BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT APRIL 29, 2009 SALES AND USE TAX APPEALS HEARINGS PETITION FOR REDETERMINATION filed by WOODLAND HILLS CAR WASH, INC. (Case No. 299486 AC) and BHUPINDER SINGH MAC (Case No. 299487 AC) Reported by: Beverly D. Toms CSR No. 1662 1 1 2 P R E S E N T 3 4 For the Board Betty T. Yee of Equalization: Chair 5 Bill Leonard 6 Member 7 Michelle Steel Member 8 Marcy Jo Mandel 9 Appearing for John Chiang State Controller (per 10 Government Code Section 7.9) 11 Diane Olson 12 Chief, Board Proceedings Division 13 14 For Board of David Levine Equalization Staff: Tax Counsel IV 15 Kevin Hanks 16 Sales and Use Tax Dept. 17 Robert Tucker Legal Department 18 Scott Lambert 19 Hearing Representative 20 For Petitioner: Poonam Gahlawat 21 Office Manager 22 Bhupinder S. Mac Taxpayer 23 Moti Balyan 24 Operations Manager 25 ---OOO--- 26 27 Culver City, California 28 April 29, 2009 2 1 ---oOo--- 2 MS. OLSON: Next item is 7A, Woodland Hills Car 3 Wash and 7B, Bhupinder Singh Mac. 4 Please come forward. 5 MS. YEE: Okay. 6 MR. LEVINE: The issues in these petitions of 7 Woodland Hills Car Wash, Inc. and Bhupinder Singh Mac 8 are whether payments from cigarette manufacturers were 9 taxable rebates. And if so, whether Petitioner should 10 be relieved of the tax under Section 6596. 11 MS. YEE: Okay. Very well. Thank you. Good 12 afternoon. 13 MR. MAC: Good afternoon. 14 MS. YEE: Please introduce yourself formally 15 for the record and also who you have with you today. 16 MR. MAC: My name is Bhupinder Singh Mac. I am 17 the owner of Mac Chevron. And I'm also the President of 18 Woodland Hills Car Wash, Inc., the two stations that -- 19 that are involved here. 20 MS. YEE: Okay. 21 MR. MAC: On the right is Mr. Moti Balyan. 22 He's my Operations Manager. And Poonam Gahlawat, she's 23 my accountant and Office Manager. 24 MS. YEE: Okay. Very well. You have ten 25 minutes. 26 MR. MAC: Basically we -- we have been -- we 27 were audited and that the auditor ascertained that we 28 have to pay tax on the cigarette rebates that we 3 1 received. 2 We have been audited a couple of times 3 previously. The letters -- the audit letters were 4 issued in 1997 and 1996, in which the auditor examined 5 our books and never said that we had any problem with 6 that audit. And at that time there was a question 7 about -- regarding the cigarette rebates, and I 8 particularly asked him and he said there is no tax on 9 that because this is a rebate and it's not something 10 that we -- we sell and charge the customer. 11 Rebates are usually considered as our purchases 12 being reduced by the amount of rebate that we received. 13 And we have been talking to the Board regarding this on 14 several occasions and when said most of the money 15 received from cigarette companies is for displays, rents 16 and promotions. 17 Any rebate for reduction in price is considered 18 as lowering the purchase price. Therefore, how can we 19 be just asked to pay sales tax on that for something 20 that we have not collected from our customer. 21 And as I said in the audit it was stated that 22 our previous -- on two previous occasions the books were 23 accepted the way they were. 24 In -- in the letter the -- there has been an 25 example cited that if a customer comes in and buys 26 something for $10 that's been priced and he gives us a 27 coupon of $2 an -- an $8 sales price does not constitute 28 that we have to charge him tax on $10. Or -- or the 4 1 other way around, that we have to charge him tax on $10 2 and the $2 is a rebate. 3 But in our instance it is not that way. We 4 display a price and we charge -- and that's the price 5 that is put into our point of sale so that when the 6 customer comes in, and that's the price that is charged. 7 And any rebate that is given to us by the 8 cigarette manufacturer is displayed -- is for the 9 display that we put up or any promotion that we do to 10 sell more cigarettes, which reduces our -- our purchase 11 price. 12 So, that's the reason we -- we believe that 13 we -- we are not to be charged the extra sales tax that 14 the Board is charging us. 15 And, secondly, as I said, in the previous audit 16 they have submitted another worksheet which says that 17 there was a $14,000 rebate -- I'll just -- cigarette 18 rebates were noted in 1996. Taxpayer obtained detail 19 of -- from Phillip -- Phillip Morris -- from Reynolds 20 and Phillip Morris. These rebates amounted to $14,255 21 and are considered taxable. 