BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT JUNE 17, 2010 ITEM C9 SALES AND USE TAX APPEALS HEARINGS PETITION FOR REDETERMINATION filed by D & H SERVICE STATION (Case No. 435924) 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 Jerome E. Horton 6 Vice-Chair 7 Barbara Alby Acting Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John Chiang 11 State Controller (per Government Code 12 Section 7.9) 13 Diane Olson Chief, Board Proceedings 14 Division 15 For Board of David Levine 16 Equalization Staff: Tax Counsel IV 17 Kevin Hanks 18 Sales & Use Tax Department 19 Chris Schutz Legal Department 20 Scott Lambert 21 Tax Counsel 22 For Petitioner: Joyce Cheng 23 Representative 24 ---OOO--- 25 26 27 28 2 1 Culver City, California 2 June 17, 2010 3 ---oOo--- 4 MS. YEE: Okay, next item, please. 5 MS. OLSON: Our next item is C9, D & H Service 6 Station. Please come forward. 7 MS. YEE: Okay, Mr. Levine. 8 MR. LEVINE: The issues in this petition of D & 9 H Service Station are whether audit adjustments are 10 warranted and whether the negligence penalty has been 11 properly imposed. 12 MS. YEE: Okay. Thank you. Good afternoon. 13 MS. CHENG: Good afternoon. 14 MS. YEE: If you could introduce yourself, 15 please. You have ten minutes for your presentation. 16 MS. CHENG: Yes, Joyce Cheng, representative 17 for D & H Service Station. 18 MS. YEE: Okay. 19 MS. CHENG: Good afternoon. 20 There are some clerical matters that I'd like 21 to address first. There's an error rate that's been 22 computed and applied to the taxes. And I just want to 23 point out that in the report there seems to be an error. 24 They're applying it to each -- they've com -- they've 25 used each quarter -- certain quarters to compute the 26 percentage but then they -- according to the report 27 they've gone back and added that error on top of the 28 audited deficiency. And that seems to be an error 3 1 clerically there. 2 There's also an argument that the percentage 3 computed is not -- it's in dispute. I raised a 4 different percentage based on some additional factors 5 and I also ran another computation using the auditor's 6 report. And I came up with an error rate of 21.65 7 percent. 8 And I think that needs to be looked at from a 9 clerical standpoint. 10 Third, as an alternative argument in this 11 particular case the owner of D & H Service Station, the 12 current owner, became the owner in January of 2007. 13 This audit refers back to the second quarter of '04 14 through the first quarter of '07. As I'll explain later 15 when I talk about the negligence penalty there's some 16 extenuating circumstances. 17 If the Board feels that the error rate needs to 18 be applied as an alternative I'm recommending that the 19 7.1 percent for the -- for the first quarter of '07 be 20 used as the error rate for that quarter only, if the 21 ultimate decision is to use the 26.56 for the other 22 quarters. 23 Second, prepaid tax credits. I conferred with 24 the auditor after the last hearing and she confirmed 25 that she used the same information that we had for the 26 gallons reported as -- purchased by the gas station. 27 And you'll see in Exhibit 1, which you may not have yet, 28 I ran another computation on a spreadsheet and it looks 4 1 as if there's about $53,000 or $54,000 of prepaid tax 2 credits that she's not getting credit for. 3 Third, there was an argument that the exempt 4 sales -- there were some handwritten notes on papers 5 that the auditor picked up as garage sale income and 6 then attributed 50 percent tax just based on basically 7 hearsay, just numbers written -- handwritten on a page. 8 We maintain that that's not the appropriate. 9 However, I'd like to call the attention to the Board 10 that this particular gas station ran a Smog Pro and I 11 think the auditor decided that industry standard was 50 12 percent for taxable sales from a garage. However, this 13 one primarily did Smog Pro checks, so I think that's a 14 faulty logic to apply in this case. 15 Negligence, this is the major argument that we 16 have for the client. This woman came to this country as 17 a teenager, not speaking English. Got married and wound 18 up in a very abusive, both emotionally and physically 19 and mentally, relationship. The information that I've 20 given in the exhibits shows the extent of the abuse. 