1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JULY 14, 2010 10 11 SALES AND USE TAX APPEAL HEARING 12 APPEAL OF 13 NCMG, INC. 14 NO. 386871 (CH) 15 AGAINST PROPOSED ASSESSMENT OF 16 SALES AND USE TAX 17 18 19 20 21 22 23 24 25 Reported by: Juli Price Jackson 26 CSR No. 5214 27 28 1 1 P R E S E N T 2 For the Board Betty Yee of Equalization: Chair 3 Jerome E. Horton 4 Vice-Chair 5 Barbara Alby Acting Member 6 Michelle Steel 7 Member 8 Marcy Jo Mandel Appearing for John 9 Chiang, State Controller (per Government Code 10 Section 7.9) 11 Diane G. Olson, 12 Chief Board Proceedings 13 Division 14 For Board of Jeff Angeja 15 Equalization Staff: Staff Counsel 16 17 For Department: Scott Lambert Tax Counsel 18 Robert Tucker 19 Tax Counsel Legal Department 20 21 Kevin Hanks Chief, Headquarters 22 Operations Division 23 24 For Petitioner: Darren Berger Representative 25 26 Shun Huang (Jason) Sheng Taxpayer 27 28 ---oOo--- 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JULY 14, 2010 4 ---oOo--- 5 MS. YEE: Let's convene the Board of 6 Equalization meeting. 7 Ms. Olson, what is our next item, please? 8 MS. OLSON: Our next item is C5, NCMG, 9 Incorporated. Please come forward. 10 Board Proceedings has received contribution 11 disclosure forms for this afternoon's hearings from the 12 parties, agents and participants. All forms are 13 properly completed and signed. All parties, agents and 14 participants are on the alpha listing provided to your 15 office. 16 Each person sitting at the table will be asked 17 to introduce themselves and, if necessary, their 18 affiliation with the taxpayer for the record. 19 Ten minutes is allocated for the taxpayer's 20 opening presentation, followed by ten minutes for the 21 Department's presentation and five minutes are allocated 22 to the taxpayer for rebuttal. 23 Ms. Yee? 24 MS. YEE: Thank you very much, Ms. Olson. 25 Members, we are on item C5, NCMG, Incorporated. 26 Let me have Mr. Angeja introduce the matter. 27 MR ANGEJA: Good afternoon, Madam Chairwoman 28 and Members of the Board. 3 1 This matter involves three unresolved issues, 2 the first is whether adjustments are warranted for 3 remnants and for an increase in ending inventory. 4 Second, whether Petitioner's liable for the use tax on 5 the cost of fixtures and marble, granite displayed in 6 the showroom and, third, whether Petitioner should be 7 relieved of the tax on remnants that were not installed 8 in construction contracts because it relied on advice 9 from a prior audit of its predecessor. 10 MS. YEE: Okay, thank you very much. 11 Good afternoon, gentleman. 12 MR. BERGER: Good afternoon. 13 MS. YEE: If you will pull yourself right up to 14 the microphone so we may hear you? 15 If you'll introduce yourselves formally for the 16 record, you have ten minutes for your presentation. 17 And, actually, before you start, I noticed that 18 we had exhibits that came in from the Petitioner 19 recently. And I don't know whether -- has everybody had 20 a chance to see them? 21 MR. LAMBERT: Yes. 22 MS. YEE: Okay, all right, good. 23 Thank you. 24 MR. BERGER: I'm Darren Berger, an employee for 25 New Century Marble & Granite. 26 MS. YEE: Okay. 27 MR. SHENG: My name is Shun Huang Sheng, I'm 28 the president of the company. 4 1 MS. YEE: Okay, very well. 2 Please proceed. You have ten minutes. 3 MR. BERGER: Okay. In 1993, when the business 4 began, it was a smaller company, roughly $100,000 a year 5 in sales. 6 And the first audit for the company was in 7 1995. After that, we moved in 2003 and that was the 8 time of the next audit. The increase in materials that 9 we had was due to the increase in business and size. We 10 had brought on more employees. We had brought in more 11 business. So, we had to purchase more material and such 12 that we used for our contracts. 13 We weren't audited again before that. And then 14 everything from that point was perfect and we've been 15 audited every year since then and everything's bee 16 perfect. 17 And what they're saying is -- is that we need 18 to go back and pay taxes on that material that we had 19 bought for the jobs. What we do is we pay taxes on the 20 material as we sell it. It's a cash sale business. So, 21 as we bring in material, we sell it to our customers. 22 They pay for the material. We pay for the taxes on 23 that. 24 And, so, they had to two different complaints. 25 I believe one of them was for the display items that we 26 had in the showroom. Our showroom is an ever changing 27 showroom. There's two different kinds of displays in 28 our showroom. Our showroom is based to show the 5 1 displays, to be able to sell the material. Most of the 2 material in our showroom is available for purchase. The 3 items that are not available for purchase are items that 4 are provided by the companies that are displaying their 5 stuff there. And we didn't buy them, they are just 6 sitting there in display. So, we wouldn't want to pay 7 taxes on something that we didn't actually purchase for 8 sale. 9 All the other items we do purchase for our 10 display functions are sold. It's an ever changing 11 showroom. So, as new products become available, we sell 12 the old product and we pay taxes based on that. 13 I've sent in all sorts of documents stating for 14 the last five years and highlighting all of the 15 different items as to show that, indeed, every time we 16 do sell those materials, we do charge tax and to show 17 that we do, indeed, sell those materials. 18 The other argument they had -- it was that we 19 don't pay taxes on our remnants, which isn't true, 20 really. Because when we buy the material, as we buy the 21 full slabs of material, we charge those clients for tax 22 on that full purchase because that's what they 23 purchased. The remnants then are just left over pieces 24 from those jobs. And we keep them in our warehouse, 25 yes, but we sell them again. So, as we sell them again, 26 we charge tax again because the way it's charged the 27 clients -- we don't upcharge the clients for material, 28 we make our money mostly in the labor and installation 6 1 part of it. And this is known by the clients when they 2 buy it. You know, they ask the question, "Can I take 3 the remnant with me if there's extra material?" 