Approved Minutes - May 3, 2000

The Board met at its offices at 450 N Street, Sacramento, at 9:35 a.m. with Chairman Andal, Vice Chairman Parrish and Mr. Chiang present.

PETITION FOR RELEASE OF SEIZED PROPERTY

Emilioís Beverage Warehouse, 56069

Tobacco Trading, Inc., 56070

For Petitioner: Glenn Bystrom, Representative

Jeffrey G. Varga, 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 Cigarette and Tobacco Products Tax Law provides the Board with the authority to seize cigarettes without a search warrant.

Whether the cigarettes were properly seized pursuant to Revenue and Taxation Code section 30436.

During hearing of this petition, Mr. Klehs entered the Boardroom.

Action: Mr. Klehs moved that the petition be denied. The motion was seconded by Mr. Andal but failed to carry, Mr. Andal and Mr. Klehs voting yes, Mr. Parrish and Mr. Chiang voting no, Dr. Connell absent.

Upon motion of Mr. Chiang and unanimously carried, Mr. Andal,

Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Dr. Connell absent, the Board ordered that the petition be submitted for decision.

BUSINESS TAXES HEARINGS

Gus and Judy Cossette, SA UT 82-635799-010; 89001117080

7-1-94, $2,155.76

For Petitioner: Gus Cossette

For Sales and Use Tax Department:Jeffrey Graybill, Counsel

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

Issue:Whether the estimated purchase price of the vehicle was excessive.

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

Gtech Corporation West, SY KH 30-670261-020,-002,-003; 89000847010; 89000846980; 89000846990

1-1-93 to 3-31-96, $-529,385.56

For Petitioner: John A. Kozar, Director of Corporate Taxes

Stafford Matthews, Attorney

For Sales and Use Tax Department:Janice Thurston, Counsel

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

Issue:(020 &003) Whether the true object of petitionerís contract with the California State Lottery to operate Californiaís online lottery system is for the provision of services or for leases of tangible personal property.

(002) Whether the evidence provided shows that petitioner overpaid its use tax liability.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Dr. Connell absent, the Board ordered that the petition and revised staff recommendation of the claims for refund be granted.

The Board recessed at 10:50 a.m. and reconvened at 11:00 a.m. with

Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang present.

BUSINESS TAXES APPEALS HEARINGS

BHEP Inc., SR AP 13-834517-010; 89000086600

4-1-93 to 3-31-96, $33,777.48

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 establishes that the audited taxable markup is excessive.

Whether the amount allowed for self-consumed taxable merchandise is adequate.

Whether relief from the negligence penalty is warranted.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish 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 revised by the Appeals Section.

Charter Aviation, SU KHD 99-961280-010; 89002448190

1-1-89 to 6-30-96, $34,082.03

For Petitioner: No Appearance

For Sales and Use Tax Department:Warren Astleford, Counsel

Action: The Board took no action.

Siamak Moazami Goodarzi, SR DHA 22-847193-010; 89000395120

10-1-92 to 11-30-95, $5,222.40

For Petitioner: Appearance Waived

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 supports additional adjustments to excess bank deposits for non-sale items.

Whether certain sales of capital assets are exempt sales in interstate commerce.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish 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, directing the staff to prepare a memorandum to the Board answering why a $2,500 adjustment wasnít made by either the Sales and Use Tax Department or the Appeals Section staff.

PSI-Med, SR EA 24-959185-010; 89000502730

7-1-87 to 6-30-94, $70,732.38

For Petitioner: Vansel S. Johnson, Jr., President

Abe Golomb, Consultant

For Sales and Use Tax Department:Warren Astleford, Counsel

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

Issue:Whether the software maintenance contracts at issue are nontaxable since petitionerís software qualifies as custom computer programming, and therefore, the maintenance contracts are also custom and not subject to tax.

Whether the software that petitioner licenses qualifies as nontaxable custom computer programming.

Whether an adjustment is warranted based on petitionerís allegation that two posting errors are included in the measure of tax.

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

Plastikon Industries, Inc., SR CHA 26-713724-010; 89000654330

10-1-93 to 12-31-96, $49,004.27

For Petitioner: David Pryor, CPA

Fred Soofer, President

John Low, Controller

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 establishes that some of the sales included in the audit as taxable are actually nontaxable sales for resale or exempt sales in interstate commerce.

