BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT JUNE 15, 2010 ITEM F1 PUBLIC HEARINGS BUSINESS TAXPAYERS' BILL OF RIGHTS HEARINGS Reported by: Beverly D. Toms No. CSR 1662 Juli Price Jackson No. CSR 5214 1 1 2 P R E S E N T 3 4 For the Board Betty Yee of Equalization: Chair 5 Jerome E. Horton 6 Vice-Chair 7 Barbara Alby Acting Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane Olson Chief, Board 14 Proceedings Division 15 Board of Equalization Staff: Todd Gilman 16 Taxpayers Rights Advocate 17 Kevin Hanks Sales and Use Tax Department 18 Chris Schutz 19 Legal Department 20 21 ---oOo--- 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 3 Speaker: Page 4 Tom Dworkin 5 5 William Connell 24 6 ---oOo--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 Culver City, California 2 July 15, 2010 3 ---oOO--- 4 MS. YEE: Let's call this meeting back to 5 order. Ms. Olson, our next item. 6 MS. OLSON: Our next item is F1, Business 7 Taxpayers' Bill of Rights hearings. 8 MS. YEE: Okay. Good afternoon, Mr. Gilman. 9 MR. GILMAN: Good afternoon, Madam Chairwoman 10 and Members of the Board. Todd Gilman, Taxpayers Rights 11 Advocate with the State Board of Equalization. 12 This is the time -- 13 MS. YEE: I'm going to have you pull the 14 microphone right up to you. I can barely hear you. 15 MR. GILMAN: Can you hear me now? 16 Is that better? 17 MS. YEE: Better. 18 MR. GILMAN: Okay. This is the Business 19 Taxpayers' Bill of Rights hearing for Culver City, June 20 15, 2010. 21 Individuals have the opportunity to present 22 their ideas, concerns and recommendations regarding 23 legislation, the quality of agency services and other 24 issues related to the Board of Equalization in the 25 administration of its tax programs, including sales and 26 use tax, environmental fees, fuel taxes and any problems 27 identified in the Taxpayers' Rights Advocate's Annual 28 Report. 4 1 Our first speaker is Mr. Tom Dworkin. Mr. 2 Dworkin, would you please come up. 3 MR. DWORKIN: Anywhere in particular? 4 MR. GILMAN: Yeah, wherever you feel 5 comfortable. 6 MR. DWORKIN: You don't want to know where I'm 7 comfortable. 8 MR. GILMAN: Okay. 9 MS. YEE: Good afternoon. 10 MR. DWORKIN: Good afternoon. 11 MS. YEE: Introduce yourself formally for the 12 record. 13 MR. DWORKIN: My name is Tom Dworkin. 14 MS. YEE: Okay. 15 MR. DWORKIN: My company name is Tom Dworkin 16 Associates. 17 MS. YEE: Great. Please proceed. 18 MR. DWORKIN: I've been in business since 1992 19 in the State. I've been audited on three different 20 occasions, for sales tax that was deemed unpaid during 21 those periods of time. 22 The first two audits we came through cleanly, 23 and we proved -- provided enough paperwork and 24 information to satisfy the audit. The third audit, 25 which began in November of 2004 started because the 26 Franchise Tax Board or Board of Equalization basically 27 said that they were no longer to allow product that was 28 made in the State drop shipped to a fabricator but in 5 1 its completed state destined for an out-of-state 2 project. 3 When I first was given that information I 4 immediately put together a bunch of paperwork and made 5 an appointment with the office downtown Los Angeles and 6 that was when John Chiang was still there and met with a 7 group of people there. 8 At the same time I petitioned my Congressman, 9 Brad Sherman, who I was fortunate enough to have a 10 nephew who's got a relationship with him and as 11 ridiculous as this sounds, was given a secret password 12 so that when I called I wouldn't go into this pool, I 13 went into that pool. 14 And I explained the situation to one of his 15 aides and they all agreed -- agreed with me that what 16 was being done was -- shouldn't be applying to my 17 business. 18 He -- and his name was John Thiella, he was 19 going to try and put together something to present to 20 the Board in Sacramento to amend the law to allow what 21 we were talking about. 22 Never happened. Kind of went away. Nothing 23 ventured -- what is it, no noise is good noise, is -- 24 whatever, no news is good news. 25 Fast forward to today, two and a half weeks ago 26 my business accounts were levied by the State and they 27 took every dollar that I had in the bank. It wasn't a 28 lot of money, but it was to me, in a business which is 6 1 now suffering dramatically because of the economy. 2 My main business is the hospitality industry. 3 If you read the papers you know what's going on in the 4 hospitality industry. They're not building anything. 5 They're not refurbishing anything. 6 So we lost -- we've been levied. We're making 7 an offer to pay off some more money. But my main 8 purpose for being here is I believe that the law is 9 incorrect. The res -- the resolution, whatever it's 10 called, the -- the legislation is incorrect and I would 11 like to try to be an advocate to get it changed so that 12 businesses like myself can stay here instead of 13 relocating to Nevada or incorporating somewhere else. 14 The other issue that I had was I sold goods to 15 the Morango tribe of Indians. And their purchase orders 16 asked me to ship it to an in-state fabricator. They 17 basically said, "We don't take control until it gets to 18 the reservation." I maintain control through the 19 manufacturing process into the bedspreads and draperies. 20 I was issued an ordinance to pay sales tax 21 because the Morangos refused to do so because it was 22 drop shipped off the reservation. 23 And now those are my two issues. And I would 24 like to join whatever team there is to try to get these 25 things changed. I mean, it would be nice if someone 26 would turn around and say, "You're right." 27 I have a -- a folder full of pages and pages 28 and pages, because we went to a hearing. We had an 7 1 attorney. The -- the State attorney was there. They 2 were supposed to respond in two weeks. They responded 3 in 90 days. He didn't get his determination done for 4 six months after that. So, a year went by from the 5 hearing to the final determination and all that time we 6 were charged interest and penalties, et cetera. 