4 The answer is no because this is how we're 5 selling it to you and this is why we can keep the cost 6 down to you. But they do pay for the full price of it 7 and it's all worked into the same contract and they're 8 well aware of it, it's stated like that in the contract 9 and it's also stated like that on the forms that I 10 provided for you. 11 So, we do pay taxes on them. We just don't -- 12 we don't want to have to pay taxes for the material that 13 is sitting back there now because, in essence, we have 14 paid taxes on all the small pieces and all of the big 15 pieces will be paid for the tax as we sell it to the 16 clients and it's installed to the house. 17 I guess the difference for me is really it's a 18 cash business. So, if we had to pay tax on everything 19 that was in our building before we sold it, there is no 20 way we can do business. In the last five years I know 21 you know the economy hasn't been the greatest in our 22 industry, the construction industry has been hit 23 extremely hard. 24 Jason and a couple of other employees there 25 that are high up and own it, he's the owner, so, he 26 hasn't even taken a salary to try to keep the business 27 open because we've -- it's been a major downsize over 28 the last four years since that increase when business 7 1 was really good. 2 So, for those reasons is why we're asking 3 really for the relief on it. We feel we've paid the 4 taxes on it. We're very fair. We've -- always get 5 audited. They always say our records are very good. We 6 pay all of our taxes. We believe in paying taxes, 7 obviously. 8 And for those reasons, we're asking for the 9 relief on it. 10 MS. YEE: Thank you very much, Mr. Berger. 11 Mr. Sheng, do you have any comment at this time? 12 MR. SHENG: Pretty much that's it. 13 MS. YEE: Okay. We'll give you an opportunity 14 later. 15 Thank you. 16 MS. STEEL: Madam Chair? 17 MS. YEE: Yes, Ms. Steel? 18 MS. STEEL: Before it goes Department, can you 19 explain why you brought 2007? This is not the tax years 20 that got audited. Is this the time that you sold 21 those -- 22 MR. BERGER: Correct. 23 MS. STEEL: -- you know, those displays? 24 MR. BERGER: Correct. 25 MS. STEEL: Okay. 26 MR. BERGER: Yeah, I gave you records from 2003 27 through 2007 to show because in there they stated that 28 we do not sell things retail. 8 1 MS. STEEL: But you sold that during this time? 2 MR. BERGER: Correct. 3 MS. STEEL: Okay, thank you. 4 MS. YEE: Thank you, Mr. Berger. 5 Department, please? 6 MR. LAMBERT: Good afternoon, Madam Chairwoman 7 and Members. My name is Scott Lambert and I'll be 8 representing the Sales and Use Tax Department today. 9 To my right is Kevin Hanks, also with the Sales 10 and Use Tax Department and to his right is Robert Tucker 11 with the Legal Department. 12 NCMG, Inc. operates as a construction 13 contractor doing business as New Century Marble and 14 Granite. 15 The Petitioner installs marble and granite 16 countertops under lump sum contracts and sells kitchen 17 and bathroom fixtures over the counter. 18 The taxpayer incorporated July 1998. The audit 19 covered the years 2003 through 2005. This was the 20 Petitioner's first audit. It should be noted, though, 21 that the business was audited for the period October 22 1993 to September 1996 when it was a sole proprietorship 23 opened by Mr. Sheng, the current corporate president. 24 Those returns were accepted as reported. 25 It was found during audit that the Petitioner 26 is the consumer of materials such as marble and granite 27 since the materials are installed to realty under lump 28 sum construction contracts and the retailer of fixtures, 9 1 which means tax is due on the selling price of those 2 fixtures. All fixtures are sold over the counter 3 without installation. 4 The Petitioner purchases materials without 5 sales tax from in-state suppliers and under a resale 6 certificate and also without sales tax from unpermitted 7 -- unpermitized out-of-state suppliers. Fixtures are 8 also purchased without sales tax for resale. 9 The marble and granite are purchased 10 specifically for each job. The marble and granite are 11 not specifically purchased for inventory. Marble and 12 granite inventory consists of remnants left over from 13 construction jobs. 14 The Petitioner reports tax on materials when 15 they are removed from inventory for the construction job 16 and on fixtures when they are sold. 17 A comparison was made of reported taxable 18 measure to recorded purchases. It was found that the 19 Petitioner had adequately reported the taxable measure 20 for 2004 and 2005. For 2003 the taxable measure equaled 21 91 percent of total purchases, therefore, a material 22 accountability test was performed for 1993 (verbatim). 23 The records for 2003 the were found to be 24 disorganized and missing. Sales tax working papers were 25 not provided. The Petitioner stated that they had 26 problems with both bookkeepers and salespeople during 27 this time period. The purchases of materials were used 28 in the material accountability test. A deduction was 10 1 made for 1 percent of materials and fixtures to 2 exempt -- to account for exempt freight in and for 3 materials and fixtures valued at $69,000 withdrawn from 4 inventory to be used in the showroom. 5 A markup was established for fixtures at 31 6 percent. The purchases of fixtures were marked up 31 7 percent to establish taxable fixture sales. The 8 purchases of materials were added to audited fixtures 9 sales. The audited taxable measure was compared to 10 reported taxable measure and a difference of $229,000 11 resulted. 12 The materials and fixtures removed from 13 inventory for use in the showroom were included as 14 taxable in the audit as a separate line item. 15 The Petitioner disagrees with the results of 16 the audit for several years reasons. One, the 17 Petitioner wants an adjustment for ending inventory. 18 The Petitioner states an adjustment should be made in 19 the cost accountability test for remnants that were 20 purchased in 2003 but were not reported and remain in 21 the 2003 ending inventory. 22 Two, the materials and fixtures removed from 23 inventory for use in the showroom should not be taxed. 24 Petitioner argues that the materials and 25 fixtures are available for sale and are, therefore, 26 being used for demonstration and display only. 27 Three, the Petitioner contends that in the no 28 change audit of the sole proprietorship, credit was 11 1 given for remnants included in ending inventory that had 2 not been reported as taxable. The Petitioner relied on 3 that advice. Therefore, the Petitioner should be 4 relieved of tax under Section 6596. 5 Regarding the adjustment for ending inventory 6 and the cost accountability test, since the Petitioner 7 is the consumer of materials consumed on construction 8 contracts, tax is due at the time of purchase. 