2000 Minutes, Wednesday, April 5, 2000

The Board met at its offices at 450 N Street, Sacramento, at 10:00 a.m. with Chairman Andal, 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

Tony Domenico, SB UT 82-654147-010; 89001138290

4-30-97, $10,400.50

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

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

Issue: Whether the evidence shows that the purchase of the vessel is subject to sales tax. Whether the transfer is exempt from the use tax pursuant to California Code of Regulations, Title 18, section 1620 (b) (3).

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish absent, the Board ordered that the petition be granted in accordance with the revised Appeals Section recommendation. John H. Capman (Deceased), SR BH 19-627889-010; 89000259130

10-1-94 to 12-31-96, $52,086.39

For Petitioner: Joseph Paternoster, Successor Trustee of the John Capman Trust
Glenn M. Smith, Attorney
Rachel M. Dollar, Attorney
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue: Whether a reduction to the tax is warranted based on petitionerís allegation that the amount of sales established by the investigation is unreasonable. Whether the weighted average markup is excessive.

Action: Upon motion of Mr. Chiang, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be redetermined in accordance with the revised recommendation of the Appeals Section with regard to pilferage, and that the negligence penalty be deleted.

Mr. Parrish entered the Boardroom.

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 remainder of the petition be submitted for decision. Charles Girard Stetter, Sr., SR GH 26-814830-010; 89000684170

7-1-93 to 6-30-96, $34,390.13

For Petitioner: Charles Stetter
Meg Stetter-Jacobi, Bookkeeper
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issue: Whether the evidence provided is sufficient to warrant further reduction to the measure of tax.

Action: The Board directed the petitioner to adjourn to a conference room with Mr. Graybill so that Mr. Graybill may review the petitionerís new documentation. The hearing will continue following this review. La Cumbre Enterprises, Inc., SR GH 26-818206-010; 89000685610

10-1-93 to 9-30-96, $43,617.33

For Petitioner: Harold H. Houshmand, Accountant
Ari Avanessian, Owner
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue: Whether audited taxable sales were established in accordance with the facts. Whether the facts support an additional allowance for self-consumption.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Mr. Andal and Ms. Mandel voting no, the Board ordered that the petition be granted. Werther International, Inc.; SS OHC 30-673308-010; 89000850450

7-1-93 to 6-30-96, $3,163.08

For Petitioner: Kurt Lieber, President
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue: Whether the evidence shows that petitioner has nexus with the State of California, thus having a duty to collect use tax on the goods shipped into California. Whether petitioner is required to collect use tax on its sales to out-of-state retailers when the property that was sold was shipped to third party customers in California by petitioner, from an out-of-state location. Mr. Klehs left the Boardroom.

Action: Mr. Andal moved that the petition be granted. 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. 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 staff meet with the petitioner to discuss commissions, and come back at 1:30 p.m. with a recommendation. The Board recessed at 11:10 a.m. and reconvened at 1:30 p.m. with Mr. Andal, Mr. Chiang and Ms. Mandel present.

PUBLIC HEARINGS PROPOSED AMENDMENTS TO PROPERTY TAXES RULES 305, APPLICATION, AND 306, APPLICATION TO ASSESSOR

James K. McManigal, Acting Assistant Chief Counsel, Property Taxes, reported that Rules 305 and 306 are proposed to be amended to interpret and make specific the Constitutional and statutory authority of the Board to prescribe rules and regulations to govern local boards of equalization and assessment appeals boards when equalizing property values. Rule 305 sets forth more precisely the contents of and provisions for amendment of an application, filing requirements and provisions for consolidation of applications by an appeals board. Rule 306 specifies that the clerk shall transmit copies of written requests for amendments or corrections to the assessor.