7 But as I said, I believe that's over the 8 bridge. It's done. I'd like to get the law changed 9 because I think it's -- I don't understand why everybody 10 that I talk to logically understands about how to ship 11 and where to ship and what it means. 12 I've pointed out that if I weave it in the 13 State, ship it out of the State, but I know that it's 14 for a hotel in Santa Monica, I charge sales tax. And I 15 was told that's what I was supposed to do. 16 I was also given the option of renting a bonded 17 warehouse in -- in Arizona, shipping the goods out for 18 one day and bringing them back in order to avoid that. 19 And I said that's not -- it's not truthful. That's not 20 truthful. Why would I do that? To go from 65th Street 21 to 56th Street I'm going to send it to Arizona and send 22 it back? And it isn't the money, it's just not fair. 23 So that's my issue. 24 MS. YEE: Okay. 25 MR. DWORKIN: I mean, it cost me a lot of money 26 in attorneys, et cetera. 27 And when we went to our hearing we were 28 prepared, I had an attorney and accountant, a file that 8 1 thick with tabs for the people. They weren't prepared. 2 Two people that were there from the Board, itself -- the 3 tax assessor, whoever they are, they were not prepared. 4 Took them 90 days just to get the information to the 5 attorney. And then in the meantime there were penalties 6 and interest and double penalties and so that's my 7 position. 8 MS. YEE: Okay. Thank you very much, 9 Mr. Dworkin. 10 MR. DWORKIN: You're welcome. 11 MS. YEE: Mr. Gilman, any history on either of 12 those issues you want to tell us? 13 MR. GILMAN: Well, I think what Mr. Dworkin is 14 seeking is a regulatory change and Mr. Dworkin has been 15 in contact with my office. 16 I do know that Mr. Dworkin right now is 17 pursuing an offer in compromise on the remaining 18 balance. He has been in contact with the staff to 19 pursue that. And as far as the -- the levy issue and 20 the harm that it's caused Mr. Dworkin I'd like to 21 further follow up this conversation with him in terms of 22 that issue. 23 But beyond that, we haven't had a chance to 24 look at any of the audit information that Mr. Dworkin's 25 provided other than the submission that we received -- I 26 believe, Laureen, was that -- 27 MR. DWORKIN: Monday. 28 MR. GILMAN: Monday, pardon me, yes, that we 9 1 got from Mr. Dworkin. So -- 2 MS. YEE: Okay. I guess not specific to his 3 individual matter but on the larger policy issue, has 4 there been any contemplation about any changes that's 5 occurred in the past? 6 MR. GILMAN: We talked amongst ourselves. Of 7 course we would like to talk with some of the folks from 8 the Sales and Use Tax Department, as well, in terms of 9 any policy issues that may need to be addressed. 10 So -- 11 MS. MANDEL: I remember something on -- 12 MS. YEE: Yes. 13 MS. MANDEL: -- drop shipments in the past. 14 MS. YEE: That's what I recall. 15 MS. MANDEL: And it went this way and that way 16 and there was some Board propo -- Leg. proposal quite a 17 long time ago on drop shipments. And then maybe there 18 was something in the reg. So if what someone is looking 19 for is a little bit of background on what has happened, 20 because the gentleman was saying he'd had contact with 21 Board staff. 22 I thought that there were some things but maybe 23 they're -- just even predate what he's talking about. 24 MR. GILMAN: They could. I -- we do have some 25 folks from the Sales and Use Tax Department here. We 26 have Mr. Hanks, who is here from the Sales and Use Tax 27 Department. So -- 28 MS. YEE: I guess let me make a suggestion. 10 1 When we have these hearings, and I appreciate, Mr. 2 Dworkin, you coming forward, there really is an 3 opportunity for us to look at whether there are some 4 appropriate policy changes that need to happen, either 5 statutorily or regularly -- through our regular 6 rulemaking process. 7 But before we even entertain that I think it 8 would be very helpful to at least have some context 9 provided to us in terms of what the history has been in 10 each of these areas. And Mr. Dworkin is here with some 11 serious concerns -- 12 MR. GILMAN: Right. 13 MS. YEE: -- with respect to how unjust the 14 rules currently are with respect to both of these issues 15 and I think for us as a Board to be able to discern 16 whether further changes are needed certainly some 17 historical context would be appropriate. 18 So that would be at least kind of the first 19 line of response I'd like to see in response to Mr. 20 Dworkin's testimony here today. And then I think it 21 sounds like on your individual matter that's proceeding 22 through various channels, as Mr. Gilman has described. 23 Okay. 24 MR. GILMAN: Thank you, Madam Chair. 25 MS. YEE: Mr. Horton. 26 MR. HORTON: Madam Chair. Thank you, Madam 27 Chair. I'd like to ask staff about the policy relative 28 to drop shipping and whether or not -- you indicated 11 1 some staff members are here. 2 MR. GILMAN: Right. I'm not the subject matter 3 expert but we do have Mr. Hanks here, and I believe we 4 do also have somebody from the Legal Department, too. 5 MR. HORTON: I'm just saying -- 6 MS. YEE: Yeah, why don't you come in. 7 MR. HORTON: Hi. Why don't you guys step 8 forward with the permission of the Chair. 9 You know, the inequity in the drop shipping is 10 that -- and I'm being redundant, I know -- you've got 11 this out-of-state retailer making the transaction 12 between the purchaser and you've got this in-state 13 warehouser for the most part dropping it off to the 14 in-state consumer and therefore liable under California 15 law. I think it's not a policy, it's more California 16 law. But -- so it's not something we can change at the 17 BOE from my perspective. 18 But I've always been concerned about our 19 efforts to go after the out-of-state retailer having 20 in-state participation and activity as an agent when the 21 drop shipper is considered his agent. I mean, the law 22 considers it his agent. The activity that's going on 23 between the California drop shipper and the out-of-state 24 retailer seems to be significant for some sort of nexus 25 to empower us to be able to -- to at least go after the 26 out-of-state retailer for the collection of the tax as a 27 means of relieving the California drop shipper of the 28 liability. 