21 Her ex-husband is a convicted felon. And he has had his 22 hands in everything that was done in this business up 23 until the time that she took it over in 2007. 24 We do not believe it's equitable to assert the 25 penalty against Ms. Nguyen, the current owner because 26 she did not have records at her disposal. She did not 27 have control. She did not have anything to do with the 28 business up until that point. 5 1 She became the owner of the business when her 2 ex-husband was required to pay her in the marital 3 settlement. And he gave her a tax toxic business 4 knowing full well what he was doing. 5 She was not tax savvy enough to get a release, 6 and so she inherited the tax problems of this business. 7 Last but not least I am informed as of 8 yesterday that the ex-husband did eventually, finally, 9 provide the second and third quarter daily reports to 10 the taxpayer. I have not seen them. She did request 11 that I ask for an extension of time to allow those to be 12 presented. 13 And as of this date they have not been seen by 14 anybody. 15 MS. STEEL: The second and third quarter of 16 what -- which year? 17 MS. CHENG: 2004. 18 MS. STEEL: 2004. Okay. 19 MS. YEE: Okay. Anything else -- 20 MS. CHENG: That's it. 21 MS. YEE: -- at this point? 22 Okay. 23 MS. CHENG: No. Thank you. 24 MS. YEE: Thank you, Ms. Cheng. We'll give you 25 time on rebuttal after we hear from the Department. 26 MS. CHENG: Okay. 27 MS. YEE: Department, please. 28 MR. LAMBERT: Good afternoon, Madam Chairwoman 6 1 and Members. My name is Scott Lambert and I will be 2 representing the Sales and Use Tax Department today. To 3 my right is Kevin Hanks, also with the Sales and Use Tax 4 Department. And to Mr. Hank's right is Chris Schutz 5 with the Legal Department. 6 D & H Service Station operates a gas station 7 and small Mini-Mart and also has two bays for auto 8 repair. 9 The audit covered the period April 2004 to 10 March 2007. The business started May 2001 and this was 11 the first audit. 12 The Petitioner had detailed records for 13 gasoline and mini-mart sales for the years 2005 and 14 2006. The taxable sales obtained from the daily sales 15 reports were added together for 2005 and 2006. 16 A small number of days, nine, were missing so daily 17 averages were used to establish those sales. 18 The difference between recorded and reported 19 taxable sales for 2005 and 2006 was over $3 million. 20 The error percentage was 26 percent. 21 Part sales of only $1687 were reported as 22 taxable for the audit period. Repair labor of 225,000 23 was recorded in the records. 24 A handwritten figure was written in daily next 25 to the labor figure. These handwritten figures were 26 added up assumed to be receipt from car repairs. 27 The Petitioner contends that these handwritten 28 figures were for referrals to auto repair shops because 7 1 the Petitioner only performs minor repairs. 2 The Petitioner did not provide an adequate 3 amount of car repair invoices for the Department to 4 establish taxable part sales. Therefore, the total car 5 repair gross receipts were added together and multiplied 6 by an assumed 50 percent taxable figure to arrive at 7 audited taxable part sales. 8 A current audit is being performed. We 9 attempted to get the taxable percentage from the current 10 records. The auditor informed us that the Petitioner 11 continues not to maintain adequate records. The auditor 12 tested the second quarter 2008. The car repair invoices 13 were not provided. 14 In addition, the records indicate that only 15 $28.50 in part sales were made during this quarter. 16 The claimed repair labor for that quarter was 17 over $13,000. The recorded part sales are not 18 reasonable. 19 To establish audited taxable measure the 20 average 26 percent of error was applied against the 21 second, third and fourth quarter of 2002 and the first 22 quarter of 2007 taxable measure to obtain unreported 23 taxable gasoline and mini-mart sales. 24 Also an average quarterly taxable figure for 25 car repair parts was also added in for these periods. 