1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 SEPTEMBER 15, 2010 10 11 SPECIAL TAXES APPEAL HEARING 12 APPEAL OF 13 ISMAIL AHMAD KARAJAH 14 NO. 534141 (ET) 15 16 17 18 19 20 21 22 23 Reported by: Juli Price Jackson 24 CSR No. 5214 25 26 27 28 1 1 2 P R E S E N T 3 For the Board Betty T. Yee of Equalization: Chair 4 Jerome E. Horton 5 Vice-Chair 6 Barbara Alby Acting Member 7 Michelle Steel 8 Member 9 Marcy Jo Mandel Appearing for John 10 Chiang,State Controller (per Government Code 11 Section 7.9) 12 Diane G. Olson Chief 13 Board Proceedings Division 14 15 For Board of Cindy Chiu Equalization Staff: Staff Counsel 16 17 18 For Department: Pamela Mash Tax Counsel 19 20 Steve Smith Tax Counsel 21 22 Mark Edwards Investigative Division 23 24 Sam Alotri Interpreter 25 26 For Petitioner: Ismail Karajah Taxpayer 27 28 ---oOo--- 2 1 450 N STREET 2 SACRAMENTO,, CALIFORNIA 3 SEPTEMBER 15, 2010 4 ---o0o--- 5 MS. YEE: Our next item, please? 6 MS. OLSON: Our next item is D2, Ismail Ahmad 7 Karajah. Please come forward. 8 MS. YEE: Okay, Ms. Chiu, do you want to 9 introduce the matter, please? 10 MS. CHIU: The issue in this petition is 11 whether the two boxes of Swisher Sweets Wine-Flavored 12 Cigars were properly seized and should be forfeited. 13 MS. YEE: Okay, thank you very much. 14 Members, we're on D2, Ismail Ahmad Karajah. 15 Good afternoon. If you'll introduce 16 yourselves for the record, please? 17 MR. ALOTRI: My name is Sam Alotri. I'm a Tax 18 Auditor at the District office. I was asked to come to 19 be the interpreter for Mr. Ismail. 20 MS. YEE: Thank you, okay. 21 You have ten minutes. I'm not sure if you've 22 discussed with Mr. Karajah how he'd like to present his 23 testimony. 24 MR. ALOTRI: I was asked to translate word for 25 word and just to be the intermediary between Mr. Karajah 26 and the Board. 27 MS. YEE: Okay, very well. 28 Okay, you may proceed. 3 1 MR. ALOTRI: I just read the petition that 2 Mr. Ismail had and it's saying that some of the items 3 that -- 4 MS. YEE: Can you pull yourself right up to the 5 microphone. 6 MR. ALOTRI: Oh, I'm sorry. 7 MS. YEE: Thank you. 8 MR. ALOTRI: -- that Board had confiscated, 9 that there -- that did not find receipts for the 10 purchase that the product that he had. 11 And I asked him. He said he had some sort of 12 an exchange with other stores or other people, I'm not 13 sure. 14 They could not -- he could not provide receipts 15 for the purchases due to an exchange with other stores 16 or something like that. That's what he told me. 17 We stopped at that and we came in to -- 18 MS. YEE: Okay. 19 MR. ALOTRI: Okay, I can translate. 20 MR. KARAJAH: Okay. 21 MR. ALOTRI: Okay, he bought 20 boxes of -- 22 cigarettes, cigars, what are they? 23 Cigars -- and they confiscated ten, right? 24 MR. KARAJAH: Yeah. 25 MR. ALOTRI: And what happened with the others? 26 So, you got back eight? They have two boxes 27 out of ten. 28 Okay. 4 1 MS. YEE: Okay. Anything else? 2 MR. ALOTRI: Anything else you want to say, you 3 want to -- 4 MR. KARAJAH: When I receive this bill, but I 5 see like State Board says that two businesses say that 6 they -- manufacturer is after the date from my invoice. 7 MS. MANDEL: The date of manufacture on the 8 product that we have is after the invoice he had 9 provided. 