12 1 Any comments on that? 2 MR. SCHUTZ: Are you saying that the -- the 3 transaction between the -- the drop shipper and the 4 out-of-state retailer in some way creates nexus so that 5 we can then bring in and -- 6 MR. HORTON: I'm actually asking. 7 MR. SCHUTZ: Yeah. 8 MR. HORTON: Even if there isn't any nexus we 9 still have the ability to inquire and to contact the 10 out-of-state retailer and at least try to collect the 11 tax, even if it's voluntarily. 12 MR. HANKS: Right. Mr. Horton, actually I 13 could -- I could respond to that. The Department does 14 have what we call a 1032 process -- 15 MR. HORTON: Yeah. 16 MR. HANKS: -- where -- where we do examine 17 whether or not there are any connections with 18 out-of-state retailers engaged in business in California 19 through the act of -- of agents. And so as that 20 information filters to the Department we -- we do 21 examine the documentation that -- that we're given 22 and -- and we make contacts to the out-of-state 23 companies to see whether or not there is some connection 24 with the State of California, whether or not indeed they 25 have agents acting and -- and making sales within 26 California. 27 MR. HORTON: So as a policy do we -- the Board 28 of Equalization transaction by transaction in this 13 1 particular case would we have attempted to collect the 2 monies from the out-of-state retailer as a way of 3 providing the -- the taxpayer before us some relief of 4 the liability? 5 MR. HANKS: I haven't looked at -- at the exact 6 transactions that -- that Mr. Dworkin is -- 7 MR. HORTON: Well, let me restate this. 8 MR. HANKS: -- is discussing -- 9 MS. YEE: Mr. Dworkin, let me have the question 10 answered and then we'll give you an opportunity. 11 MR. HORTON: Yeah, let -- let me restate it. 12 As a policy, whenever this type of transaction occurs, 13 is it our policy to seek some sort of equity for the 14 California retailer by pursuing the out-of-state -- the 15 out-of-state retailer who actually consummated the 16 transaction? 17 MR. HANKS: It's certainly something that -- 18 that we look at to see whether or not the out-of-state 19 parties engaged in -- in business within California. 20 However, barring that connection if -- if they -- if we 21 can't establish nexus with the out-of-state company and 22 the property is being drop shipped to a customer within 23 California, then that triggers the -- the tax that I 24 believe Mr. Dworkin is -- is referencing. 25 I think the sales in this case were -- were 26 made and -- and drop shipped to locations to fabricators 27 in California for work that needed to be done before 28 the -- the final product was -- was fabricated. But 14 1 that there was a transfer of ownership in title within 2 California. 3 The customer at that point I believe then had 4 control of the transaction and directed the -- the 5 fabrication to occur in -- here in California. 6 MS. YEE: Mr. -- 7 MR. HORTON: So, Madam Chair, maybe as a policy 8 we ought to consider at a minimum seeking to -- to see 9 if we can get some voluntary compliance with the 10 out-of-state retailer. A letter of such or some 11 communications that says pursuant to our law your 12 participate in California retailer who is drop shipping 13 these items will be held liable for the tax unless you 14 collect the tax directly from the -- from the purchaser. 15 It will serve to do a couple of things. Maybe 16 it will serve to educate the out-of-state retailer and 17 they might voluntarily comply. At the same time it will 18 serve to educate the purchaser that there is a tax 19 liability because -- in that the California drop shipper 20 is liable for it, they may be able to seek some type of 21 relief from the purchaser, themselves. 22 And so, with all parties educated typically 23 that's where we get to doing the right thing. It's when 24 one participant may not be aware of the liability, and 25 in this case Mr. Dworkin, being totally caught off guard 26 because the law in and of itself doesn't comply with 27 normal logic of a particular businessman who is just 28 assisting an out-of-state retailer in their mind and not 15 1 participating in the profits. That's where the real 2 rubber meets the road, I think. 3 So, Madam Chair, I defer procedurally how to do 4 that but certainly we can take that under consideration 5 in the Leg. Committee, if that's necessary, or the 6 Business Committee -- 7 MS. YEE: Taxes Committee, right. 8 MR. HORTON: -- to consider a policy that 9 provides some relief. I mean, we have the big guns 10 here, not the taxpayer. And so we ought to use our big 11 guns to the extent that we can to minimize the burden on 12 California taxpayers. 13 So -- 14 MS. YEE: Okay. Mr. Gilman, you have a 15 suggestion? 16 MR. GILMAN: Mr. Dworkin, did you have anything 17 you wanted to say or -- 18 MR. DWORKIN: Yeah, I -- I really appreciate 19 what you just said, because you made an effort to 20 understand what's going on. But the big -- the big 21 issue is I'm not a retailer. I'm a -- 22 MR. HORTON: No, I get that. 23 MR. DWORKIN: -- wholesale manufacturer. 24 MR. HORTON: I get that. 25 MR. DWORKIN: Okay. I wove the fabric through 26 a mill here. I was hired to weave that fabric by a 27 purchasing agent for an out-of-the-state hotel company. 28 They -- at the same time they hired me to weave the 16 1 fabric they hired a drapery manufacturer in Vernon, 2 California to fabricate the draperies for that hotel in 3 Memphis, Tennessee. 4 MR. HORTON: And where did you drop ship it? 5 MR. DWORKIN: To the -- to the -- to the 6 workroom in California. 7 MR. HORTON: What happened there? 8 MR. DWORKIN: They made draperies. 9 MR. HORTON: And then what happened to the 10 draperies? 11 MR. DWORKIN: They shipped it to Memphis, 12 Tennessee, an out-of-state purchaser. 