26 The difference for the audit period was $4.9 million. 27 The Petitioner provided schedules of sales for 28 the fourth quarter 2004 and the first quarter of 2007 at 8 1 the appeals conference. The schedules indicated that 2 the Petitioner was due a refund for the fourth quarter 3 of 2004 and the first quarter of 2007 was understated 7 4 percent. 5 The Petitioner wants to add the two quarters to 6 the calculation of the percentage of error that is 7 applied to the three quarters of 2004 and the first 8 quarter of 2007. 9 The Petitioner calculated that the percentage 10 of error to be applied to those periods would be to 21.7 11 percent. 12 The Department has some concerns regarding 13 these schedules. The fourth quarter 2004 shows a 14 taxable measure of $1.2 million. The lowest taxable 15 measure during 2005 and 2006 was $1.56 million with a 16 high of 2.1 million. 17 In addition, gasoline sales were estimated 18 using the number of gallons purchased and the average 19 gasoline selling price using U. S. Department of Energy 20 data. 21 The estimated taxable sales for the fourth 22 quarter of 2004 was 1.74 million, which was 23 significantly higher than the Petitioner's schedule 24 showing 1.2 million in sales. 25 For the first quarter of 2007 the percentage of 26 error was 7.1 percent. The lowest percentage of error 27 for the periods 2005 was 15 and a half percent. 28 Therefore, the Department requested that the 9 1 supporting daily sales reports be provided for review. 2 The requested daily sales reports were not provided. 3 Accordingly, no adjustments were made. 4 The Petitioner claims that they have reported 5 the proper amount of taxable parts for vehicles. All 6 recorded labor represents non-taxable repair labor. 7 Audited gross receipts for car repair was 8 $345,000. Only 1687 was reported as taxable of parts. 9 This is clearly not accurate. 10 The Petitioner was afforded the opportunity to 11 provide the car repair sales invoices. The Petitioner 12 provided 12 days of sales invoices. Only two days could 13 be traced to daily sales reports. This was not 14 considered as sufficient. 15 The District Office did report, though, that 16 the sales invoices indicated that the 50 percent ratio 17 of part sales to total receipts was reasonable. 18 The Petitioner disagrees with the application 19 of a negligence penalty. If there was negligence, it 20 was due to Mr. Dennis Nguyen, the former president. Ms. 21 Nguyen did not become a corporate officer until 2007. 22 The negligence penalty was applied because the 23 records were in poor condition. The Petitioner failed 24 to report substantial amounts of taxable sales recorded 25 in its records without explanation and the 26 understatement is large in relationship to reported 27 taxable sales. 28 It should be noted that Ms. Nguyen signed the 10 1 2005 and 2006 sales tax returns as the Manager. The 2 Department also received from Ms. Nguyen a signed 3 document by her dated March 20, 2006 that granted her 4 representative Power of Attorney. 5 More importantly, the Petitioner is a 6 corporation and not an individual. The corporation is 7 an entity that is being held liable for the liability 8 and not an individual at this point. 9 It should also be noted that the Petitioner is 10 going through a subsequent audit for the period April 11 2007 through March 2010 and has unreported taxable sales 12 measured by over $1 million. 13 Also both -- both corporate officers, each held 14 separately previous Sales and Use Tax permits for 15 unrelated type businesses. 16 Accordingly, the Department concurs with 17 Appeals' decision and recommendation. 18 And I think we're going -- I just had a brief 19 time to take a look at the submission. There -- they 20 have indicated that there's a problem with the 21 pre-payment. And I don't know if Mr. Hanks has -- has 22 found a difference, but it appears to be slightly 23 different than our numbers. And there's no backup 24 behind what they gave us and so it's difficult to 25 determine what the difference is due to. 26 MS. YEE: Okay. 27 MR. HANKS: Sorry. That's basically it. 28 MS. YEE: Okay. So, Ms. Cheng, maybe you can 11 1 respond to the concern. 