Action: Upon motion of Mr. Parrish, 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 submitted for decision, deleting the negligence penalty.

AMCS Inc., SZ GH 26-763172-010; 89000666040

4-1-92 to 3-31-95, $31,553.72

For Petitioner: C. E. "Butch" Kruse, Consultant

Harry Last, 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 pool covers at issue were fixtures.

Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Dr. Connell absent, the Board ordered that pool covers be considered as materials, that hydraulic pumps, power packs and electric motors be considered as fixtures, and the matter be referred to the Appeals Section to make the adjustments for time and materials contracts and to make a recommendation to the Board whether a Memorandum Opinion should be issued.

The Board recessed at 12:00 p.m. and reconvened at 1:30 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang present and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

STATE ASSESSEE PRESENTATIONS ON THE VALUATION OF THEIR PROPERTIES

PUBLIC COMMENTS

Speakers:Jonathan B. Wood, Pacific Bell

Peter Michaels, Cooper, White & Cooper

David A. Brown, Yuba County

William Copren, Sierra County

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

The Board recessed at 2:10 p.m. and reconvened at 2:20 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

FINAL ACTION ON PETITION HEARD MAY 3, 2000

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel not participating, the Board ordered that the petition of GTech Corporation West, SY KH 30-670261-020, -002, 003, 89000847010, 89000846890, 89000846990, be adjusted with respect to the Ė020 account for the fourth quarter 1993 in the amount of $28,296.32 and for the first quarter 1994 in the amount of $71,189.78 and granted with respect to the Ė020 and Ė003 accounts.

BUSINESS TAXES APPEALS HEARINGS

Balwant Rai Birla & Sudesh Birla, CP ET 50-001677-010, CR ET 02-001247-010; 89000959600; 89000005140

1-12-93 to 11-17-1995, $116,358.76

For Petitioner: No Appearance

For Sales and Use Tax Department:Monica Brisbane, Counsel

Action: The Board took no action.

Sam L. Morse Co., SR EAA 24-954847-010, 001; 15465, 41285

7-1-95 to 9-30-98, $10,209.22

For Petitioner: Roger Olson, President

For Sales and Use Tax Department:Janice Thurston, Counsel

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

Issue:Whether the sale of a vessel delivered to the purchaser in this state qualify as an exempt sale in interstate commerce.

Whether petitioner is responsible for collecting the transit district tax based on the registration address of the vessel.

Whether petitioner is entitled to a refund for sales tax reimbursement collected for a sale in foreign commerce.

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.

Sam Arman, TK MT 44-038726-010; 89000950260

1-1-91 to 6-30-97, $27,235.64

For Petitioner: Sam Arman

For Sales and Use Tax Department:Janet Vining, Counsel

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

Issue:Whether petitioner, as lessor, is liable for the fee even though his lessees operated the underground storage tanks.

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 that the penalty be deleted.

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 that the petition be submitted for decision, granting the taxpayer 30 days to submit additional documentation, the Sales and Use Tax Department 30 days to respond, and the Appeals Section 30 days for review and to prepare a recommendation to the Board.

Richard R. Southworth, SB UT 82-662727-010; 89001148310

5-31-97, $5,610.00

For Petitioner: Richard R. Southworth

For Sales and Use Tax Department:Warren Astleford, Counsel

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

Issue:Whether the evidence establishes that the purchase of the vessel at issue was a nontaxable purchase for resale.

Action: Upon motion of Mr. Klehs, 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.

Kumar Jewelers, Inc., SY GH 26-826703-010; 89000689570

10-1-92 to 9-30-95, $17,223.84

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 relief from the tax is warranted based on petitionerís argument that it is entitled to a sales tax-included deduction.

Whether relief from the tax is warranted based on petitionerís contention that it was misadvised in the previous audit by the pervious auditorís acceptance of certain claimed tax-included sales.

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 petition be granted as recommended by the Appeals Section.