13 MR. HORTON: So the product eventually went out 14 of state? 15 MR. DWORKIN: Absolutely. A hundred percent 16 out of state. And I did not sell it to -- I did not 17 sell it to -- 18 MR. HORTON: I don't want to adjudicate a case 19 that comes before us -- 20 MR. DWORKIN: No, but I -- the same -- you've 21 got the same expression on your face that I've had for 22 years. 23 I explain that everybody I explained it to in 24 its simplest and most logical fashion, just like I 25 explained the fact if I made it here, sent it to 26 Memphis, Tennessee, but it was really destined for the 27 Loew's Hotel in Santa Monica, I knowing that because of 28 what I knew would charge sales tax even though there was 17 1 nothing in the paperwork trail for the auditor to see 2 that tax was really due on that one. I could have 3 gotten away with that, and I didn't. I charged the 4 sales tax. 5 MR. HORTON: Madam Chair, a comment? 6 MS. YEE: Yes, Mr. Horton. 7 MR. HORTON: So, let me make sure I understand 8 this correctly and -- 9 MR. DWORKIN: Absolutely. 10 MR. HORTON: And, again, I don't really want to 11 get into the case, but I do understand it relative to 12 the hearing. 13 Whenever you drop -- whenever you shipped a 14 product to some -- in a continuous process of a 15 manufacturing process and then the product is completed 16 and then it's -- you know that it's going somewhere in 17 California -- 18 MR. DWORKIN: I charge sales tax. 19 MR. HORTON: -- you charge the sales tax? 20 MR. DWORKIN: Absolutely. 21 MR. HORTON: And you have evidence of some sort 22 that the product in question never really -- went 23 somewhere in Texas or somewhere outside the State of 24 California? 25 MR. DWORKIN: Absolutely. 26 MR. HORTON: And that matter is still up for 27 consideration by the Board? 28 MR. DWORKIN: No, they -- they -- they didn't 18 1 like the way something was written and I brought affi -- 2 you don't -- you don't have time right now, and I 3 understand that. And I appreciate that. 4 MR. HORTON: No, I didn't say I didn't have 5 time. Who's they? 6 MR. DWORKIN: No, I mean the -- the Board 7 doesn't have time. The hearing doesn't have time. 8 MS. YEE: Well, Mr. Dworkin, I think Mr. Horton 9 wants to get a little bit more texture with respect 10 to -- 11 MR. DWORKIN: Sure. Go ahead. 12 MR. HORTON: Who's they? They -- they didn't 13 understand -- 14 MR. DWORKIN: We sat before -- 15 MR. HORTON: -- there was a document -- 16 MR. DWORKIN: -- a -- what's -- what was the -- 17 MR. GILMAN: He had an Appeals hearing -- 18 MR. DWORKIN: Had an appeal. 19 MR. GILMAN: -- with an Appeals attorney. 20 MR. DWORKIN: I brought paperwork in a -- in a 21 small way, the last things that were debated. I brought 22 this from my attorney with documentation to prove 23 everything in writing that we were -- 24 MR. HORTON: I got it. Well, through the 25 Chair, I would -- I would suggest that we take another 26 look at that. It never reached the Board for 27 adjudication, it sounds like. 28 MR. GILMAN: It was -- 19 1 MR. HORTON: It was resolved at a hearing level 2 and probably closed out, probably the statute has ran 3 and so forth and so on, but again I don't know, but I 4 think 10 or 15 minutes with an auditor or someone in 5 Appeals might give him some resolution and give some, as 6 well, as to whether or not this was a matter that should 7 have raised to our level. 8 MR. SCHUTZ: Mr. Horton, I can provide a little 9 clarification. 10 MS. YEE: Mr. Schutz, yes. 11 MR. SCHUTZ: The transactions that Mr. 12 Dworkin's speaking about, what occurred was a 13 out-of-state customer that could have been a retailer, 14 but it was a customer, contracted with Mr. Dworkin's 15 company and a fabricator. Mr. Dworkin then shipped -- 16 drop shipped the -- the fabric after he made it to the 17 fabricator of the draperies. And at that point the 18 out-of-state customer took title. 19 And because it took title at the second 20 fabricator, that's why it was considered a drop ship -- 21 a sale in California. 22 MR. HORTON: There's some title language 23 involved. All right. 24 MS. MANDEL: I'm -- I'm sorry. 25 MS. YEE: Ms. Mandel. 26 MR. HORTON: The name of the company is so 27 familiar. Was there not a Board hearing? 28 MR. HANKS: Yes. Ms. Mandel, I believe this 20 1 was a matter that -- that went before the Board. I 2 don't believe Mr. Dworkin actually -- 3 MS. MANDEL: Oh, maybe it was on a 4 nonappearance -- 5 MR. HANKS: -- appeared before you. It was on 6 a nonappearance calendar. 7 MS. MANDEL: Okay. I just have this memory of 8 the -- the name and -- 9 MR. DWORKIN: Yeah, it's actually on the 10 internet and we didn't appear, as I told this gentleman 11 today -- we didn't appear because I can't afford to pay 12 an attorney any more -- 13 MR. HORTON: Yeah. 14 MR. DWORKIN: -- to come. I mean, I'm done. 15 MR. HORTON: Madam Chair, just a closing 16 statement, however. 17 MS. YEE: Yes, Mr. Horton. 18 MR. HORTON: But it seems to me that we need -- 19 to the extent that we can, let's do what we can to 20 figure out a way to educate all the parties involved 21 when the transaction occurs. We see that as an 22 opportunity now to educate everyone involved as to what 23 the law is, and in the hopes of somehow bringing some 24 relief to the taxpayer. 25 I -- I now understand the delivery process and 26 how that title was taken here in California, therefore 27 this is subject to sales tax. But it's such an -- such 28 an easily repairable transaction in order to make that 21 1 transaction exempt. I mean, a little bit of knowledge 2 about what the law says, and this is unusual, it goes 3 against normal logic relative to sales and use tax and 4 Bradley-Burns and all the rest of that stuff, that a 5 little bit of knowledge could have created an exempt 6 transaction and therefore not been subject to the sales 7 tax. 8 But let's see what we can do transaction by 9 transaction. I'm not advocating that we send out a 10 notice. I've done that and didn't -- so, that's just my 11 input for the day. 12 MS. YEE: Thank you, Mr. Horton. Other 13 comments, Members? 