2 MS. CHENG: I do have a copy of what I was 3 given by the taxpayer which -- you'll have to rely on 4 the auditor, Ms. Roberson -- that she looked at it and 5 said it was the same thing that she got from BP, which 6 showed the monthly gasoline sales. I do have a copy in 7 my bag that I'd be happy to give -- 8 MS. YEE: Okay. 9 MS. CHENG: -- to the Board. 10 MS. YEE: Why don't you go ahead and take five 11 minutes to -- on rebuttal and then we'll have you leave 12 that. 13 MS. CHENG: Okay. I'll apologize for my 14 ignorance in this matter, but I wasn't aware that a 15 current audit would be used to reflect on an old audit. 16 I will say that again the Board wants to focus on 17 previous sales permits that were held by both Jenny and 18 Dennis Nguyen. Jenny did not have control over 19 anything. She was, as I said, an abused spouse. There 20 is substantiation. 21 The IRS granted innocent spouse based on what 22 we provided. He has a criminal record. If she had -- 23 if there was a sales permit in her name, she didn't -- 24 she more than likely did not apply for it herself, 25 Dennis probably did it. 26 If she signed something in '06 I'm not aware of 27 that. But she would not have had daily hands-on in the 28 business. Somebody else would have been running it. 12 1 She is not -- how do I say this? She's not business 2 savvy. I'll just say it that way. 3 That's it. That's all. 4 MS. YEE: Okay. 5 MS. CHENG: Thank you. 6 MS. YEE: Questions, Members? Ms. Steel. 7 MS. STEEL: To the Department, that I just 8 heard that she was abused and she took over this -- this 9 store or company on 2007, first quarter. So, first 10 quarter of 2007 comparing to other -- 2005 and 2006, 11 there is a percentage of difference is only 7.1 percent. 12 So -- comparing to other quarters. 13 Why didn't we put that 7.1 percent to add to 14 theirs and try to divide it and, you know, same weighted 15 average coming out from there? 16 MR. LAMBERT: I -- I believe there's some 17 dispute as to when she was involved with the business. 18 She signed the 2005 -- all the 2005 and all 2006 sales 19 invoices as the manager of the business. She -- there's 20 a note in our computer system dated March -- March 14, 21 2006, it says tax -- "telephone call to Jenny Nguyen, 22 sales. She confirmed that she received business as 23 divorce settlement." And this is dated March 2006. 24 "She is new President. She will make payment in full. 25 Send her billing notice. She is at business every day. 26 Told her payment in full be expected in 15 days." 27 MS. STEEL: So that's 2006. 28 MR. LAMBERT: This is 2006, but we have her -- 13 1 MS. STEEL: Signed before -- 2 MR. LAMBERT: -- at the busi -- signing the 3 returns in 2005. The first quarter of 2005. 4 It appears that she was at the business. 5 There's some -- it might have been -- and I'm -- and I'm 6 not sure legally how it was set up but it -- it appears 7 fairly evident she was involved in that business 8 before -- 9 MS. STEEL: Okay. Then let's not think -- 10 MR. LAMBERT: -- 2007. 11 MS. STEEL: -- of that -- that part. Then why 12 wouldn't it include the first 2007, first quarter? 13 MR. LAMBERT: Why did we not include that in 14 there? 15 MS. STEEL: Because was much -- much lower than 16 the other ones. 17 MR. LAMBERT: She -- yes. For -- we used the 18 periods 2005 and 2006 as our test basis because we had 19 the backup for the daily sales reports for each one of 20 those days. 21 MS. STEEL: But you don't have first quarter of 22 2007 -- 23 MR. LAMBERT: That is -- 24 MS. STEEL: -- for daily back -- backup. 25 MR. LAMBERT: That is correct. We did not have 26 it for that period. 27 If -- in 2007 what they have recorded down 28 there is a percentage of error of 7.1 percent. If you 14 1 look in 2005 and 2006 the smallest percentage was 15 and 2 a half percent. 3 MS. STEEL: Ms. Cheng, can you explain that, 4 the first quarter of 2007 that Ms. Nguyen didn't provide 5 any backup? 6 MS. CHENG: My understanding is that when the 7 auditor went to the accountant's office all the 8 documents were there. Including the -- not the second 9 and third quarters of '04. 10 MS. STEEL: Right. That one -- 11 MS. CHENG: Those were not available. 