Namrata Patnaik, SR GH 99-352210-010; 89002213490

9-15-93 to 6-30-95, $22,407.44

Pennsylvania CMOS Technologies, Inc., SR GH 99-414354-010; 89002242210

1-1-94 to 12-31-96, $35,620.80

For Petitioner: Ram C. Dhara, CPA

For Sales and Use Tax Department:Kevin Hanks, Hearing Representative

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

Issue:Whether the evidence is sufficient to show that unreported taxable sales and disallowed sales for resale were computed in accordance with the facts.

Whether relief from the negligence penalty is warranted.

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 that the measure of tax be reduced by $224,554.00 for the petition of Namrata Patnaik, dba Incom.

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 Pennsylvania CMOS Technologies, Inc., be redetermined as recommended by the Appeals Section.

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 vote be reopened for the petition of Pennsylvania CMOS Technologies, Inc.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, the Board ordered that the petition of Pennsylvania CMOS Technologies, Inc., be redetermined as recommended by the Appeals Section.

Gerald A. Weibe, Mary E. Weibe, Dennis R. Brooks, Robert F. Amos, & Kay Amos

SP UT 82-648284-010; 89001130880

3-31-94, $3,856.88

For Petitioner: Gerald A. Wiebe

Dennis Brooks

For Sales and Use Tax Department:Janice Thurston, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed. No contribution disclosure statements were filed for Robert & Kay Amos.

Issue:Whether the evidence shows petitioners Gerald A. and Mary E. Wiebe (the Wiebes) and Robert Brooks (Brooks) each purchased an interest in the subject aircraft.

Whether relief from the penalty for failure to file a return 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 that the petition be submitted for decision.

The Board recessed at 3:30 p.m. and reconvened at 3:35 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

BUSINESS TAXES APPEALS HEARINGS

Marmi Corporation, SR CHB 21-798393-070/-080/-090; 89000333520/333530/333540

4-1-93 to 9-30-93, $50,406.11

10-1-93 to 3-31-94, $52,617.08

4-1-92 to 3-31-96, $136,492.90

For Petitioner: Appearance Waived

For Sales and Use Tax Department:Kevin Hanks, Hearing Representative

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

Issue:Whether bank deposits rather than state income tax returns should be used to determine petitionerís gross receipts.

Whether the 3.3 percent exempt sales found in the prior audit of petitioner should be applied in this audit.

Whether relief from the fraud penalty is warranted.

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

FINAL ACTION ON PETITIONS HEARD MAY 3, 2000

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel not participating, the Board ordered that the petition of Emilioís Beverage Warehouse, LLC, 56069, Tobacco Trading, Inc. 56070, be denied.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel not participating, the Board ordered that the petition of Gus and Judy Cossette, SA UT 82-635799-010; 89001117080, 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 and Mr. Chiang voting yes, Ms. Mandel not participating, the Board ordered that the petition of PSI-Med, SR EA 24-959185-010; 89000502730, be redetermined as recommended by the Appeals Section.

Mr. Andal moved that the petition of Plastikon Industries, Inc., SR CHA 26-713724-010; 89000654330, be granted. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs and Mr. Chiang voting no, Ms. Mandel not participating. The Board deferred consideration of this matter to the next Sacramento Board meeting.

Mr. Andal moved that the petition of Richard R. Southworth, SB UT 82-662727-010; 89001148310, be granted then withdrew his motion. Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish passing then voting yes, Mr. Andal voting no, the Board ordered that the petition 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 Sam L. Morse Co., SR EAA 24-954847-010, 001; 15465, 41285, be redetermined as recommended by the Appeals Section.

Mr. Andal moved that the petition of Robert F. Amos, & Kay Amos, SP UT 82-648284-010; 89001130880, be redetermined as recommended by the Appeals Section and that the petition of Gerald A. Weibe, Mary E. Weibe, Dennis R. Brooks be granted. The motion failed for lack of a second.

Upon motion of Mr. Andal, 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 of Robert F. Amos, & Kay Amos, be redetermined as recommended by the Appeals Section.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,

Mr. Andal and Mr. Parrish voting yes, Mr. Klehs passing then voting yes, Mr. Chiang voting no, Ms. Mandel passing then voting no, the Board ordered that the petition of Gerald A. Weibe, Mary E. Weibe and Dennis R. Brooks be granted.

The Board adjourned at 3:40 p.m.

The foregoing minutes are adopted by the Board on July 26, 2000.