14 Okay. Mr. Gilman, you have enough direction on 15 this one? 16 MR. GILMAN: I -- I do. We'll -- we'll work on 17 strengthening the policy and maybe the direction that we 18 can work with the Sales and Use Tax Department on. 19 We'll continue to work with Mr. Dworkin in terms of the 20 existing liability. 21 Like I mentioned earlier, I believe he is 22 pursuing an offer in compromise on the balance of the 23 liability. I do have some concerns about his financial 24 well being because of the fact that he did indicate that 25 the levy did wipe him out. 26 And I believe you mentioned to me earlier that 27 you're hanging on by a shoe string. 28 MR. DWORKIN: Basically. 22 1 MR. GILMAN: Okay. 2 MR. DWORKIN: I had to tell my children, who 3 work -- both work for me, my son and daughter-in-law, 4 that I didn't know whether I could pay them any more. 5 They're 37 years old. I mean, business stinks. We all 6 know that. It really does. 7 MR. GILMAN: It sounds to me -- 8 MR. DWORKIN: Mr. Horton, you made my day, by 9 the way. I have to tell you. Thank you. 10 MS. YEE: Okay. And I'll just reiterate my 11 request to provide us with some of a historical context 12 with respect to both of these issues. 13 MR. GILMAN: Yes, Madam Chair. 14 MS. YEE: Thank you. 15 Okay, thank you very much, Mr. Dworkin. 16 MR. DWORKIN: Thank you. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 23 1 MR. GILMAN: Our next speaker is Mr. William 2 Connell. 3 MS. YEE: Okay. 4 MR. GILMAN: Members, can you read that? 5 Hand it to me and I'll put it over here (indicating). 6 MR. CONNELL: Just lay it down. 7 MS. YEE: That's good, right there. 8 MR. GILMAN: Can you see that? 9 MS. YEE: Yes. 10 ---o0o--- 11 WILLIAM CONNELL 12 ---o0o--- 13 MR. CONNELL: Good afternoon, my name's William 14 Connell. I'm from Carpenteria, California. 15 I'm here on a subject that I'm sure most of you are very 16 familiar with, the veterans' tax exemption statute, I've 17 been pursuing for almost 18 years. 18 I believe I can get some closure on this very, 19 very quickly. I don't want to spend a lot of time. I 20 gave you a submission. You should have a couple of 21 pages. 22 Chairman Salud Carabajal from my county, who's 23 been arm in arm with me, has also submitted a small 24 page. I've asked all my veteran buddies to everybody 25 back off. I think I can solve this and I am doing my 26 best. 27 I have a very small statement to make. And I 28 believe at this time, because I have dropped all my 24 1 civil actions and all, I'll be able to get some feedback 2 from the Board this time, unlike the past -- the last. 3 Good afternoon, I believe, as many people do, 4 that every able-bodied person should serve in our armed 5 forces -- not be forced to. I believe it's a great way 6 to grow up. 7 And one of the reasons I believe that is that 8 freedom is not free. There is a price to pay. As I 9 speak to you today, over 100,000 service personnel are 10 paying that price in the Mideast and all their families 11 are paying that price and will continue to pay that 12 price for quite sometime as it appears. 13 Upon their honorable discharge, the veterans 14 have earned benefits. One of these benefits is 15 contained in our Business and Professions Code 16102, 16 enacted in 1872, an earlier enactment was in 1855 and 17 there is multiple updatings that enactment throughout 18 the course of our state's history. 19 Most recently, this veterans' tax exemption was 20 updated by Senate Bill 809. When it was first put in 21 our State law, it was unanimous -- every Senator, ever 22 Assembly person, signed by the Governor, bang, into law. 23 It reads right -- in part, right in front of 24 you, there's commas behind the word "license," there's 25 commas behind the word "tax." It means that if you're 26 an honorable discharged veteran, you're allowed, you're 27 given the right to hawk, peddle or vend your goods, 28 your wares, your merchandise. 25 1 "By itinerant" means without the payment of any 2 license, tax or fee whatsoever -- city, county, state -- 3 plain meaning, hard plain meaning must be applied. 4 Many veterans over the years are taught to obey 5 orders, to serve honorably, to complete your mission and 6 leave no one behind. Well, our Attorney General has 7 offered me thousands of dollars and thousands more 8 dollars and thousands more dollars to just drop this. 9 They would pay me. 10 And I have continuously and most respectfully 11 denied because there are a group -- you have the 12 numbers, I provided you with the numbers -- of veterans 13 who have been denied this tax benefit. I have been 14 denied this tax benefit for 17, 18 years. I still have 15 no money back. 16 This Senate Bill 809 that just passed was 17 passed unanimously in the Assembly, unanimously in the 18 Senate, every committee, every vote. And it also held a 19 of 5-0 vote from the State Board of Equalization 20 supporting this. 21 Now, look we're $20 billion dollars in the red. 22 I got every legislator in the California to agree on 23 a tax exemption. Now, look, I'm almost driven to tears 24 because I do not have the illegally taken money returned 25 to me yet. I've cost, as this gentleman before me, 26 these lawyers cost me out the kazoo. My personal wealth 27 is zero. I've spent 10,000, $12,000 out of my own 28 pocket right now. My legal fees are 15,000. I got 26 1 $31,000 in the tax money that you should have never 2 taken from the veteran in the first place. 3 I can prove I'm trustworthy. Openly false 4 information was put forth at every one of my hearings. 5 I wasn't allowed to call witnesses. I wasn't allowed to 6 put legislative intent materials forth that I paid 7 thousands of dollars for. I was given the bum's rush in 8 the '90s. You all understand what I'm saying. 9 The money should have never been taken from the 10 veteran to begin with. I just want my money returned. 