12 MS. STEEL: Right. 13 MS. CHENG: First quarter of '07 -- 14 MS. STEEL: I'm talking about 2007. Yeah, 15 first quarter. 16 MS. CHENG: It's my understanding -- I was not 17 there but it's my understanding, this is what I have 18 been told, that those documents were there, that the 19 auditor didn't look at them. 20 She did look at '05 and '06 but that -- and 21 there are figures in her report for 2007. I can't 22 explain to you anything other than that. That's -- 23 that's just my understanding. 24 MS. STEEL: When she took over by -- by herself 25 for this business? When? 26 MS. CHENG: As far as I know it was in 2007. 27 MS. STEEL: But according to our phone record 28 that it was 2006 March. 15 1 MR. LAMBERT: That -- that and all I -- 2 MS. STEEL: Was the conversation there. 3 MR. LAMBERT: Yeah. There was a conversation 4 on that day that said, "I'm running the business," and 5 also we have a document that's a -- that's giving -- and 6 I can't remember the individual's name, but it was 7 giving somebody Power of Attorney. I think it was her 8 accountant. And that was also dated early in 2006. 9 MS. STEEL: If she took over this business as 10 marriage settle -- in divorce settlement, how she got 11 the innocent spouse relief from IRS? 12 MS. CHENG: Innocent spouse was for 2003 income 13 taxes. I believe 2003 is when she was -- 14 MS. STEEL: So that innocent spouse relief 15 doesn't have anything to do with this business them? 16 MR. LEVINE: No, I think that she submitted the 17 documentation to show the level of abuse and not -- it's 18 not directly relevant. 19 MS. STEEL: But she's been signing all the 20 papers since -- you know, for -- since even before they 21 got divorced. 22 MS. CHENG: I'm not -- I am not --- honestly, 23 I'm not aware of that. I did not know that. 24 MS. STEEL: So, Mr. Lambert, so you -- we have 25 all the paperworks that she signed all the papers, all 26 the documents, all the tax returns. 27 MR. LAMBERT: Uh-huh, I have them right here. 28 MS. STEEL: Okay. 16 1 MS. CHENG: Do you -- 2 MR. LAMBERT: I can show them to her. 3 MS. CHENG: Were they contempor -- were the 4 contemporaneously signed? 5 MR. LAMBERT: Yes. I have them dated in -- 6 MS. STEEL: Okay. Thank you. 7 MR. LAMBERT: It will just -- it will just take 8 me a minute to -- 9 MS. YEE: Okay. 10 MR. LAMBERT: -- locate them here. 11 MS. YEE: All right. Other questions, Members? 12 MR. LAMBERT: Right, that was 2006 right there. 13 Jenny Nguyen, 1-18-06. 14 MS. CHENG: That's a -- 15 MR. LAMBERT: That's a prepayment. 16 MS. CHENG: Okay. 17 MR. LAMBERT: But the other one -- the other 18 ones are in here. Let's see. Jenny Nguyen. Let's see. 19 March -- 20 MS. YEE: Ms. Cheng and Mr. Hanks -- or, I'm 21 sorry, Mr. Lambert, you may actually be up on the next 22 case. 23 I'm wondering if we can give you an opportunity 24 to confer because it also sounds like, Ms. Cheng, you 25 have some additional documents that you want to leave 26 with the Department, as well. 27 MS. CHENG: I turned in the exhibits that I had 28 and -- he's correct, it was to show the amount of duress 17 1 and stress and abuse that she was under which led to her 2 being given -- let's just say this was a deliberate 3 attempt at -- of Dennis's to get back at her. There was 4 a dispute over the children. I mean, it's an extremely 5 messy situation -- 6 MS. YEE: Okay. 7 MS. CHENG: -- that was going on. 8 MS. YEE: Okay. 9 MS. CHENG: And he did everything he could to 10 undermine her and make -- put her name on things and -- 11 MS. YEE: Okay. Let's see what it is that you 12 need. 13 MR. LAMBERT: Well, yeah, that was -- this is 14 her signature dated April 15, 2004. This is for the 15 first quarter 2004. 16 MS. CHENG: Okay. 17 MR. LAMBERT: So there's -- 18 MS. CHENG: Can I make one comment -- 19 MS. YEE: Yes. 20 MS. CHENG: -- before we leave? 21 I would need to compare those with her 22 signature that we have on file. I can't tell from 23 looking at this right now. I do know that in the -- the 24 packet of information that we gave on the innocent 25 spouse Dennis used family members to sign Jenny's name 26 to documentation. 