner: Waived Appearance
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issues:Whether relief from the fraud penalty is warranted.

Whether petitioner provide evidence to show that the delivery charges are excludable from gross receipts.

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

Progressive Auto Stereo, Inc., SY CHA 21-818332-010; 8900033760

10-1-90 to 9-30-93, $17,543.61 Tax

For Petitioner: Waived Appearance
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issue:Whether the method used to establish taxable gross receipts from sales of car stereos and pagers was inappropriate.

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

Ms. Mandel entered the Boardroom on behalf of Dr. Connell in accordance with Government Code Section 7.9.

Napa Pipe Corporation, SR JHF 27-776147-003; 89000719380

1996, 2nd Quarter, $53,179.73 Claim for Refund

For Claimant: Heidi H. Schunke, Accountant
For Sales and Use Tax Department: Janice Thurston, Counsel

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

Issues:Whether claimant is entitled to the bad debt deduction that it claimed on its second quarter 1996 tax return.

Whether claimant has shown that its customer paid the disputed tax to this state.

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. The Board also directed staff to provide the claimant with written instruction regarding usage of a direct payment certificate.

Herman Daniel Franck, SN BH 52-002494-010; 89000963320

2-1-93 to 1-31-94, $32,993.81 Tax, $ 3,299.38 Penalty, Failure to File

$16,496.87 Penalty, Operating without a Permit

For Petitioner: Herman Franck, Owner
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 establishes that the audited measures of tax are excessive.

Whether petitioner is subject to sales tax liability as the retailer with respect to the taxable sales at issue.

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 submitted for decision.

Eva W. Del Conte, SY JH 53-000120-010; 89000969800

6-1-90 to 12-31-91, $13,955.70 Tax, $3,791.11 Penalty

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.

Issue:Whether petitioner, as a corporate officer and owner, is responsible for the tax liability incurred by the business during the period of corporate suspension.

Action: The Board took no action.

Titina Hardwick Hall & Gary Hall, SR JH 99-600196-010; 89002323700

10-1-94 to 10-25-94, $1,152.36 Tax, $115.24 Penalty

For Petitioner: Titina Hardwick Hall, Petitioner
Gary Hall, Petitioner
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 only a portion of the liability of the predecessor partnership because, upon dissolution of the predecessor partnership, the court ordered that petitioner was only liable for 48 percent of any subsequently discovered partnership debt.

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.

The Board recessed at 10:40 a.m. and reconvened at 10:55 a.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Thomas J. Poling, SR EAA 53-000267-010; 89000970100

7-1-95 to 3-31-97, $124,557.55 Tax

For Petitioner: Thomas J. Poling, Petitioner
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 subject to dual liability as a corporate officer for the tax liability of Tom's Auto and RV, Inc. (SR EAA 99-501007), for the third and fourth quarters 1995 under Revenue & Taxation Code, Section 6829.

Whether petitioner is subject to dual liability as officer of the corporate partner having control or supervision, for the tax liability of the partnership (SR EA 99-979195), for the first quarter 1997.

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 11:00 a.m. and reconvened at 1:30 p.m. Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

FINAL ACTION ON PETITIONS HEARD NOVEMBER 1, 2000

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 of Herman Daniel Franck, SN BH 52-002494-010; 89000963320, be redetermined as recommended by the Appeals Section.

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 of Titina Hardwick Hall & Gary Hall, SR JH 99-600196-010; 89002323700, be granted.

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 of Thomas J. Poling, SR EAA 53-000267-010; 89000970100, be redetermined as recommended by the Appeals Section.

The Board recessed at 1:35 p.m. and reconvened at 2:10 p.m. with Mr. Parrish, Mr. Klehs, Mr. Chiang and Dr. Connell present.

FRANCHISE AND INCOME TAX MATTERS

Helmi A. Hisserich, 99A-0341; 89002469560

1997, $1,158.00

Considered by the Board:June 30, 2000

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

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Klehs, Mr. Chiang and Dr. Connell voting yes, Mr. Parrish voting no and Mr. Andal absent, the Board adopted the formal opinion reversing the action of the Franchise Tax Board.

The Board recessed at 2:15 p.m. and reconvened at 2:20 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

PUBLIC HEARINGS

BUSINESS TAXPAYERS' BILL OF RIGHTS HEARING

Mr. Andal stated this was the full Board meeting to hear what taxpayers believe can be done to improve functions of the Board of Equalization.

Jennifer L. Willis, Taxpayers' Rights Advocate, made introductory remarks.