11 I want to be made whole. It's very, very simple. You 12 shouldn't have taken the money in the first place. You 13 shouldn't have put me through all this for 17 years. If 14 I wasn't 1000 percent correct, your District Director 15 wouldn't have told me, 16 "Mr. Connell, you're 100 percent correct and 17 everybody in Sacramento knows you're a 100 percent 18 correct. And don't give up on this." Now, I am going 19 to sit back. That's my comments. I am completed. 20 But that's the law from the 1800s, clear, 21 concise, no ambiguity. We're allowed to hawk, peddle or 22 vend -- small business -- without payment. It's very 23 similar to a lot of different states. 24 The first lawyer and tax consultant here at 25 that the State said, "No, that law doesn't mean what 26 that law says it means." 27 Of course that law means it, it's to take care 28 of us veterans who come home, give us the small, little 27 1 job. 2 I'm done. I -- I just want you -- because of 3 all of the shenanigans in my first Board hearing and my 4 second Board hearing, you can open by Board hearing case 5 right now. You can combine my case with the other 6 additional veterans cases as a cost cutting measure. 7 We're all small. There was another two or three hot dog 8 vendors, there was a T-shirt vendor, there was an 9 incense -- you know, we're not talking big money here, 10 but we're talking a livelihood for these people. And 11 they were given the back of their hand -- just get out 12 of here. 13 I mean, I -- many a night I just couldn't, for 14 the life of me, understand what the -- what the problem 15 was. There shouldn't be a problem, it should be very 16 clear. 17 Betty, you've helped me on this tremendously. 18 I have taken -- I've taken your advice. 19 Bill Leonard, before Ms. Alby, I've taken his 20 advice. 21 I have followed to the letter every single, 22 solitary thing I was told to do, including not taking my 23 civil action into a class action and then dismissing my 24 class -- I mean dismissing my action so that you guys -- 25 I have perfect confidence in you and the integrity of 26 this Board. There were mistakes made, there were 27 horrible mistakes. 28 MS. OLSON: Time has expired. 28 1 MR. CONNELL: Thank you. 2 MS. YEE: Thank you, Mr. Connell. 3 Any questions, Members? 4 Thank you again for coming forward. And I want 5 to applaud you for all of the work that you did on 6 SB 809. It really did increase the awareness, certainly 7 at the legislature with respect to -- 8 MR. CONNELL: How do I get my money? 9 MS. YEE: Well, we're going to ask our -- 10 Mr. Gilman, I think, why don't we have you confer with 11 the Legal Department on this matter and see what avenues 12 there are for this. 13 I will tell you, Mr. Connell, when we worked on 14 SB 809 together, it was a prospective remedy and we 15 did -- it was to apply going forward. 16 MR. CONNELL: Understood. 17 MS. YEE: Okay. But we did -- 18 MR. CONNELL: Understood, but it was a 19 clarification of an existing statute because it was 20 almost taken word for word. 21 MS. YEE: It was a clarification of an existing 22 statute, but the effect is a prospective application. 23 But let me have Mr. Gilman confer with the Legal 24 Department again. 25 And, believe me, if we had any kind of avenue 26 to really try to return any of your taxes that have been 27 paid previously, we would have done it already. But 28 we're not. 29 1 We're open to looking at other alternatives for 2 how we may be able to do that. 3 MR. CONNELL: Well, I appreciate your help. 4 And those other avenues, would they be -- would there be 5 a State grant available for a disabled American veteran 6 in the sum of $61,585? 7 MS. YEE: Well -- 8 MR. CONNELL: Then I'm out of your hair. 9 MS. YEE: Mr. Connell -- 10 MR. CONNELL: You know, it doesn't matter, 11 borrow from Peter to pay Paul, you know, I'm open for 12 anything, but -- 13 MS. YEE: Well, I am very open to looking at 14 resolution to this. And, believe me, I appreciate you 15 coming to every single one of these hearings and making 16 your case. 17 And perhaps what we need to do, Mr. Gilman, is 18 to be a little bit more creative. I have no idea what 19 the Department of Veterans' Affairs has available to 20 help veterans in Mr. Connell's position, but let's kind 21 of think outside the box on this. 22 Obviously, in the tax arena, we're kind of -- 23 we've reached the wall, we have reached the wall. 24 MR. CONNELL: Well, I know one thing that one Board's 25 decisions do not bind another Board to those decisions. 26 I know that. I've read that in the rules and 27 regs. So, you know, if you don't agree with the Board 28 that smacked me around and smacked the other veterans 30 1 around on a very close 3 to 2 vote, with very shaky 2 information that was put forth, openly false 3 information, there is all sorts of -- you can't mislead 4 a Board. Those other Boards were misled by the 5 information that was put forth. 6 The Supreme Court case was never overturned 7 with Brooks versus Santa Clara, it was upheld. That was 8 huge. 9 So, you know, there was a lot going on that 10 should -- just should never have gone by the Board 11 Proceedings Division. 12 If you could turn to them, maybe, one more time 13 and say look, "Mr. Connell has this issue, this issue," 14 and answer each issue. 15 Hey, I got thrown a couple of curve balls. I 16 got knocked down a few times by a couple of high, tight 17 ones right next to my chin. I'm still standing here. 18 I believe that myself and the other veterans involved -- 19 and you have their numbers, you know who they are -- 20 we're not talking a lot of money, combine our cases, 21 say, "Let's take a look at this." 22 That's what I really would wish you to do. 23 I -- I don't think you're completely up against the wall 24 and finished with this. 25 MS. YEE: Well -- 26 MR. CONNELL: I believe that there's some 27 way -- there's some way that the Board, in your 28 integrity and your patriotism and how you understand 31 1 what's going on now with the almost 30 percent 2 unemployed veterans coming home -- forget the 11 percent 3 that normal people are unemployed, a vet getting out 4 right now can't find a job. 5 MS. YEE: Yes. Okay, thank you. 6 Mr. Horton? 