27 MS. YEE: Uh-huh. 28 MS. CHENG: -- and I -- I'm more than happy to 18 1 concede that if that is her signature, but I can't say 2 that because I know the history on the case. 3 So it's -- there is a chance that that is not 4 her signature. It -- 5 MS. MANDEL: Yeah. 6 MS. CHENG: It's her name but it may not be her 7 signature. 8 MS. YEE: Ms. Mandel. 9 MS. MANDEL: I was going to say, I was looking 10 through the material that you submitted to IRS and there 11 is a statement in here that -- that he would have family 12 Members sign her name -- 13 MS. YEE: Right. 14 MS. MANDEL: -- to things. And so I understand 15 what you're saying. You're -- you're not -- you're not 16 sure. 17 MS. YEE: Okay. 18 Well, what time frame would you need to verify 19 that? 20 MS. CHENG: Well, the documentation I would 21 want to look at is in my office. 22 MS. YEE: Okay. 23 MS. CHENG: So -- but I can do that by -- 24 well -- 25 MR. HORTON: Is that signed? 26 MS. CHENG: I mean, would you need it like 27 today? 28 MR. LEVINE: There is a signature -- a 19 1 signature in the package. I assume that must be 2 authentic. 3 That's the transfer agreement 4 MS. CHENG: Yeah. Thank you. 5 I'm sorry. 6 MR. LAMBERT: That's all right. 7 MS. CHENG: But if you look at the other 8 signature you'll see there's a difference in -- 9 MR. HORTON: Madam Chair. 10 MS. YEE: Yes. Mr. Horton. 11 MS. CHENG: I'd like to say my memory is that 12 good. 13 MR. LAMBERT: Well, that was '07. 14 MR. HORTON: Would it be helpful to look at the 15 signature on the documents submitted by the taxpayer? 16 MS. YEE: That's what -- 17 MS. CHENG: He's just given that to me. Thank 18 you. 19 MR. HORTON: Oh. Right. 20 MS. MANDEL: -- little slower. 21 MS. LAMBERT: This is dated -- 22 MR. HORTON: Yeah. Yeah, they are. 23 MS. CHENG: See, that's -- that's not hers. 24 MR. HORTON: I like it right in front of us. 25 MS. CHENG: There's another one that's very 26 similar to that. 27 MR. HORTON: Beat me to the punch every day. 28 MS. MANDEL: Uh-huh. 20 1 MS. CHENG: -- keep a copy of the exhibits, but 2 it's in the innocent spouse package -- 3 MS. STEEL: -- on the way it's different. 4 MS. CHENG: -- to show the signatures that the 5 other family members were using, for her. 6 MR. HORTON: Yeah, I know this guy. I'm just 7 kidding. 8 MS. CHENG: Thank you. 9 MS. YEE: Okay. Any conclusion? All right. 10 MR. LAMBERT: She says it's not the same. 11 MS. YEE: Okay. 12 MR. LAMBERT: I -- I'm not a sig -- I couldn't 13 tell, so -- 14 MS. YEE: Okay. 15 MS. STEEL: Well I can tell it's different, 16 too, here. 17 MR. LAMBERT: You can tell it's different? 18 MS. STEEL: Yeah. 19 MR. LAMBERT: Huh? 20 MS. STEEL: It's totally different, even here. 21 MR. LAMBERT: Well, I don't know. 22 MS. STEEL: So -- 23 MR. LAMBERT: I'm -- 24 MS. STEEL: So now -- so, Mr. Levine, what 25 happened? 26 MR. LEVINE: They don't really look the same to 27 me, either, but the issue is whether this taxpayer, 28 meaning the corporation, is -- was negligent. 21 1 There's -- I don't think there's any dispute that this 2 is a really unfortunate situation or that the existing 3 owner of -- of Petitioner in technical terms got 4 screwed. 5 But the question is whether the corporation was 6 negligent and not whether -- whether this shareholder 7 was involved in the corporation at the time because 8 we're not talking 6829 liability. 9 Basically, if -- for her to avoid the penalty 10 you'll have to find the corporation was not negligent. 11 And it's a judgment call. But it's not whether this 12 owner was negligent, it's whether this taxpayer was 13 negligent, the corporation. 14 I assume if she was actually involved in the 15 business you'd be a little less sympathetic on that 16 decision. So that's how it's relevant. 17 MS. MANDEL: Can I ask one question? 18 MS. YEE: Please, Ms. Mandel. 19 MS. MANDEL: Because I think you -- you tried 20 to ask it but maybe Ms. Cheng -- did you say that there 21 were now the records that were not available at the -- 22 at the audit and that had not been provided previously? 