Speakers: Kai Mickey, Premier Sales and Use Tax Consulting

Abe Golomb, Associated Sales Tax Consultants

Mr. Andal stated for the record that he would have voted with the minority

on Helmi A. Hisserich, 99A-0341; 89002469560. At his request a written dissenting opinion signed by Mr. Andal and Mr. Parrish will be entered into the record

(Exhibit 11.1).

Exhibits to these Minutes are incorporated by reference.

PROPOSED UNDERGROUND STORAGE TANK MAINTENANCE FEE REGULATION 1205

Mr. Andal announced the public hearing of Underground Storage Tank Maintenance Fee Regulation 1205.

Mr. David Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1205 proposes to define "fee payer" for purposes of administration of the Underground Storage Tank Maintenance Fee and to clarify that there is a rebuttable presumption that the owner of real property is the owner of an underground storage tank located on the real property, even if the property is leased to another person. The proposed regulation also describes the type of evidence which may be submitted to rebut this presumption.

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

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 adopted Regulation 1205 as published (Exhibit 11.2).

PROPOSED SALES AND USE TAX REGULATION 1525.2, MANUFACTURING EQUIPMENT

Mr. Andal announced the public hearing of Sales and Use Tax Regulation 1525.2, Manufacturing Equipment.

Mr. David Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1525.2 is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6377. The regulation presumes that "consumables" consist of property that the taxpayer treats as having a normal useful life of less than one year for state income or franchise tax purposes. Amendments are proposed to allow taxpayers to submit evidence to overcome this presumption.

Speakers: Chris Micheli, Carpenter Snodgross & Associates

Eric Miethke, Nielsen, Merksamer, Prinello, Mueller & Naylor

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 staff to cancel the pending regulatory action and proceed with a Rule 100 Change to reflect the .25% reduction in state sales tax rate, effective January 1, 2001.

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 Regulation 1525.2 be brought back to the Business Taxes Committee to amend the language (Exhibit 11.3).

PROPOSED SALES AND USE TAX REGULATION 1595, OCCASIONAL SALES, SALE OF A BUSINESS

Mr. Andal announced the public hearing of Sales and Use Tax Regulation 1595, Occasional Sales, Sale of a Business.

Mr. David Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1595 is proposed to be amended to interpret, implement and make specific Revenue and Taxation code section 6006.5. Amendments are proposed to recognize the first two sales in a series of sales requiring a seller's permit as occasional sales.

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

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 Regulation 1595 as published (Exhibit 11.4).

PROPOSED SALES AND USE TAX REGULATION 1655, RETURNS, DEFECTS AND REPLACEMENTS

Mr. Andal announced the public hearing of Sales and Use Tax Regulation 1655, Returns, Defects and Replacements.

Mr. David Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1655 is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code sections 6006-6012 and Civil Code sections 1793.2-1793.25. Amendments are proposed to incorporate existing Board administrative guidelines regarding transfers of tangible personal property under these programs into the regulation, to delete gender-specific language, and to clarify that the rule regarding optional warranties also applies when the tangible personal property at issue is purchased out of state.

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

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 Regulation 1655 as published (Exhibit 11.5).

The Board recessed at 3:05 p.m. and reconvened at 3:15 p.m. with Mr. Parrish, Mr. Klehs, Mr. Chiang, and Ms. Mandel present.

BUSINESS TAXES APPEALS HEARINGS

U.S. Department of the Navy, HF EF 38-001983-001; 89000929150

1-1-91 to 12/31-91, $257,184.00 Claim for Refund

For Claimant: Wendy Kelly, Assistant Counsel
For Department of Toxics Substances: Dennis H. Mahoney, Senior Staff Counsel
For Sales and Use Tax Department: Janet Vining, Counsel

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

Issue:Whether hazardous waste disposal facility fees paid by claimant comprise double payment of fees for the provision of the same services by the state, and thus constitute imposition of a prohibited tax by the State of California on the Federal Government.

Mr. Klehs left the Boardroom.

Action: Upon motion of Mr. Chiang seconded by Ms. Mandel 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.

Cadence Design Systems, Inc.,TU ET 35-101218-001, -002, -003, -004, -005, -006; 89000904770, -4780, -4790, -4800, -4810, -4820

9-1-95 to 3-31-96, $399.50 Claim for Refund

6-1-96 to 6-30-97, $356.86 Claim for Refund

12-1-97 to 9-30-98, $196.47 Claim for Refund

3-1-97 to 3-31-97, $ 80.71 Claim for Refund

9-1-97 to 9-30-97, $ 75.43 Claim for Refund

3-1-98 to 3-31-98, $102.74 Claim for Refund

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

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

Issue:Whether the evidence shows that the 911 tax collected by the service provider on monthly access charges should be refunded because the monthly access charges are separately stated charges for private communication services.