9 Also Petitioner purchases for the job. An 10 inventory of unused slabs is not maintained. 11 The Petitioner reports tax on materials by the 12 job. The material purchased invoices were attached to 13 the sales invoices. The Petitioner was unable to show 14 that material purchased in 2003 was used on construction 15 jobs performed in 2004. The Petitioner maintains a 16 small and constant inventory for fixtures. A large 17 inventory is not maintained because of the large 18 selection of types and brands of fixtures carried. 19 The Petitioner was given the opportunity to 20 provide information regarding the fluctuation of the 21 fixture inventory in 2003 and was unable to provide any 22 documentation. 23 Regarding the materials and fixtures removed 24 from inventory for use in the showroom, the materials 25 are subject to tax since the Petitioner is not the 26 retailer of materials and, therefore, the materials are 27 not being held for retail sale. 28 The fixtures are also in the Petitioner's 12 1 showroom in a mock-up of kitchen and bathrooms and 2 readily available for sale. It should be noted that the 3 fixtures are firmly attached to realty. Most of these 4 fixtures stay in place until the line is discontinued by 5 the manufacturer or are scratched or damaged and need to 6 be replaced. 7 Also, Petitioner did not have record of 8 fixtures frequently removed from inventory in 2004 or 9 2005 for use in the showroom, which indicates that the 10 showroom fixtures are not generally held for sale. 11 If either of their showroom materials or 12 fixtures are later used or sold, the Petitioner would be 13 entitled to receive an offset tax paid purchases resold 14 credit for the cost, which is not to exceed the selling 15 price. 16 Regarding the 6596 contention, there is no 17 mention in the no change audit of the sole proprietor 18 that an adjustment was made in the audit for the ending 19 inventory of remnants had not been reported as taxable. 20 It should be noted when the purchase invoice 21 were attached to the sales invoices in 2004 and 2005, 22 tax was being accrued on the entire amount of material 23 purchased, which is contrary to the Petitioner's 24 argument. 25 The Petitioner's submission indicates a credit 26 should be given for the cost of remnant and showroom 27 fixture sales. 28 And theory the Department does not disagree 13 1 with the Petitioner. It should be noted that in this 2 case, though, all of the information provided is for 3 periods outside the audit period. The Petitioner would 4 need to file a claim for refund to address the possible 5 overpayment. 6 Also the documentation provided does not 7 indicate whether the materials are, in fact, remnants or 8 the fixtures were showroom fixtures. In addition, it 9 would need to be established that the over-the-counter 10 sales of these items were, in fact, reported as taxable. 11 Accordingly, the Department concurs with Appeals 12 Division's decision and recommendation. 13 MS. YEE: Thank you very much, Mr. Lambert. 14 Mr. Berger, you have five minutes on 15 rebuttal. 16 MR. BERGER: Okay, I would say, listening to 17 what he said, I mean, the biggest thing he -- they keep 18 bringing up is the fact that we don't sell our stuff in 19 the showroom. And, yes, it's permanently affixed 20 because it has to be displayed. There are things that 21 screwed in. It's not part of the property, it's 22 something that is displayed on a wood box and then the 23 pieces are attached to the wood boxes. They aren't 24 something that we use as part of our property. It's 25 not, you know, a working faucet where we go and we can 26 turn the water on or, you know, a bathtub that we can go 27 sit there and take a bath in. It's not part of our 28 property, it's actually something we do sell. And we do 14 1 sell it often. 2 He had stated that the paperwork we provided 3 does not show that these were, indeed, remnants that we 4 sold during this time period. I went through every 5 single piece of paper making sure that these things were 6 stated. And I highlighted through the lines to be able 7 to show that we did pay these taxes on these exact 8 items. And that was part of why - I mean, it took a lot 9 of time to go through and do that. 10 In 2003, yes, we grew. That was our growing 11 year. And, yes, there were some mistakes that were made 12 by employees. There were a lot of different people in 13 the company because we were hiring at the time. And we 14 all know when we hire, we don't exactly -- we're not 100 15 percent in the training at the point when they're first 16 out there. So, yes, there were some mistakes made. 17 There was also a large stock that was bought based on 18 the promise of sales that may not have occurred exactly 19 as we wanted at that given moment. But they have been 20 sold since and that's why I documented the different 21 remnant pieces. 22 We call them remnants, even if they're full 23 pieces because they weren't part of that one job. But 24 those have been sold in different projects. And we have 25 paid taxes on them. And that's why I gave the documents 26 going further into the years other than just those two 27 years to show within that couple year period we did sell 28 those and we did pay taxes on them. 15 1 We fully believe we have paid all of our taxes. 2 It's something that we do. Small businesses are hard 3 enough these days not to try to do everything right, to 4 make it. 5 Like I said, we're struggling as it is. 6 Something like this, if you hold us accountable for 7 everything, is possibly the end of our company. So, we 8 want to do everything we can to maintain what we're 9 doing. 10 If the owner is taking no salary to keep his 11 employees employed, you know, I applaud him for that and 12 I applaud the efforts that he's trying to do to keep us 13 in business in this marketplace. The construction 14 marketplace has been devastated, especially something 15 like ours that's not a necessity, it's an accessory that 16 makes your house look nicer. And when people buy this 17 kind of stuff and when the economy takes a turn, then, 18 obviously, the first ones to go are the luxury items. 19 And we are definitely a luxury item -- 20 functional, but yet luxury. So, something like this -- 21 you know, we feel we did what we were supposed to do. 22 We feel we pay our taxes. And we will continue to pay 23 our taxes. And the audits from those years forward has 24 shown that we are extremely diligent in doing the right 25 thing and paying our taxes the way we're supposed. 26 MS. YEE: Thank you very much, Mr. Berger. 