7 MR. HORTON: Again, this is -- I've been -- 8 I've had the benefit of your testimony on a number of 9 occasions and have appreciated it every time. 10 The Chair -- I mean, I concur with the Chair's 11 assessment of the law and the actions of the legislature 12 is that it was prospective. 13 MR. CONNELL: Moving forward. 14 MR. HORTON: A return to the legislature to ask 15 them to make it retroactive for a year or for a period 16 of time, might empower the Board of Equalization to take 17 a look at that from a retrospective perspective, if you 18 will. I hate to put those two together. 19 To your other matter, which is separate and 20 apart from your concern before the Board, is that 21 through the stimulus package there are a number of 22 programs to provide veterans with funding for job 23 creation, housing, and starting a business. 24 So, I'd be more than willing to work with those 25 veterans to assist them in identifying those funds so 26 that they can further their economic empowerment, if you 27 will, aside from, you know, until this bill is -- until 28 there is legislation that empowers this agency to go 32 1 back -- 2 MR. CONNELL: To go backwards. 3 MR. HORTON: -- wards, you can't go backwards, 4 the law doesn't allow us to. 5 But we can go forward. And in going forward, 6 we can assist you. The Work Force Investment Board, 7 Local Work Force Investment Board, referred to as the 8 WIB, there are a number of housing programs where they 9 can enter into the construction building business to 10 begin to build housing for veterans that are returning 11 and existing veterans. 12 So, there's quite a bit of -- 13 MR. CONNELL: A lot's going on. 14 MR. HORTON: Yeah. 15 MR. CONNELL: Yeah. 16 Well, I appreciate your comments and everybody 17 else up on the Board. 18 One last item is that I submitted to the Chair 19 a packet that was given to me by Assembly Member Nava in 20 regards to a -- I guess it was 4-page application that I 21 filled out that would go to the State Controller in 22 regards to having monies returned, if you -- if you had 23 a -- you have it in your office. 24 MS. YEE: Is this the Victims' Compensation and 25 Government Claims -- 26 MR. CONNELL: Yes, exactly. 27 MS. YEE: -- application? Yes. 28 MR. CONNELL: Okay. So, I think that that 33 1 should be looked at in some sort of a manner because I'm 2 at a point where I kind of think a bunch of us veterans 3 here were victimized by some really sharp, 4 silver-tongued attorneys for the State and I just think 5 if somebody was to take -- a real administrative group 6 of judges were to take a look at what happened or 7 transpired, they could, maybe in that regard, try to get 8 some of these very small funds returned to the group of 9 veterans -- small in the overall scheme of things, you 10 know, 60 some odd thousand dollars to me is, you know, 11 might be -- I might even have a barbecue. 12 But -- okay, I have spent enough time with you 13 guys, I got a long ride home. 14 I thank you. And if -- you'll be in contact 15 with me in regards to the Victims' Compensation Board 16 and anything else Mr. -- 17 MS. YEE: Yeah, let me -- let me do this before 18 you leave. 19 I want to just memorialize some of the options 20 that have been put forth today for Mr. Gilman and I 21 think he'll be yurt point of contact, Mr. Connell 22 One, let's look at Mr. Horton's suggestion in 23 terms of the feasibility of subsequent legislation that 24 would have some retroactive application with respect to 25 the provisions of SB 809 from this legislative session. 26 Secondly, Mr. Connell, have you already filed 27 the Victim's Compensation? 28 MR. CONNELL: Well, I filled it out completely. 34 1 MS. YEE: Okay. 2 MR. CONNELL: I sent an information packet to 3 your office. 4 MS. YEE: Okay. So, it's in my office? 5 MR. CONNELL: So, it's in your office 'cause -- 6 MS. YEE: Very well, I will refer than on to 7 Mr. Gilman and we'll get you the appropriate assistance 8 in terms of how to get that filed. 9 MR. CONNELL: I appreciate that. 10 MS. YEE: Okay. I also would, I think as a 11 matter of courtesy and assistance, Mr. Horton's alluded 12 to and I know these are available through the Federal 13 Economic Stimulus Funds, there are provisions for -- 14 MR. CONNELL: Veterans? 15 MS. YEE: -- different communities, including 16 veterans, relative to the employment and other types of 17 benefits. 18 MR. CONNELL: How do I access that? 19 MS. YEE: Well, we're going to get you the 20 information. 21 MR. CONNELL: Okay. 22 MS. YEE: It's something we don't have purview 23 over, Mr. Connell, but as a courtesy we'll get you that 24 information. 25 MR. CONNELL: You've been more than -- this 26 group has been more than courteous to me. 27 MS. YEE: Okay, and then fourth, let's see what 28 our own California Department of Veterans Affairs may 35 1 have available relative to grant programs or other types 2 of financial assistance for veterans in Mr. Connell's 3 situation. 4 Okay. 5 MR. GILMAN: Madam Chair, would you like me to 6 follow up on that for Mr. Connell in terms of the 7 Veterans Affairs information that's available? 8 MS. YEE: I'm sorry, say again? 9 MR. GILMAN: Would you like me to follow up on 10 that Veterans Affairs information, to see if that's 11 available? 12 MS. YEE: I think having a single point of 13 contact -- 14 MR. GILMAN: Okay. 15 MS. YEE: -- would be very helpful. 16 MR. GILMAN: Okay. 17 MS. YEE: I really don't want this to get 18 dispersed to where we're going to be right back here a 19 year from now hearing from Mr. Connell proposing alt 20 these options again. 21 So, Mr. Gilman, if you would take the 22 leadership on this, I would appreciate it. And any 23 other -- 24 MR. GILMAN: Yes, ma'am. 25 MS. YEE: -- prongs that you can pursue where 26 we might have an opportunity for Mr. Connell and his 27 veterans' community in similar situated circumstances to 28 access whatever assistance might be available. 36 1 Okay? 2 MR. GILMAN: Thank you. 3 MS. YEE: Other comments, Members? 