22 This is their internal sheet. I never received 23 any of this sheet. All I got was a letter saying that 24 the audit has been accepted. If this was the problem, 25 you know, they should have told us and we would have 26 started charging the taxes. 27 In any event, this audit finished and they said 28 that we are supposed to be charging taxes. We change 5 1 our practice and have been charging taxes and have been 2 paying the taxes. That's why we believe that we should 3 not be unduly asked to pay these taxes, which we have 4 not collected. 5 MS. YEE: Okay. 6 MR. MAC: That's all. 7 MS. YEE: Okay. Very well. 8 Any -- 9 MR. BALYAN: I will take from here. 10 MS. YEE: Yes, could you pull the microphone in 11 front of you, sir. 12 MR. BALYAN: As Mr. Mac explained, my name is 13 Moti Balyan, and I'm Operation Manager for Woodland 14 Hills Car Wash and Mac Chevron. 15 Mr. Mac is in business from last 30 years. And 16 from last 30 years I think Department is also aware and 17 everybody is aware that we sell cigarette and 18 manufacturer always ask the retailers to do the sale and 19 on that they reward us. 20 The -- another thing this money is given to us 21 is that they ask for eight feet of space. And 22 there's -- as everybody know and Department know that 23 nothing is free. 24 When they rent the space, they have to pay for 25 it. Eight foot display take a lot of space. And that 26 space we cannot use it only we have to advertise and 27 promote their product. 28 And this money is -- Department is saying in -- 6 1 in the letter that they are not aware that they are 2 getting the rebate previously. 3 Cigarette manufacturers are always aggressive 4 in insisting retailers to push their product, and in 5 that concern they reward us. 6 After we have this dispute I brought in the 7 notice of the manufacturer and instead of giving the 8 rebate, they're starting price markdown on the invoices. 9 Now we don't have that issue. They mark down the 10 prices, otherwise they're $2.50 off $2 -- $3 off. 11 And other side for the display and for the rent 12 and other thing, they give us a separate check. 13 The dispute is still not resolved but Mr. Mac 14 start paying the tax the day we came to know the day 15 Department told even that money is no taxable. 16 It's -- the -- it's the money for the space and 17 the services we provide for the manufacturer. And we 18 are still paying the tax until it get resolved. 19 So we request you to consider this. It's not 20 the money that we supposed to pay tax. It -- this money 21 they give us -- to us for certain reasons. They -- if 22 we lose -- if we put the price -- suppose my price is $5 23 for the cigarette, and suppose I charge -- and my 24 regular price is $6, if I'm getting $1 rebate. If I 25 charge $6 tax -- if I charge $5, then I'm not collecting 26 tax for the Department. If I'm displaying $6 and 27 charging $5 then I'm violating the Better Business Law. 28 So I don't know where to go. Better Business 7 1 say whatever price you display you have to charge it. 2 Okay. Department said that you have to put high -- you 3 have to put high price and sell it lower and then charge 4 the tax. 5 So we are in middle between rock and wall. So, 6 in this situation if you guys can advise us and help us 7 out in this issue. Thank you. 8 MS. YEE: Thank you much. Okay, Department. 9 MR. LAMBERT: Good afternoon, Madam Chairwoman 10 and Members. My name is Scott Lambert and I'll be 11 representing the Sales and Use Tax Department. 12 To my right is Kevin Hanks, also with the Sales 13 and Use Tax Department. And to Mr. Hanks' right is 14 Robert Tucker with the Legal Department. 15 I will address the specifics of the Sales and 16 Use Tax petition for Bhupinder Singh Mac and then 17 discuss Woodland Hills Car Wash, Inc.'s petition, which 18 is very similar. 19 Mr. Mac, Petitioner, operates as a sole 20 proprietor of a chain of gas stations with Mini-Marts 21 that sell cigarettes. The start date of the seller's 22 permit was January 1, 2001. The audit period was from 23 October 1, 2001 to September 30, 2004. 