27 Mr. Sheng, do you have any comment? 28 MR. SHENG: I'm not speaking fluent in English, 16 1 maybe -- hope I'm not making hard time for you. 2 But I -- 3 MS. YEE: No, it's okay. 4 MR. SHENG: -- will explain a little bit. 5 Business started 1993 and we -- in the 6 beginning we purchasing container, we import container, 7 we do consignment. All of the materials stuck in the 8 company and then soon we sell that material, we collect 9 the tax and we pay. 10 Soon the first audit at 1995, everything clear. 11 We've assuming everything going the same way. We buy 12 the material. We stock the material and we sell it and 13 collect the tax to pay. 14 That's the same thing, we do it all the year. 15 We -- at 2001 we moved to a different location, 2001 to 16 2002, that whole year, we moving. 17 In 2003 we start new location is a couple three 18 times bigger than before. And we -- from that 100,000, 19 from probably $800,000 sales up to $4 million sales -- 20 is a big increase at that time. Of course, we buy more 21 stock material and we do hire more salespeople. 22 And we created more and more remnant material, 23 but we still have it stock -- more stock material was -- 24 we see -- after we do move to new location, we don't buy 25 for container, we buy for bundle. We -- which wholesale 26 company very good material and we buy a bundle with less 27 cost and then we stock in the warehouse. 28 And that -- that year is a big draw, 2004-2005, 17 1 starting a new showroom, increase in more people, buying 2 more material, having more money coming in, but at the 3 end that year is -- they find out that you are -- you 4 are buy that material but you don't pay the full amount, 5 the tax you purchasing. 6 But we -- we know there's way more materials 7 stock in the warehouse. And we -- we, to the gentleman 8 what he say is your accounting is messy, actually is 9 true. I feel frustrated for that. 10 2003 we buy a new program -- before we use a 11 Quicken program and the we buy new -- buy software 12 called Business Vision. The people work for the office 13 for ten years as a bookkeeper. After we get the new 14 software, the people had to learn it, make accounting is 15 not as clear. 16 And then he quit the job and that's actually -- 17 that's how actually I only spent a very minimum time in 18 the company and building and construction. 19 And it come to audit, there is a lot of messy 20 things, doesn't clear. But generally this company we 21 try to do is always make good organization, good in 22 bookkeeping. But there is messy times to change from 23 the QuickBooks to the new program. The people were over 24 there for ten years, he need to quit the job and after 25 he quit and there's the audit. 26 We have people can not able to be presented 27 when they ask -- I agreed that. 28 But, generally what I feel is we spent a lot of 18 1 time to find out it's the sales, the remnant is stock 2 material, the display of it. The item we sell. We cut 3 the checks to pay you and that's the invoice we 4 submitted for you. 5 And how to explain this, that display item is 6 in the -- lot of kitchen, kitchen cabinet. We sell -- 7 we only always need update appliance. We obviously need 8 to update. We sell it, but we cut the checks and we pay 9 you. 10 But at that time they ask me to pay all of the 11 money before and we never did that way -- always buy the 12 material and sell it and pay you tax. 13 But (unintelligible) at that time and that's 14 why we cannot agree for what they ask for at that time. 15 MS. YEE: Thank you, Mr. Sheng. 16 Questions, Members? 17 MS. STEEL: Question? 18 MS. YEE: Ms. Steel? 19 MS. STEEL: So, when you set up those displays, 20 you just take it out and sell it after that you put new 21 displays and old ones that -- 22 MR. BERGER: Yes. 23 MS. STEEL: -- how it works? So, how long you 24 usually keep that? 25 MR. BERGER: It all depends on the actual item. 26 A lot of times people will come in and they want 27 something from the wall. If they don't want to wait for 28 it, I mean, this has happened more than -- 19 1 MS. STEEL: Just take it out? 2 MR. BERGER: -- yeah. It's not the right thing 3 to do most of the time, but sometimes we have to because 4 they're insistent on having it then. 5 And, if not, the displays -- they come in all 6 the time and they are like, 7 "Okay, this is -- we have new ones of these, 8 get rid of this. We have new ones of these, 9 get rid of this." 10 So, we'll put those on sale and we'll sell 11 those as well. 12 MS. STEEL: How about those end pieces, that 13 after you cut it and then sell it and then, you know, 14 you have a lot of inventories left with those end 15 pieces? 16 MR. BERGER: The remnants? 17 MS. STEEL: Yeah, remnants? 18 MR. BERGER: They can be there as long as 19 they -- I mean, I don't know. They've been there -- 20 some have been there years. 21 MS. STEEL: But you're selling it for what kind 22 of -- 23 MR. BERGER: Just like a vanity. A lot of 24 times people -- when you -- in the slab business, they 25 have to buy a full slab, whether they want a 40 by 20 26 piece or 120 by 40 piece. When you buy from a slab 27 yard, they don't give pieces. 28 So, a lot of people will come in saying, 20 1 "Hey, I'm just looking do a vanity. Do you 2 have any remnants?" 3 And then we bring them in the back and they 4 have all these different colors to choose from where 5 they're not having to pay for a full slab of material 6 for something they only need he quarter of a slab of 7 material for. 8 MS. STEEL: Okay. To the Department, that 9 2003, the merchandise purchases exceeded the reported 10 taxable measure. But that taxpayer just explained that 11 they buying the bulk and then they sell it. 12 And then 2003 and 2004 I saw that a lot of 13 sales went up. So, that's not really good cause of 14 that, you know, going after them you for you lied about 15 it because I think every business is different, that 16 sometimes they buy inventories much -- you know, certain 17 years they buy more, when it's cheaper and it's a good 18 conditions. That's one thing. 19 And second thing is that even the auditor did 20 not give written advice about the remnants in inventory 21 but ultimately the inventory adjustment in error because 22 of that, isn't that we think as written advice? 23 MR. LAMBERT: I'm not sure what the question 24 is. 25 MS. STEEL: The ending inventory, the -- this 26 is not the first audit, right? 27 MR. LAMBERT: Well -- 28 MS. STEEL: 2003 -- 21 1 MR. LAMBERT: -- technically, it's -- 2 MS. STEEL: -- I am talking about 2003. 