4 Thank you, Mr. Connell, have a safe drive home. 5 MR. CONNELL: Thank you very much for your 6 time, I appreciate it very much 7 MS. YEE: Thank you. 8 Thank you, Mr. Gilman. 9 MR. GILMAN: Madam Chair, with your permission, 10 at this time I'd like to ask if there are any other 11 individuals that would be -- or would like to come 12 before the Board and provide any comments in terms of 13 the Taxpayers' Bill of Rights for Business Taxes? 14 MS. YEE: Okay. Are there any members of the 15 audience that wish to come forward to speak with respect 16 to issues around business taxes? 17 Okay, seeing none. 18 MR. GILMAN: Okay, with that being the case, I 19 have one written submission that I'd like to read into 20 the record. 21 Mr. Abe Golomb, from Sales Tax Reductions 22 Specialists, expresses concerns about a number of 23 instances in which BOE Compliance staff has been 24 unwilling to negotiate reasonable payment plans with his 25 clients to pay their liabilities, without being put out 26 of business by unreasonable and unrealistic payment 27 demands. 28 I've spoken to Mr. Golomb about this and 37 1 Mr. Golomb is going to follow up with some additional 2 information. I believe there was some that was faxed 3 over and showed it to you, just recently. 4 And I have also contacted the Sales and Use Tax 5 Department to follow up on that, to see whether or nor 6 our staff are following policy in terms of allowing 7 payment arrangements to -- in order to allow taxpayers 8 to make payments on liabilities that are preexisting, 9 but I am going to be following up again with the Sales 10 and Use Tax Department and I'll be communicating with 11 Mr. Golomb as well. 12 MS. YEE: I am sorry, could you repeat that? 13 MR. GILMAN: I am sorry. 14 MS. MANDEL: He's speaking very fast. 15 MS. YEE: Okay. 16 MR. GILMAN: I'm sorry. 17 MS. YEE: Actually, pull yourself up to the 18 microphone and -- 19 MS. MANDEL: Yes. 20 MS. YEE: -- and slow up a little bit. 21 MR. GILMAN: Okay. 22 MS. YEE: I'm trying to -- 23 MS. MANDEL: We also have the fans from the -- 24 MR. GILMAN: A little ambient noise, I'm sorry. 25 MS. YEE: That's okay. 26 MR. GILMAN: I've been in contact with 27 Mr. Golomb and I've received some additional information 28 and I have also been in contact with Mr. Jeff Maguire in 38 1 terms of the comments Mr. Golomb has made. 2 I'm going to follow up -- Mr. -- I am going to 3 follow up with Mr. McGuire to see whether or not some of 4 the comments that Mr. Golomb has provided will assist us 5 in maybe strengthening policy or looking at payment 6 arrangements that taxpayers are having difficulty in 7 making payments on. 8 There was a case example that was provided by 9 Mr. Golomb where he references the taxpayer, back in 10 2008, that I personally worked and I worked with 11 Mr. Golomb and the Collection staff to resolve his 12 issue. 13 Subsequent to that, Mr. Golomb has some 14 additional concerns that he's raised. 15 And, so, I have talked to Mr. McGuire and I'm 16 planning on addressing those with him when I return to 17 Sacramento. 18 MS. YEE: Okay, then let me -- for fear of 19 being redundant -- but I think it bears repeating. 20 I really want to use these Taxpayers' Bill of Rights 21 hearings to look at larger policy issues or, certainly, 22 internal procedural issues if they are requiring some 23 revision. 24 And I appreciate looking at Mr. Golomb's 25 specific examples, but I think issue is actually fair 26 ripe now, to the extent that we've had this downturn in 27 the economy, we've had more taxpayers calling to request 28 being placed on payment plans. 39 1 We've had taxpayers who've been on payments 2 who've not been able to meet their payment plan 3 requirements. 4 And I don't know if the Sales and Use Tax 5 Department has any kind of a consistent -- any kind of 6 consistent guidance that they do provide to our 7 Compliance staff with regard to how to look at requests 8 for payment plans. 9 I know my office has been involved a lot with 10 trying to facilitate taxpayers being put on payment 11 plans and a whole myriad a of circumstances, you know, 12 obviously, the surface when we do that. 13 But I think, given the fact that we're in this 14 downturn and we're going to be in it for the next 15 handful of years, it would behoove us to look at what 16 kind of higher level guidance we may want to give to our 17 District staff relative to payment plans. 18 I am not saying it's a one size fits all, but 19 certainly, obviously, if we've had taxpayers who've been 20 on payment plans and have had a history of not 21 fulfilling them, that's something we look at. 22 But maybe it's just a checklist of factors in 23 terms of what we give way to, but this issue isn't going 24 away tomorrow. And it's not just going to be limited to 25 Mr. Golomb's specific examples. 26 MR. GILMAN: Thank you, Madam Chair. 27 MS. YEE: Okay, other comments? 28 Ms. Alby? 40 1 MS. ALBY: Thank you, Madam Chair. 2 I just wanted to take an opportunity, Todd, to 3 thank you for your great service and Taxpayer Advocate's 4 Office and Ms. Simpson. You both do a great job with 5 limited resources, for sure. And it's very much 6 appreciated. 7 Thank you. 8 MR. GILMAN: Thank you for your kind words. 9 That ends the business taxes portion of the 10 hearing. 11 ---o0o--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 41 1 REPORTER'S CERTIFICATE 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 July 15, 2010 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 pages, 13 pages 1 through 23, constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: July 13, 2010. 17 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 42 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 JUNE 15, 2010 I recorded verbatim, in 10 shorthand, to the best of my ability, the proceedings in 11 the above-entitled hearing; that I transcribed the 12 shorthand writing into typewriting; and that the 13 preceding pages, 24 pages through 41 constitute a 14 complete and accurate transcription of the shorthand 15 writing. 16 17 Dated: July 13, 2010 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 43