24 Petitioner previously operated the gas stations 25 as a partnership July 1998 to December 2000. The 26 Petitioner was audited three times during that time 27 period. 28 There is only one item at issue in this audit; 8 1 cigarette rebates. During the audit it was discovered 2 that the Petitioner had revenue from cigarette rebates 3 that was not reported in the amount of $396,000. 4 Cigarette buy-down rebates paid by cigarette 5 manufacturers are taxable per Regulation 1671.1. In a 6 Tax Information Bulletin sent with the third quarter 7 1998 sales tax return there was an article that said, in 8 essence, rebates paid by manufacturers are taxable. 9 There appear to be some possible confusion 10 regarding this issue before that time. The Board 11 previously took note of the possible confusion about the 12 issue and concluded that the subject rebates should be 13 regarded as taxable only for periods commencing on and 14 after January 1, 1999. 15 The Petitioner argues that the cigarette 16 rebates included in the audit as taxable are not subject 17 to tax for several reasons. 18 One, the rebates were not found to be taxable 19 in the prior audits of the predecessor. The Petitioner 20 provided no-change audit letters for the last audit of 21 the predecessor. 22 In essence, the Petitioner is arguing that 23 Section 6596, excusable delay, reliance on advice, 24 should preclude the Department from including cigarette 25 rebates in the measure of tax in this audit. 26 Department's response. The file for the 27 predecessor account was destroyed due to the permit 28 being closed out in December of 2000. Although the last 9 1 no-change audit working papers for the predecessor for 2 the period January 1, 1995 to September 30, 1996 was 3 placed in the Petitioner's new file. The audit working 4 papers clearly show that the Petitioner was instructed 5 that cigarette rebates were taxable. 6 On the back of the no-change report dated 7 January 24, 1997 it stated, "Cigarette rebates were 8 noted in 1996. Taxpayer obtained detail of rebates from 9 Phillip Morris. These rebates amounted to $14,000 and 10 are considered taxable." 11 An additional schedule had audit comments on 12 them. The comments read, "Taxpayer and bookkeeper were 13 informed that a possible refund exists." And they were 14 also informed that cigarette rebates are considered to 15 be subject to the sales tax. 16 A no-change audit was prepared because the 17 rebates were offset by a discovered like amount credit. 18 In addition, the Petitioner was notified by the 19 third quarter of 1998 Tax Information Bulletin that 20 cigarette buy-down rebates were subject to tax. The Tax 21 Information Bulletin was sent out after the last 22 predecessor audit was conducted. 23 Accordingly, the Petitioner has been properly 24 notified that cigarette buy-down rebates from 25 manufacturers are taxable. 26 Contention 2. Petitioner could not collect 27 sales tax reimbursement from his customers on the amount 28 of the rebates because the manufacturers mandated a 10 1 pre-set selling price and the cigarette displays were 2 clearly marked with that selling price. 3 The Department's response. The pre-set selling 4 price would not affect the Petitioner's ability to 5 charge and collect the proper sales tax reimbursement. 6 Sales tax should be charged on the selling price plus 7 the amount of the rebate. 8 If the Petitioner has questions regarding this, 9 the Department would gladly contact the Petitioner to 10 explain. The Petitioner is responsible for reporting 11 and paying the sales tax whether sales tax reimbursement 12 was expected or not. 13 Contention number 3. A portion of the amount 14 received from cigarette manufacturers was for display 15 rental and not subject to tax on that basis. 16 The Department's response. Payments received 17 from a cigarette manufacturer in consideration for 18 lowering the price of the sales price of cigarettes is 19 includable and taxable gross receipts. 20 Payments received from a cigarette manufacturer 21 in sole consideration for display or product placement 22 would not be subject to tax. 23 The Petitioner provided excerpts from a couple 24 cigarette agreements. Some pages of the agreements were 25 missing. 