3 MR. LAMBERT: It's not -- if you look -- count 4 the sole proprietorship, this would be the second audit. 5 MS. STEEL: Right. 6 MR. LAMBERT: Even though it's a corporation. 7 MS. STEEL: What I'm saying is they didn't 8 count -- they actually gave the changes -- the accounts 9 for changes in inventory because they -- you know, they 10 have -- they sold it and then they paid the taxes those 11 ending pieces remnants. 12 MR. LAMBERT: Okay. 13 MS. STEEL: So, they -- what they did was that 14 they didn't give written advice that the remnants in 15 inventory that can't be purchased without tax, but 16 auditor made an inventory adjustment in error. 17 MR. LAMBERT: Okay, I'm somewhat confused 18 about -- 19 MS. STEEL: So, that's incorrect audit advice 20 that they gave. 21 MR. LAMBERT: -- I'm confused in regards to 22 their argument because it seems like they're arguing two 23 different things. 24 The way I understand that they report is that 25 they've taken -- they purchased a slab, or multiple 26 slabs for the job and then report the tax on those 27 purchases, right? 28 And, so, if that's the case, the remnants would 22 1 be tax paid, that we wouldn't be assessing them tax 2 again in the audit. 3 And, so, I'm not sure exactly what their 4 argument is in regards to remnants. 5 MS. MANDEL: I had a question about -- I was 6 trying to follow what they said, just like you were 7 trying to follow it. 8 MS. YEE: Can you clarify, Mr. Berger? 9 MR. BERGER: Yeah, most definitely. 10 Well, there was two different purchases made, 11 there's one -- yes, he's correct, we purchased the 12 material for the jobs and we paid taxes in full for 13 those jobs. 14 And then there is the stock material that 15 increased so greatly in those one years based on what he 16 was saying they bought the containers full of material. 17 MS. MANDEL: So, those containers full of 18 material were not bought for a specific job, he was 19 buying a container of material and put it in the back. 20 MS. YEE: Kind of in stock? 21 MR. BERGER: Correct. 22 MS. MANDEL: And the -- but then the remnants, 23 I thought you said something about when you do a job, 24 the people aren't entitled to the remnant, that they're 25 not buying the remnant. 26 MR. BERGER: Right, they're buying -- they're 27 buying the slab for the job. 28 If there is leftover slab from their job and 23 1 they don't want to do another project like a vanity or 2 something, where they're using that slab for the job, 3 then the slab comes to us and it sits in our yard. 4 They can come back and purchase more with us 5 and if they don't, then we sell it off as like vanities 6 and stuff like that. 7 MS. MANDEL: Okay, so, the -- 8 MR. BERGER: And then again we'll charge tax 9 again because we're making another sale. 10 MS. MANDEL: Okay, so -- 11 MS. STEEL: So, is there two sets? 12 When you bought the bulk, it's different than 13 what you bought for other inventory, is that -- that's 14 been, you know, you already paid taxes, sales taxes on 15 that? 16 MR. BERGER: What they're saying is in the 17 thing they were calling the remnants is the leftover 18 pieces. 19 MS. STEEL: Right. 20 MR. BERGER: So, as far as the leftover pieces 21 are concerned, we already paid taxes on those. 22 But we pay tax again as we sell them if 23 somebody else buys another piece. 24 As far as the bulk container -- 25 MR. SHENG: Let me explain, okay? 26 More laminate come in 2004-2005 and was hiring 27 more salespeople. They order the sales 28 (unintelligible), they don't go through the detail where 24 1 the client come in, customer not accept it and it's 2 stone. You purchase and you cannot return it. 3 We need to let them sit on the pad. And the 4 (unintelligible) for the client. You could get more and 5 more that year. We have so much salespeople. We called 6 them remnant. And we called that leftover. 7 Example, you do a kitchen counter, you need one 8 and a half slab, but I need -- I have to buy two of it. 9 Half slab sit over there, we call them remnant. 10 MS. STEEL: But those were on -- already paid 11 tax? 12 MR. SHENG: Yeah, when we paying the taxes like 13 that, we buy the slab from the wholesaler, we don't pay 14 the -- we collect the tax from clients when we invoice 15 the client pay the checks. 16 But we pay the full amount, what we 17 purchased -- what we purchasing, that two slabs. The 18 half slab left over, we sell them not -- we sell them, 19 well, discount, but we sell for a lot of those, more 20 remnants. 21 We kept the checks for it and a lot of the 22 stock material, that yes, I know one party, they make 23 big mistake for 20 slab, they come in in the wrong 24 color. The people not accept it. 25 You have buy another 20 piece to fill this job, 26 but the 20 piece sit in my yard. 27 MS. YEE: Okay. 28 MR. SHENG: I call them remnants. 25 1 MS. STEEL: Let me ask Department, so, is that 2 the reason that they didn't mention anything about that, 3 the other audit for the same company, the other owner? 4 MR. LAMBERT: What they did is they just -- 5 they basically did it the same way. 6 My understanding is -- I haven't looked at the 7 working papers myself, but what I spoke to the auditor 8 about, they took a look at purchases and then compared 9 it to what was reported. And it was -- it was okay for 10 that period. 11 I'm still somewhat confused about what they're 12 saying. It appears peers they're arguing two different 13 things. 14 I can tell you exactly -- I don't know if I can 15 Give you the answer, but I can tell you exactly what we 16 did and it will clear it up. 17 But I don't know if -- 18 MS. MANDEL: Can I. -- 19 MR. LAMBERT: -- I don't know where you'll get 20 to from there. 21 MS. MANDEL: Can I just see if I understand 22 what he was saying about the slabs? 23 MR. LAMBERT: Uh-huh. 24 MS. MANDEL: Two groups of slabs -- first group 25 of slab, I want to do construction at my house. First 26 group of slab I need one and a half slabs to have in my 27 house. I can't buy one and a half slabs, they have 28 to -- they get two slabs for me, for me two slabs. I 26 1 pay -- they pay tax on the two slabs. But I only wind 2 up with one and a half in my house. 3 Under their contracts, they say they get the 4 other half slab back. That's a remnant. 5 MR. LAMBERT: Yes. 6 MS. MANDEL: They say that's already tax paid 7 because they paid tax on the full two slabs. 8 MR. LAMBERT: Right. 9 MS. MANDEL: You come to their shop, want to 10 make a vanity. And you like the half slab that's 11 sitting there that happens to be the one that came as 12 part of mine. 13 They sell you that one and pay tax on that half 14 slab. That's the one sort of group of slabs. 