23 MS. CHENG: Right, it's my understanding that 24 the second and third quarters of '04, the dailies, which 25 is what was the foundation of the audit, have now been 26 given to Jenny from her ex. I have not seen them. I've 27 been informed that she has them and she wanted the 28 opportunity to have time to present those for those two 22 1 quarters. 2 MS. MANDEL: Okay, that's what I thought I 3 heard you say earlier. Okay, thanks. 4 MS. YEE: Okay. Well, pleasure of the Board? 5 MS. MANDEL: And that's -- that's the 6 information that the Department did not have so it 7 might -- 8 MS. YEE: Right. 9 MS. MANDEL: -- that you were looking for, 10 right? 11 MR. LAMBERT: That's -- we had -- they had 12 the -- 13 MS. MANDEL: They had some, yeah. 14 MR. LAMBERT: -- the Sales Journal, income -- 15 MS. MANDEL: Yeah. 16 MR. LAMBERT: I mean it was a Sales Journal. 17 MS. MANDEL: But these dailies would be 18 helpful? 19 MR. LAMBERT: If the -- if the dailies are 20 accurate they would be very helpful to the -- 21 MR. LEVINE: Can't know how good they are 22 until -- until we review them. 23 MS. MANDEL: Right. So we might like to review 24 them. 25 MS. YEE: Okay. 26 MR. LAMBERT: Fine. And just to -- to add one 27 comment on the -- they want a $54,000 adjustment and we 28 were just looking through that, in the audit we gave 23 1 them a $127,000 adjustment for that prepayment. So it 2 appears that we've covered everything that they wanted 3 plus quite a bit more. 4 MS. YEE: Okay. 5 MR. HANKS: That relates to the prepayment 6 on -- on the fuel purchases. 7 MS. CHENG: The amount that I had. 8 MR. HANKS: In the audit we gave -- that was 9 for -- 10 MS. YEE: Maybe -- let me suggest this, perhaps 11 we should provide a 30-30-30. 12 MS. CHENG: My column shows that -- 13 MS. YEE: Ms. Cheng. 14 MS. CHENG: I'm sorry. 15 MS. YEE: Instead of trying to just kind of 16 resolve this on the fly, I think it would be helpful if 17 you could provide the -- the dailies from the two 18 quarters of 2004 that you believe have materialized and 19 whatever other outstanding issues you feel like you need 20 to get up to speed on. 21 MS. CHENG: Okay. 22 MS. YEE: Let's give you additional time for 23 that. 24 MS. CHENG: Thank you. 25 MS. YEE: Okay. 26 MS. STEEL: And I want to request one more, 27 that if the signature is different that I want to know 28 that you have a proof of when she really took over this 24 1 business, too. 2 MS. CHENG: Okay. 3 MS. YEE: Okay. Very well. So is there a 4 motion? 5 MS. STEEL: 30-30-30. 6 MS. YEE: We have a motion by Ms. Steel to 7 grant a 30-30-30. Is there a second? 8 MR. HORTON: Second. 9 MS. YEE: Second by Mr. Horton. 10 Without objection, that motion carries. 11 Mr. Levine, you want to just describe kind of 12 of time -- 13 MR. LEVINE: I'm sorry, describe the time? 14 MS. YEE: Describe the 30-30-30 process. 15 MR. LEVINE: There will be 30 days for you to 16 submit any additional documentation, explanation. As 17 part of that I'd recommend -- unless the Department 18 followed you, I didn't follow your here explanation, you 19 did it shorthand, so you might want to do it long-hand 20 in a -- in a submission. If you do so, when it -- 21 what's going to happen is you'll have 30 days to submit 22 your information and any argument or explanation. The 23 Department will have 30 days to review it and to come up 24 with its recommendation. Then it will come back to 25 Appeals Division. 26 If you don't explain your position we'll have 27 to rely on the Department's understanding of your 28 position. So you won't do too well -- much better than 25 1 they describe. 2 So for -- for your benefit and ours, if you can 3 describe it and then we can better describe your 4 position to the Board when it comes back, then we bring 5 it back to the Board, it comes on a nonappearance 6 calendar. She won't have to come back for that. 7 MS. CHENG: Okay. 8 MS. YEE: Okay. 9 MS. CHENG: Very good. 10 MS. YEE: Very well. So, without objection 11 that's what we will do. 12 MS. CHENG: Thank you very much. 13 MS. YEE: Great. Thank you. 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 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 June 17, 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 26 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: July 26, 2010. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 27