26 Accordingly, we reviewed all the cigarette 27 agreement documents provided by Petitioner and found no 28 support for Petitioner's contention that a portion of 11 1 the rebate amount received from the cigarette 2 manufacturers is designed for display or product 3 placement. 4 Therefore, it is the Department's position that 5 cigarette rebate payments received by Petitioner should 6 be included as taxable gross receipts. 7 In regards to amnesty. On March 18, 2008 the 8 Board ordered that cases for -- that for cases involving 9 third party cigarette rebate subject to the amnesty 10 interest penalty, the amnesty interest penalty 11 applicable to the tax measured by the rebates will be 12 relieved if within 30 days of the Notice of 13 Redetermination the taxpayer either makes full payment 14 of the amount due or enters into an installment payment 15 plan not exceeding 13 months and successfully completes 16 that agreement. 17 Therefore, we recommend relief of the amnesty 18 interest penalty in accordance with the Board's previous 19 order. 20 Accordingly, we recommend that the petition for 21 Mr. Mac be denied. 22 MS. YEE: Okay. 23 MR. LAMBERT: In regards to Woodland Hills Car 24 Wash; Petitioner operates as a corporation a chain of 25 gas stations with Mini-Marts that sell cigarettes. The 26 start date of the seller's permit was November 1, 1991. 27 The audit period was from October 1, 2001 to 28 September 30, 2004. There's only one item at issue in 12 1 this audit, as well, cigarette rebates. 2 During the audit it was discovered that the 3 Petitioner had revenue from cigarette rebates that was 4 not reported as taxable in the amount of nearly $21,000. 5 This was the third audit of this taxpayer. The 6 two previous audits were no changes. The audit for the 7 period July 1, '93 to September 30, '96 is the only 8 audit of the two previous audits that mentions cigarette 9 rebates. 10 The notes in the audit state that the cigarette 11 rebate figures were requested from the Petitioner but no 12 further mention of cigarette rebates were made after 13 that. 14 It should be noted that the related account was 15 audited for the same time period and cigarette rebates 16 were considered taxable in that audit. 17 Therefore, it is assumed that the Petitioner 18 did not have any cigarette rebates during the last 19 audit. 20 Even if there had been cigarette rebates during 21 the prior audit, the third quarter 1998 Tax Information 22 Bulletin notified the Petitioner after that audit that 23 cigarette rebates are taxable. 24 The Petitioner was put on notice starting with 25 January 1, 1999 that cigarettes rebates were taxable. 26 The cigarette rebates were received for only 27 five quarters of this audit period, from April 2002 to 28 June 2003. The prior comments and arguments from the 13 1 related petition apply here, as well. 2 Accordingly, for these reasons we recommend 3 that the petition be denied. 4 MS. YEE: Okay. Thank you very much. 5 You have five minutes on rebuttal. 6 MR. MAC: Well, the only thing, you know, 7 they -- they compare us with the -- the seller like 8 telephone companies where a customer comes in and -- and 9 gives a rebate. You know, they buy $100 of the phone 10 and they -- they are given a rebate to pay the full 11 price, and they -- they mail in the rebate coupon and 12 they get the check back. 13 But in our instance it isn't the same. As Mr. 14 Moti said, what whatever we display we have to sell 15 that -- that price to the customer. 16 If we're displaying $4.50 cents, that's what 17 we're supposed to charge. We cannot charge $6 on the -- 18 to the customer, and give them a rebate and charge them 19 sales tax on $6. 20 Until that policy change it's a nuisance as it 21 is a very, very competitive business. And, you know, 22 to -- to argue with a customer, and most of the people 23 who are smoking, you know, they are so irritated, this 24 always a problem and if you charge them $6 and even the 25 tax on that extra dollar 50, we end up arguing with the 26 customers. 27 That's the reason from -- from after the audit 28 was a (inaudible) eat that loss and we have been paying. 14 1 But to pay this undue, you know, 40 -- 45,000, what you 2 guys are asking, it's -- it's just not possible. It's 3 too much burden on -- on us. 4 And that's why I request that this -- this 5 should not be charged and this should not be, you know, 6 any -- any charge to us for this. 7 MS. YEE: Mr. Balyan. 