15 The other group of slabs they're saying is they 16 brought whole container loads full of slabs -- they 17 bought a lot of slabs. 18 I mean, the way the case was written up for us, 19 it said that they only bought slabs for particular jobs. 20 MR. TUCKER: Right. 21 MR. LAMBERT: That's my understanding. 22 MS. MANDEL: But he's -- what the gentleman's 23 saying today is that there were times -- and I guess it 24 must have been in this 2004 -- that they bought whole 25 container loads of -- let me get a whole bunch of slabs 26 in here and then maybe I'll have some people want to do 27 jobs and they'll like this piece, that piece and the 28 other piece. 27 1 On the whole containers of slabs, they just put 2 that in their yard, did not pay tax on it at that time, 3 paid tax as they sold the slabs out. 4 So, that -- I mean, that's what I heard him say 5 and he's nodding. 6 MR. LAMBERT; Yes. 7 MS. MANDEL: He's nodding yes. 8 MR. LAMBERT: Yes. 9 MS. MANDEL: So, then how -- so, that little 10 piece about the containers and we did have stuff in our 11 yard, maybe they called all of it remnants for the sake 12 of -- which maybe then got confusing with the particular 13 jobs, if they were also referring to the slabs that were 14 in the yard that had come on containers as remnants, 15 that could make life confusing. 16 But that's what I heard them say as to what 17 they had on the marble and granite. 18 Is that right? 19 MR. BERGER: Correct. 20 MS. MANDEL: Okay. Does that help you now? 21 MR. LAMBERT: I understand. 22 MS. MANDEL: Okay. 23 MR. LAMBERT: Yeah. 24 MR. TUCKER: It sounds like a timing issue. 25 MR. LAMBERT: Well, here's -- here's the issue 26 is we only had a problem in 2003 so if he was making the 27 purchases in 2004, that wasn't an issue in this 28 particular audit. 28 1 So, we only -- 2 MS. MANDEL: The container purchases? 3 MR. LAMBERT: Well, yes. 4 MS. MANDEL: I just want to make sure so that 5 they can get their facts when they tell us yes or no. 6 MR. LAMBERT: Right. I was unaware of 7 container purchases, they're -- it's not mentioned in 8 the audit, not aware of that. 9 But to put that aside, we only had a problem in 10 the year of 2003. And in the -- and how we calculated 11 the tax in 2003 is we took their purchases of materials 12 and we took their purchases of fixtures, we made slight 13 adjustments for the freight end on both of those, 14 1 percent we lowered them, and then we marked up the 15 fixtures 31 percent. 16 And, so, we took the taxable fixtures plus the 17 purchases of materials and said that is your -- your 18 taxable measure that you owe. And we compared it to 19 what you reported. 20 We didn't do anything with remnant sales is the 21 way I understand it. So, if they did sell remnants 22 over the counter or they sold it to someone else that 23 would not have been included in the 2003 audited taxable 24 measure. 25 Now given that, if they purchased large 26 containers in 2003 and they were not sold until a later 27 period, that could account for a difference for why 2003 28 might be -- that the taxable measure that we arrived at 29 1 might have been overstated. 2 Now, you'd also have to take a look at, 3 obviously, 2002, what the -- what the inventory that got 4 reported during that time, we don't know what that is. 5 But from the auditor's statement, they took a look at 6 2004 contracts. The purchase invoices would be attached 7 to the back of those and none of the contracts that were 8 looked at showed 2003 purchases in 2004. 9 So, that's, I guess, the explanation that we 10 can give. So, if they did report it, there was no way 11 for us to verify that, in fact, inventory from 2003 was 12 reported in a later date. 13 MR. BERGER: That's what I tried to do with the 14 documents. 15 MS. MANDEL: Okay. And are these new 16 documents? We just got them -- we got them this 17 morning. 18 But have you -- have you looked through them 19 and -- 20 MR. LAMBERT: I received the e-mail yesterday 21 in regards to this. The -- what I saw were no invoices 22 what I -- 23 MS. MANDEL: Well, because he says he'd bring 24 them to the hearing. 25 MR. LAMBERT: Yeah. 26 MS. MANDEL: -- and he's got a giant box. 27 MR. LAMBERT: I understand that. 28 I didn't see any invoices, but all of the 30 1 information that they have is for periods outside of the 2 audit period. 3 MS. YEE: Mr. Berger, had said that -- did you 4 have records from both -- 5 MR. BERGER: I have -- well, the purchase was 6 made in 2003, all of the pieces are the pieces that have 7 been sold have been since 2003. 8 So, over the last five years we've been selling 9 that material. 10 MS. MANDEL: So, when I'm -- I misspoke then 11 when I said the big container was 2004, it was 2003? 12 MR. BERGER: When was it? 13 MR. SHENG: We -- actually, that 2003, I 14 believe, 2003-2004, we purchasing by bundle and by a 15 container. 16 That -- that -- what the invoice -- what the 17 containers -- what they sold -- I have a feeling that, 18 yes, it's true because that accounting issue doesn't -- 19 I wondered inventory at the end of the year they told me 20 how much material, what they left over too, but that 21 time there's -- it's extremely difficult for the new 22 accounting going all that and other information. 23 But I do sold that other material, they send 24 five people over there and I can show them, but I take 25 them to the -- to the yard, to the -- to the warehouse. 26 That's two big loads of all bundled -- bundle material 27 stuck over there. I cannot sell them, but the materials 28 are stuck over there. 31 1 And all the material -- and later every one we 2 sell, we collect the tax and that's the invoice because 3 too we sell more laminates in 2005, 2006, 2007, 2009 and 4 all year and we -- every one resale we collect the tax 5 and that's when we submit them for that copy and that 6 bring all of the invoice here with the contract. 7 We do the construction always with the 8 contractor. After the contract says remnant material 9 sells from inventory or stock or laminate. And then the 10 people -- the accounting invoice always (unintelligible) 11 it be easy to find out which one is laminate we sell. 12 And some is like a kitchen bath display, the display 13 item we sell -- we invoice sold and display item and 14 that's why we bring also invoices to show you. 15 MS. YEE: So, let me see if I understand what 16 you have available documentwise. 17 I thought what we had received was recently? 18 MR. BERGER: There are recent. 19 MS. YEE: I'm sorry? 