Speakers: John McKibben, Deputy Executive Officer Los Angeles County Board of Supervisors Mr. Parrish and Mr. Klehs entered the Boardroom. Mr. McKibben testified that the proposed amendments to Rule 305 are contrary to existing law. He stated that now the person signing the application must be either the taxpayer or an authorized representative, and that the amendments allow for fraudulent signatures. He also stated that the Board has no authority under the statute for these amendments. The rule expands on deadlines contained in the law. He also stated that there will be costs incurred in vacated hearing time when issues change up to and including the day of the hearing. Thomas R. Parker, Deputy County Counsel El Dorado County Mr. Parker testified that he agrees with everything Mr. McKibben said, and he urged the Board not to adopt these rules as written. He stated that the rules were beyond the parameters of Revenue and Taxation Code Section 1603 and goes beyond the Boardís jurisdiction. Darlene Bloom, Clerk of the Board Orange County Ms. Bloom testified that she also agrees. The imbedding of the agentís authorization into the form was a consumer protection issue. Fraudulent claims have been reduced since making the original signature required on the form. Jim Bohn, CPA Mr. Bohn testified that he disagrees with the earlier statements and supports the Boardís adoption of the rules as published.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang, Ms. Mandel voting yes, the Board adopted the amendments to Property Taxes Rules 305, Application, and 306, Application to Assessor, as published. A copy of the rules as amended is incorporated in these minutes by reference (Exhibit 4.1).

PROPOSED AMENDMENTS TO SALES AND USE TAX REGULATION 1521, CONSTRUCTION CONTRACTORS

David H. Levine, Acting Assistant Chief Counsel, Business Taxes, reported that Regulation 1521 is proposed to be amended to interpret, implement and make specific Revenue and Taxation Code section 6012. The regulation, in part, currently sets forth a series of formulae by which a manufacturer/installer of fixtures may calculate taxable gross receipts derived from specified construction contracts. Amendments are proposed to provide that the measure of tax on sales of on-premise electric signs furnished and installed by the seller as an improvement to real property pursuant to a lump sum contract shall be 33% of the total contract price.

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

Action: 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 adopted the amendments to Sales and Use Tax Regulation 1521, Construction Contractors, as published. A copy of the regulation as amended is incorporated in these minutes by reference (Exhibit 4. 2).

FINAL ACTION ON PETITIONS HEARD APRIL 5, 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 petition of Charles Girard Stetter, Sr., SR GH 26-814830-010; 89000684170, be redetermined in accordance with the revised recommendation of 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 Werther International, Inc., SS OHC 30-673308-010; 89000850450, be granted in accordance with the revised recommendation of the Appeals Section. Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, Mr. Klehs voting yes, Mr. Chiang and Ms. Mandel voting no, the Board ordered that the remainder of the petition of John H. Capman (Deceased) SR BH 19-627889-010; 89000259130, be redetermined as recommended by the Appeals Section.

BUSINESS TAXES HEARINGS

Comdisco Healthcare Group, Inc., SS OHA 30-690964-010; 8900872260

4-1-92 to 6-30-95, $140,557.40

For Petitioner: Eric J. Coffill, Attorney
For Sales and Use Tax Department: Warren Astleford, Counsel

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

Issue: Whether the present value of the future rent payments are taxable upon lesseeís purchase of the leased equipment prior to the termination of the lease.

Action: Upon motion of Ms. Mandel, 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. James William Birges, SR DH 97-021438-010; 89000963890

2-1-93 to 3-31-97, $126,301.51

For Petitioner: Mandeep Dhillon, Consultant
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue: Whether a greater allowance for installation labor is warranted. Whether the facts support petitionerís claim that the selling price on certain sales were reduced subsequent to invoice date. Whether petitionerís claim that certain sales quotations were never consummated warrants a reduction in the taxable measure. Whether the facts prove that certain sales were not made by petitioner. Whether a certain sales was a nontaxable sale for resale. Whether the facts support an additional allowance for tax-paid purchases resold. Whether relief from the penalty for knowingly operating without a permit is warranted.