8 MR. BALYAN: Yeah, I have some concern about 9 the Department. The Department is saying that when they 10 did the audit in '96 and other times they said that they 11 found some extra credit and they understate the -- 12 rebate money towards that. But we received the letter 13 from the Department stating that my taxes were exactly 14 acceptable and there was no adjustment. So I don't 15 think Department is true and honest regarding the 16 adjustment about the 14 thousand 200 some dollar rebate. 17 In previous audit Department said that they 18 find the $14,000 rebate and they -- they have -- we have 19 some tax credit. And they applied that tax credit to 20 our side, but Department is no longer -- because the 21 letter says that they have accepted the tax return 22 acceptable as we filed, there is no change. That's what 23 the letter says. 24 But Department is saying here that they have 25 adjusted that tax return. 26 The second thing, Department is saying that in 27 Woodland Hills Car Wash, Inc. last five quarters we have 28 the -- the cigarette issue. Because -- the rebate issue 15 1 is because we rented the space -- eight feet of space to 2 the Phillip Morris and R. J. Reynolds. That is the rent 3 that -- for the display, for the space. That's what the 4 money was for the last quarter because we did not sign 5 any agreement previously. 6 So, the rebate, if -- if the manufacturer want 7 to pay the rebate or want to buy down, then they should 8 do without any contract. But they -- they don't do 9 that, until -- unless you sign the contract. When you 10 sign the contract you provide them space and they use 11 that space at their own benefit. Then they pay that 12 money. 13 They are not giving to everybody because there 14 is no agreement. Those are the people, some are 15 providing space to them. And we provide the space, we 16 merchandise, we provide service to them. That's why 17 they are giving this rebate. 18 They are not giving us this to give it to 19 the -- to passing to the customer. And this our option, 20 either we pass it to the customer or we keep it to 21 ourself. But to -- as Mr. Mac say, we stay 22 competitive. It's dime and penny business. That's why 23 we try to reduce the price. 24 But that money is not that they -- it should go 25 to the customer or it should pass on to them. It's all 26 sold season. They cannot dictate that where that money 27 should be used. 28 Thank you. 16 1 MS. MANDEL: Question. 2 MS. YEE: Ms. Mandel. 3 MS. MANDEL: This gentleman is -- has a very 4 different description of the agreement with Phillip 5 Morris than what you describe, Mr. Lambert. Because if 6 the -- if the agreement is for display and if the 7 agreement does not require a price reduction, I'm -- you 8 know, I don't -- I don't think I have the agreement in 9 front of me right now. 10 But he just said it was at the -- retailer's 11 option whether they would reduce the price or not. 12 I thought that the whole deal was if there was 13 a required price reduction -- so, have you read the 14 agreement? Do we have the agreement? What's the 15 story -- what's -- what's going on with the agreement? 16 Because that agreement from Phillip Morris I thought was 17 what was going to govern -- 18 MR. LAMBERT: You're absolutely right. 19 MS. MANDEL: Okay. 20 MR. LAMBERT: That would govern what -- the 21 taxability of it. And if it's just for shelf space and 22 that's what they're paying for, that income would not be 23 subject to tax. 24 MS. MANDEL: If it's just for shelf space. 25 MR. LAMBERT: Absolutely. 26 So, it comes down to your -- 27 MS. MANDEL: But wait, wait, wait. Can you 28 wait for the rumbling -- 17 1 MR. LAMBERT: Sure. 2 MS. MANDEL: -- because I don't hear as well 3 with the rumbling. 4 Okay. 5 MR. LAMBERT: So, it comes down to your 6 question is, what's the difference between what he's 7 arguing and what we're arguing. The information that's 8 been provided to us in terms of the agreement -- 9 MS. MANDEL: Have you read the agreement? 10 MR. LAMBERT: Yes. 11 And as I mentioned in my presentation, we don't 12 have all the documents. And so -- 13 MS. MANDEL: All the documents. 14 MR. LAMBERT: Well, all the -- all the 15 agreement that -- from Phillip Morris. 16 MS. MANDEL: Okay. 17 MR. LAMBERT: We don't have -- 18 MS. MANDEL: It's missing pages or something. 