20 MR. BERGER: They are recent. 21 MS. YEE: No, no, let me describe what I think 22 we got recently because I hear Mr. Sheng saying he's got 23 more detailed information that actually would be more 24 helpful. 25 And that is, we had received looked like 26 summaries of sales transaction and it looked like those 27 were probably for the year -- those were for later 28 years, 2006 through '09 and then also some general 32 1 ledger sales tax account information that probably helps 2 explains some of the sales tax accrual over the timing 3 at issue that we're talking about. 4 And what I think I just heard Mr. Sheng say 5 that you had, in addition to that copies of all of the 6 invoices or contracts? 7 MR. BERGER: Yeah, I will -- I didn't want to 8 -- I just had nine copies, so, I just gave you -- I gave 9 basically the tops of everything. 10 I have the actual, the documents -- 11 MS. YEE: Okay. 12 MR. BERGER: -- that go along with those 13 records. 14 MS. YEE: Okay. 15 MR. BERGER: In case somebody wanted to say, 16 "Hey, I -- " 17 MS. YEE: So, up until today you have not 18 provided those -- 19 MR. BERGER: No. 20 MS. YEE: -- to us? 21 MR. BERGER: No. 22 MS. YEE: Okay, seems like that would be 23 helpful information, yes? 24 MR. BERGER: Well, that's what they said when I 25 called and asked, they said that -- send the pertinent 26 stuff, right. 27 So, I sent the top ledger sheets, the -- 28 MS. YEE: Okay. 33 1 MR. BERGER: -- itemized, I highlighted it, I 2 numbered it, I. -- 3 MS. YEE: I think for us the pertinent stuff 4 was the stuff on the bottom. 5 MR. BERGER: I'm sorry. 6 MS. YEE: That's okay. 7 MR. BERGER: And then they said I had to mail 8 nine copies and my copy -- my facts are already -- 9 MS. YEE: That's okay, we understand -- 10 understandable. 11 It's that detailed purchase information or 12 invoice records that I think is really going to be 13 helpful in terms of -- 14 MR. BERGER: I did bring those with me. 15 MS. YEE: Okay, Mr. Lambert, do you want to -- 16 MR. LAMBERT: I was just -- if you could ask 17 whether those -- I guess the supporting purchase 18 invoices date back to 2003, because that's -- that seems 19 to be the critical -- or, I guess, 2003 -- 20 MS. YEE: Starting from 2003? 21 MR. LAMBERT: -- well, I -- the only problem 22 was 2003. 23 MS. YEE: Oh, okay. 24 MR. LAMBERT: So, I'm still -- I understand 25 what their argument is, I am just wondering how it's 26 supported. 27 MS. YEE: Mr. Berger, can you tell me that? 28 Well, first of all, how far back to the -- 34 1 MR. BERGER: Well, I went back as far as 2004, 2 I believe, 2005 -- 2004, I think it is because the 3 purchases were made in 2003. So, the sales didn't begin 4 on that material until 2004 and 2005. 5 What I was shown is -- for supporting documents 6 isn't the purchase, it's the sale of the remnants and we 7 log them in our computers as remnant sales. So, we know 8 that those are pieces that were in our stock that we 9 have sold. 10 It's a difference compared to how we log our 11 new sales, you know, we just track it different, slab 12 material, slab labor. 13 MS. YEE: Yeah, no, I understand what you're 14 trying to track. 15 Are you able to go back to 2003 and start with 16 the -- 17 MR. BERGER: I'm sure I could. 18 MS. MANDEL: The purchases? 19 MR. BERGER: I'm sure -- I'm sure we could. 20 I'm sure we can do some research on it and find that 21 out. 22 MS. YEE: That would be helpful because that, 23 as Mr. Lambert suggests, that's where we have the 24 problem. And if we could at least look at the purchase 25 information from 2003 -- 26 MR. BERGER: I still don't know if there'd be a 27 way to directly correspond am invoice, per se, of ten 28 slabs -- that it went with this job (indicating) because 35 1 it's not set up as a remnant. 2 Pase verde is the color, for an example, it 3 doesn't say on there "remnant sale of pase verde." 4 So, I mean, it would take some time. I mean, 5 we would need some time to be able to go back and get 6 those documents, go through all of the records and to 7 match up those invoice with the actual -- to make sure 8 that the colors are the exact colors that went with this 9 job and that job. 10 MS. YEE: Well, if you have information, I 11 think it's worth doing. We certainly will give you the 12 time to do that. 13 MS. MANDEL: Yes, especially since the 14 Department didn't realize 'til today that there was 15 these giant lump bundled purchases -- 16 MS. YEE: Right. 17 MS. MANDEL: -- that were not for particular 18 jobs. 19 MS. YEE: Right. 20 MR. SHENG: I can say that invoice of the 2005, 21 that were set up -- 22 MS. YEE: Mr. Sheng, speak into the microphone, 23 please? 24 MR. SHENG: So, that will be more east to find 25 in 2005 because we use the new -- new software over 26 there. Before that it's in QuickBook -- QuickBook 27 program, it doesn't able to pull out any more 28 information any more and then the individual computer 36 1 now that information -- that new program's in the server 2 it's a lot more easier to report information. 3 Before that -- I want to explain that 4 purchasing after year 2005, every purchasing, they were 5 follow-up book order number. Before that, in the 6 QuickBook use, they didn't have that function. They 7 don't -- they don't follow that order. 8 But we -- and that purchasing may be not able 9 to tell you this purchasing for what -- for stock or for 10 job. But after 2005 they can tell that because that -- 11 everything in the purchasing (unintelligible) were on 12 the order. 13 MS. YEE: Okay. 14 MR. SHENG: I know that the information we can 15 find but we might be spend too much time to find it -- 16 to search for the information, but I do not know that 17 information that -- can be able to provide you clear, 18 that we can what we put on invoice what we purchasing 19 but can be -- you say in stock, for stock, use for 20 customer. 21 MS. YEE: Okay. 22 MR. SHENG: That's what I tell you. 23 MS. YEE: Department, worth looking at, I mean, 24 given the recordkeeping and what was in place back then 25 and possibly not being able to distinguish between 26 the -- 27 MR. LAMBERT: I don't see a problem -- 28 MS. YEE: -- types of purchases? 