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

Action: Upon motion of Mr. Klehs, seconded by Dr. Connell and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Dr. Connell voting yes, the Board ordered that the petition be submitted for decision. The Board recessed at 2:25 p.m. and reconvened at 2:45 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Dr. Connell present.

APPEALS MATTER

Liberty Life Assurance Company, IT ET 34-001792-010, 020; 89000900290, 89000900300

1985, $60,212.44

1986, $69,048.43

1987, $75,355.17

1988, $80,674.75

1989, $99,471.67

Considered by the Board: February 23, 2000

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

Action: Upon motion of Dr. Connell, seconded by Mr. Klehs and duly carried, Mr. Klehs, Mr. Chiang and Dr. Connell voting yes, Mr. Andal voting no, Mr. Parrish passing then voting no, the Board ordered that the petitions be redetermined without adjustment. Dr. Connell left the Boardroom and Ms. Mandel entered.

BUSINESS TAXES HEARINGS

Dennis Eugene Wilson, SN DH 52-006364-010; 89000965960

10-1-96 to 12-31-96, $15,610.07

For Petitioner: Dennis Wilson
For Sales and Use Tax Department: Sharon Jarvis, Counsel

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

Issue: Whether petitionerís purchase of a new motorhome is subject to use tax. Whether relief from the tax is warranted due to petitionerís reliance upon oral advice from a Department of Motor Vehicles (DMV) employee. Whether relief from the 10 percent penalty for failure to file a return is warranted. Whether relief from the 10 percent penalty for misuse of a resale certificate is warranted.

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

6-1-90 to 12-31-91, $7,746.81

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

Action: The Board took no action. Albert C. Rich & Paul N. Israel, SR KH 99-217490-001; 89002152670

3-1-93 to 3-31-94, $6,204.00

For Petitioner: Appearance Waived
For Sales and Use Tax Department: Sharon Jarvis, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed for Albert C. Rich. No Contribution: disclosure statement was filed for Paul N. Isreal.

Issue: Whether claimant is entitled to offset the balance of its claim against its tax liability for the period January 1, 1995, through June 30, 1995

Action: 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 claims be redetermined as recommended by the Appeals Section. Robert Alan Phillips, Deborah Jean Phillips, Leroy Louis Abraham & Kimberly Ann Adrian, SR JH 99-452167-010; 89002261960

10-1-94 to 12-31-96, $26,461.58

For Petitioner: Deborah Phillips
For Sales and Use Tax Department: Jeffrey Graybill, Counsel

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

Issue: Whether petitionerís reliance upon (allegedly) erroneous, oral advice from the Boardís staff warrants relief from the applicable tax and interest.

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

FINAL ACTION ON PETITIONS HEARD APRIL 5, 2000

Upon motion of Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that in the petition of Comdisco Healthcare Group, Inc., SS OHA 30-690964-010; 8900872260, the petitioner be granted 30 days to provide evidence on the sole issue of who was providing insurance during the seven months following the passing of title and staff 30 days to respond. 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 James William Birges, SR DH 97-021438-010; 89000963890, be redetermined as recommended by the Appeals Section. Mr. Parrish moved that the failure to file penalty be deleted. The motion failed for lack of a second. 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 Dennis Eugene Wilson, SN DH 52-006364-010; 89000965960, be redetermined as recommended by the Appeals Section. Mr. Klehs moved that the petition of Robert Alan Phillips, Deborah Jean Phillips, Leroy Louis Abraham, & Kimberly Ann Adrian, SR JH 99-452167-010; 89002261960, be granted. The motion failed for lack of a second. Mr. Parrish moved that the sales be considered tax paid. The motion was seconded by Mr. Andal but failed to carry, Mr. Parrish and Mr. Andal voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no. Upon motion of Mr. Chiang, seconded by Mr. Klehs and duly carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, the Board ordered that the petition be redetermined as recommended by the Appeals Section. The Board adjourned at 3:20 p.m.

The foregoing minutes are adopted by the Board on May 24, 2000.