19 MS. YEE: It's incomplete. 20 MR. LAMBERT: Absolutely. There's missing 21 pages. 22 MS. MANDEL: Do you -- do you have a full copy 23 of the agreements with Phillip Morris for this time 24 period? 25 MR. BALYAN: Ma'am, I don't have for the year 26 the Department is asking, but I have the new one. If 27 Department asked or if you guys allow, I can provide it 28 to the Department. 18 1 And in any agreement, I had the full file. It 2 doesn't say anywhere that with that price we have to 3 reduce the selling price. 4 MS. MANDEL: You -- I'm sorry, you have the 5 what? 6 MR. BALYAN: I have the latest agreement but I 7 couldn't find the old agreement, like what Department 8 asked us for the 2001, because we never keep. And I ask 9 Phillip Morris, R. J. Reynolds, everybody, if they can 10 come up with anything, you know, I oppose the Legal 11 Department. But they said they don't have. And if they 12 do, they won't providing to me. 13 I couldn't collect any for, but I have the 14 latest -- what information I have, I have here. I can 15 more than happy to give it to the Department. 16 MS. YEE: Mr. Leonard. 17 MR. HANKS: Ms. Mandel -- unfortunately, 18 having -- having a copy of -- of the agreement, the 19 current agreement that the Petitioner has wouldn't 20 assist us with knowing what type of agreement the 21 Petitioner maintained with Phillip Morris back during 22 the time of the -- the audit period. 23 And, unfortunately, Phillip Morris has various 24 premium programs and -- and have modified those programs 25 over time. 26 As I understand it, they had a Type 1 and a 27 Type 2 contractor in the period in question. The Type 1 28 type of agreements would have been the display type of 19 1 allowances that you're describing, that we would have 2 treated as -- as wholly exempt from tax. No -- no 3 question about it. 4 But Petitioner hasn't been able to produce that 5 agreement and tie that into the amount of rebate income 6 they generated during the audit period. 7 MR. LAMBERT: May I add one thing? 8 MS. YEE: Yes. 9 MR. LAMBERT: Normally on that Type 1 agreement 10 they're going to pay you so much per store and it stays 11 to be a constant income. And if you take a look at 12 the -- the tax per quarter, you don't see that. It's 13 variable. 14 So, I think that -- you know, and if it's based 15 on a variable amount of how much you sell, then it's 16 generally going to be a a Type 2 contract. 17 MS. YEE: Mr. Balyan. 18 MR. HANKS: Good point. That's correct, as 19 well. 20 MS. YEE: Okay. 21 MR. HANKS: Yes. 22 MS. YEE: Ms. Mandel -- oh, you didn't -- any 23 other questions? 24 MR. BALYAN: Can I answer? 25 MS. YEE: Mr. Balyan. 26 MR. BALYAN: Yeah. The -- the contract Phillip 27 Morris changes from year to year. It change only the 28 amount they will provide. The definition, the 20 1 specification, the space, the size, everything is as it 2 was in 2001 or 2004 or 2007 and '8. The definition is 3 exactly the same. Only the change is the timing and the 4 space requirement, or the rebate amount. That's what 5 they change. 6 They had no change their definition since the 7 beginning of -- of their agreement, when they start 8 signing the agreement. 9 So if Department want 2007 and '8 I do have. 10 Previous whatever agreement I have I have provided it to 11 the Department. And they state the definition of 12 everything. 13 MS. YEE: Okay. Ms. Steel. 14 MS. STEEL: Well, this rebate issue is just 15 coming back and back because it's -- it's very tough to 16 run business in California because, you know, you have 17 to explain to customers. 18 And we have another stuff, CRV, California 19 Redemption Value, same thing, too. So we -- actually, 20 from my district that we made our own sign to give to 21 small stores that, you know, when you charge taxes. Do 22 we have any of those signs for these people that even -- 23 this is the rebate, so you have to pay taxes. Something 24 make this cust -- I mean taxpayers easier to charge 25 sales taxes, you know, from the customers. 26 Because this -- as is, it's tough to run a 27 business in California. On the top of it you have to 28 argue with your own customers. That's very, very tough. 