37 1 MR. LAMBERT: -- with us going back out there 2 and taking a look at it. I -- I think it's going to be 3 difficult to try and track some of those later sales in 4 '04 and '05 or, actually, any period after that. 5 You know, if they purchased it in '03 and they 6 turned around and report it at a later time, they're 7 entitled to a tax paid purchases resold credit, no 8 matter how late it that it goes. 9 I mean, you run into a little bit of problem if 10 they did in 2006 because the statute of limitations -- 11 the three years after the audit period, but -- you know, 12 what probably needs to be done is that -- and I know 13 they don't want to do -- they probably don't want to 14 hear this, but, technically the way it is when you 15 purchase for the job, you should not be issuing a resale 16 certificate for that. You owe tax at the time of -- if 17 it's for a construction job, you pay tax at the time 18 that you purchase it. And that's what they should be 19 doing in this case. 20 MR. SHENG: Yeah, actually we don't like to use 21 a different method. In the future we talk about we 22 purchase material, we pay the tax in the wholesale, we 23 don't want to do it any more like that. 24 But in -- that's the issue here. We don't know 25 how to start. Actually, I would like to find a 26 professional to give me an opinion before we resell the 27 job and then have the tax to pay. 28 I really go to -- we buy the material, we pay 38 1 the tax first and then don't need to worry about the tax 2 any more. 3 MS. YEE: Yeah. 4 MR. SHENG: And that (unintelligible) we want 5 to learn that knowledge and change for it. 6 But for this audit, wasted a lot of time, a lot 7 of time. And right now the economy -- I got to cut -- 8 cut the manager, no manager. And I will be manager. 9 And no reception, cut one bookkeeping -- you asking me 10 to do that, I have to do it. 11 But I don't know, I need at least 24 hour, 12 doing something I never take break for two months. The 13 file -- piled for the file, you need to pull out 14 everything, take a lot of time to do that, but I have to 15 respond to it at this time. 16 I do not know you -- I feel like that 17 information we -- the product we sold, we cut the 18 checks, provided the invoice number and then you get and 19 everything. And you really know that we cut -- we 20 collect the checks for every sale -- the display or the 21 remnant -- they're all by contract -- the copy, he has 22 contract with invoice and the displays -- the 23 kitchen/bath displays are in -- (unintelligible) it's in 24 the software. You see display on the invoice, this sold 25 display is coming out, is sold. 26 But it's going to take a lot of time to look 27 for every file. I do not know where any simple reason 28 why the information but go back to 2003 or 2002 and 39 1 we'll spend a lot of time. I want you to -- I will find 2 any other information I can provide. 3 MS. YEE: Okay. I can appreciate that it's 4 very time intensive, but we really do need some of the 5 supporting source documentation here. 6 Members, other questions before we -- 7 MR. HORTON: Madam Chair? 8 MS. YEE: Yes, Mr. Horton. 9 MR. HORTON: Just a quick question of the 10 Department. 11 The Department accepted 2004 and 2005? 12 MR. HANKS: Yes. 13 MR. HORTON: Will any of this have an impact on 14 those periods that we've have already accepted? 15 MR. LAMBERT: Possibly, it -- I guess it 16 depends on how much it would lower any particular period 17 but -- below what it might be accept -- what is 18 acceptable that they have already reported. 19 Did I make that clear? 20 MR. HORTON: Oh, no, no. 21 MR. LAMBERT: I did? Okay. 22 MR. HORTON: I might -- it appears as though 23 we're going to a 30-30-30. I might suggest that the 24 Department do somewhat of a hypothetical analysis and 25 have that discussion with the taxpayer to make sure that 26 we're not opening up Pandora's box for those two periods 27 that we've already accepted. 28 MR. LAMBERT: Yes. 40 1 MR. HANKS: Yes. 2 MR. LAMBERT: I can't see the liability going 3 any -- I mean, it won't -- it wouldn't go any higher 4 than it is now based on the adjustments as far as I can 5 tell. 6 MR. HORTON: No, I think the liability -- 7 MR. HANKS: Absolutely. 8 MR. HORTON: -- probably goes down, but if you 9 end up making a -- well, I don't want to get into it, 10 but take a look at and if it warrants it, I would -- for 11 the benefit of the taxpayer, I would like for them to 12 have that information prior to making a decision about 13 how they go forward with these particular transactions. 14 MR. TUCKER: It's a very good point. 15 MS. YEE: Okay. Mr. Lambert? 16 MR. LAMBERT: It may be easier for the 17 Department, instead of the 30-30-30 get just get -- just 18 to send it back for a re-audit to -- 19 MS. YEE: Sounds like there is potentially 20 quite a bit of information that we'll need to look at. 21 I think that's -- 22 MR. LAMBERT: Sounds like they have it 23 available. 24 MS. YEE: -- yeah, it's a good idea. 25 Okay, is there a motion then? 26 MS. STEEL: I make a 30-30-30. 27 MS. YEE: Actually, I think what we'll do 28 instead is send it back for a re-audit. 41 1 MS. STEEL: Okay. 2 MS. YEE: And then the time will -- 3 MS. STEEL: Reaudit means that go back to 2003 4 or -- 5 MR. LAMBERT: Gives us -- 6 MS. STEEL: -- you going to do a new audit? 7 MR. LAMBERT: -- just gives us the additional 8 time -- 9 MS. STEEL: Okay. 10 MR. LAMBERT: -- to do instead of putting the 11 time constraint on them. 12 MS. YEE: Okay. 13 MS. STEEL: I think it's going to help you, 14 though -- 15 MS. YEE: Yes. 16 MS. STEEL: -- because they assess the tax on 17 the entire cost of 2003. 18 So, I think it's going to help you a lot. 19 MS. YEE: Yeah. 20 MR. LAMBERT: Okay. 21 MS. YEE: Okay, all right. We have a motion by 22 Ms. Steel to direct this matter back to reaudit. 23 Is there a second? 24 MR. HORTON: Second. 25 MS. YEE: Second by Mr. Horton. 26 Without objection -- 27 MR. BERGER: What is exactly we need to do? 28 MS. YEE: That motion carries. 42 1 Actually, the Department will confer with you 2 and give you a sense of what additional records you need 3 to make available. You probably already have most of 4 it. 5 But to the extent that you can go back to the 6 purchases of 2003, I think that would be very, very 7 helpful. 8 MR. BERGER: Okay. 9 MS. YEE: But I know Mr. Sheng has indicated 10 that the time intensiveness that's involved with that, 11 work it out with the Department in terms of how much 12 time they're going to give you to try to get those 13 records together. 14 MR. BERGER: Okay. 15 MS. YEE: Okay. 16 MR. BERGER: Thank you very much. 17 MS. YEE: Thank you both very much. 18 ---o0o--- 19 20 21 22 23 24 25 26 27 28 43 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 JULY 14, 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 1 13 through 43 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: October 14, 2010 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 44