Action: The Board took no action.

Quantum Corporation, TU ET 35-101233-001, -002, -003; 89000904850, -860; 33893

9-1-95 to 12-31-95, $ 386.72 Claim for Refund

12-1-95 to 12-31-95,$ 656.96 Claim for Refund

1-1-96 to 12-31-97, $3,196.47 Claim for Refund

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

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

Issue:Whether the evidence shows that the 911 tax collected by the service provider on monthly access charges should be refunded because the monthly access charges are separately stated charges for private communication service.

Action: The Board took no action.

Flying Vikings, Inc. SR-CHA 99-822359-010; 89002405410

4-1-95 to 12-31-97, $5,940.00 Tax, $00.00 Penalty

For Petitioner: Mats Salomonsson, Owner
Celine Correa, Owner
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issues:Whether the petitioner should be required to pay use tax on a 1972 Cessna 172M Skyhawk, registration number N7287Q, which was subsequently repurchased, and sold a second time.

In the alternative, whether the measure of tax for the 1972 Cessna 172M Skyhawk, registration number N7287Q should be calculated at the fair rental value of the aircraft.

Whether petitioner is entitled to a tax-paid purchase resold deduction, on the sale of a Piper Arrow, registration number N7655J.

Whether relief from the use tax on a 1979 Cessna 172, registration number N3151E, is warranted based on petitioner's allegation that an aircraft broker transferred title to petitioner or collected tax on the purchase.

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

Mr. Klehs re-entered the Boardroom. Ms. Mandel left the Boardroom.

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

Fast N Easy, Inc., SY KH 28-838860-010; 89000770840

10-1-94 to 12-31-97, $33,470.48 Tax

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 rebates from cigarette manufacturers, for discounting cigarette prices to customers by those same amounts, constitute additional taxable gross receipts pursuant to Revenue and Taxation Code Section 6012.

Action: The Board took no action.

The Board recessed at 4:00 p.m. and reconvened at 4:20 p.m. with Mr. Parrish, Mr. Klehs, and Mr. Chiang present.

Westar Transport, SR ARF 97-506236-010; 33070

9-1-95 to 3-3-96, $6,254.25 Tax, $00.00 Penalty

For Petitioner: Ron Silva, Owner/CEO
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issues:Whether petitioner's reliance on erroneous advice from a California retailer warrants relief from the tax.

Whether the determination is barred by the statute of limitations.

Ms. Mandel entered the Boardroom.

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

Mr. Klehs stated for the record he wanted to clarify that the majority

opinion regarding Helmi A. Hisserich, 99A-0341; 89002469560, is the order staff will follow. The dissenting opinion will be accepted as part of the record only.

Marble Systems Installation, Inc., SS BH 19-769241-010; 19431

4-1-94 to 3-31-97, $11,084.04 Tax

For Petitioner: Abe Golomb, Representative
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issue:Whether certain sales qualify as exempt sales in interstate commerce.

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

Asia Source, Inc., SR CHA 26-786030-010; 89000673070

10-1-93 to 9-30-96, $10,825.85 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 measure of disallowed sales for resale was established in accordance with the facts.

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

Ivan Herrera, SR BHA 99-113749-010; 89002108740

Ivan Herrera & Norma Herrera, SR BHA 53-000503-010; 37877

10-1-92 to 12-31-95, $26,240.92 Tax, $6,560.33 Penalty

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 Department properly determined the taxable measure for understated taxable sales.

Whether the Department has established that petitioner underreported his taxable sales with the intent to evade tax.

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

Tech Data Corporation, SR OHC 30-676390-010; 89000854030

07-01-91 through 06-30-94, $966,269.57 Tax

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.

Issue:

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD NOVEMBER 1, 2000

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, Mr. Andal absent, the Board ordered that the petition of U.S. Department of the Navy, HF EF 38-001983-001; 89000929150, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition of Flying Vikings, Inc. SR-CHA 99-822359-010; 89002405410, be redetermined as recommended by the Appeals Section. The Board directed staff to implement a payment plan.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition of Westar Transport, SR ARF 97-506236-010; 33070, be redetermined as recommended by the Appeals Section. The Board directed staff to give written advice on interstate transportation to petitioner.

The Board adjourned at 4:55 p.m.

The foregoing minutes are adopted by the Board on February 15, 2001.