21 1 So, I think we should give them advice and then 2 big sign, you know, on the window or in front of the 3 cash register so they know that they have to pay taxes, 4 so they don't have to argue with the -- you know, their 5 taxpayers' employees or taxpayers. 6 MR. HANKS: Right. Right. I agree with you, 7 Ms. Steel. Having -- having that type of notification 8 would be -- would be helpful for the -- the taxpayers. 9 And I agree. 10 MS. STEEL: So can we do that from BOE? 11 MR. HANKS: Ms. Steel, I would have to look 12 into that and see whether or not we have that type of -- 13 of display that -- that we could provide to taxpayers. 14 I'm not aware of -- of that type of notification that -- 15 that we provide. 16 MS. STEEL: But we can make it, though? To 17 have, right? 18 MR. HANKS: We can certainly look into doing 19 that. 20 MS. STEEL: Thank you. 21 MS. YEE: Okay. Other questions or comments? 22 MR. BALYAN: I have -- 23 MS. YEE: Mr. -- 24 MR. BALYAN: I have one more comment. Ma'am, 25 if Department -- we close the old account in 2000 and 26 open the new account in 2001, after two audited. If 27 Department would have advised during that -- when we go 28 to the new permit, or would have provided instruction 22 1 that we have to pay the sales tax on the rebate, we'll 2 be more than happy to do it because we do honest 3 business and we go -- we are law abiding citizen. We go 4 as per the law. 5 And the second thing is that regarding the 6 customer, we have a -- in one station around 700 7 customer visit every day. So, if we explain and if we 8 fight for this rebate it will be a nightmare for us and 9 for the -- or employees and for the customer. So those 10 are the two things I want to bring it in. 11 I have not received anything from the 12 Department. Even still you go to the Department, you 13 apply for the new station, new permit, nobody advise you 14 that you have to charge tax on the rebate. 15 MS. YEE: Okay. Thank you. Mr. Leonard. 16 MR. LEONARD: Just -- just a comment to the 17 Board. I know Ms. Mandel has been living this nightmare 18 of rebates even longer than I have. It just seems the 19 fairest solution is not what the Board decided before, 20 but a solution of customer knowledge. 21 If I know by means of a coupon or something 22 that I get or bring is on the -- the invoice that says 23 that someone else is paying for part of my product but 24 I'm obligated to pay their share of the sales tax as 25 well as my share for that product, that would seem to be 26 the -- the solution where everybody is notified, 27 Everybody has -- has total choice. 28 This solution just fails that because you're -- 23 1 as Ms. Steel brought out, you're asking the retailer to 2 charge an excessive sales tax rate based on the price 3 that the customer alone paid. And a lot of those 4 customers can do the math at the counter and, you know, 5 it just doesn't work. 6 I mean, I still get the letters, as we all do, 7 from the cell phone customers even though that law is 8 much clearer. They know they're getting a -- a rebate 9 but it doesn't keep the -- the complaints down at all 10 because it -- it's -- it still is a logic that doesn't 11 make sense to everybody. 12 And this one is even worse. The customer 13 doesn't know. It's not even clear that the price of the 14 product has been reduced. So it's not a rebate applied 15 to my benefit as a customer and -- and clearly the tax 16 rate doesn't compute with the -- with the posted tax 17 rate for the State of California and the District taxes 18 in that area. 19 So I would urge that we -- that we revisit and 20 revise our policy. 21 MS. YEE: Okay. Thank you very much. 22 Other questions or comments, Members? 23 Okay. Hearing none, is there a motion? 24 MS. MANDEL: Take it under submission. 25 MS. YEE: Okay. Motion by Ms. Mandel to take 26 this matter under submission. I will second that 27 motion. 28 Without objection, that motion carries. 24 1 Thank you very much, gentlemen. We will 2 discuss your matter later this afternoon and send you 3 written notice of our decision. 4 Thank you. 5 MR. MAC: Thank you very much. 6 ---oOo--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 1 REPORTER'SCERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 April 29, 2009 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 25 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: July 31, 2009. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 26