10 So, did he -- did he have -- does he have an 11 invoice -- 12 MR. KARAJAH: Yeah. 13 MS. MANDEL: -- for after January 11th, 2010? 14 MR. KARAJAH: No. 15 MS. MANDEL: No? 16 MR. KARAJAH: My invoice in 19 December 2009 17 and the second one for a January 9th. 18 MR. ALOTRI: Yeah, December 19th, 2009, there 19 was an invoice. And then January 9th, 2010. 20 MS. MANDEL: Okay. Did he -- did he -- from 21 whom did he buy product after January 9th, 2010? 22 MR. ALOTRI: Who is that is smoke shop with? 23 What's his name? 24 MR. KARAJAH: (Unintelligible) Town. 25 MR. ALOTRI: (Unintelligible) Town. 26 Exchanged what? 27 MR KARAJAH: Two boxes. 28 MR. ALOTRI: Two boxes? 5 1 MR. KARAJAH: Two boxes with regular Swisher. 2 MR. ALOTRI: Okay. So they switched with the 3 other shop. 4 MR. KARAJAH: He switched with mine. 5 MR. ALOTRI: Do you have docu -- do you have 6 any papers? 7 MR. KARAJAH: Yeah. 8 MS. CHIU: Just directly translate exactly what 9 Mr. Karajah's saying rather than having a discussion 10 between the two of you. 11 MR. ALOTRI: I was just trying to find out what 12 happened so I can explain -- 13 MS. CHIU: Okay. 14 MR. ALOTRI: -- to the Board that -- what he 15 had transpired in this exchange with the other store. 16 MS. CHIU: Well, please convey that to the 17 Board. 18 MR. ALOTRI: Well, apparently, he had a 19 neighboring store and he had exchanged two boxes with 20 the -- with them. 21 Apparently, there's no documentation of that 22 exchange. 23 MS. MANDEL: No documentation of that exchange? 24 MR. KARAJAH: No. 25 MR. ALOTRI: He said he can -- if he the Board 26 wanted to subpoena the other person, he can talk to him 27 to come and talk to the Board, I guess, about that 28 exchange. 6 1 MS. MANDEL: Okay. So, I guess that's his 2 explanation of where those -- the product we have came 3 from. 4 MS. STEEL: But without subpoena, can you go to 5 next door and find out that they paid -- they paid 6 taxes? 7 You have those invoice that you exchanged this. 8 So, if you got the invoice that -- the other store has 9 invoice that they paid taxes, can you find that one out? 10 MR. ALOTRI: He said he has invoices, the other 11 store. 12 MS. STEEL: They have invoices that they paid 13 the taxes? 14 MR. ALOTRI: Did they pay tax to him. 15 MS. STEEL: No, no, no, to -- when they bought 16 it? 17 MR. KARAJAH: No. 18 MR. ALOTRI: Okay, he said he bought the 19 product in -- february 2nd. 20 MR. KARAJAH: February 5th. 21 MR. ALOTRI: February 5th and he paid tax on 22 the product. 23 His neighbor said to him that he did pay him -- 24 he paid tax. 25 MS. STEEL: So, can you get the invoice that 26 already paid the taxes from next door? 27 MR. KARAJAH: Yeah. 28 MS. STEEL: Can you? 7 1 MR. KARAJAH: Yeah. 2 MS. YEE: Does he understand what we're 3 seeking? 4 Could you ask him? 5 MR. ALOTRI: Okay, he understand that. 6 MS. STEEL: So, Department is it okay if they 7 bring the invoice that next door already paid taxes 8 because he's swapped it? 9 MR. EDWARDS: Well, we would review it, 10 however, without an exchange documentation showing 11 exactly what happened, you know, it's -- anybody can say 12 that they exchanged product. 13 MS. STEEL: But if it's the same products 14 because a lot of stores that they exchange to each other 15 that -- 16 MR. EDWARDS: But it's not done at the time of 17 sale. 18 And, in general, retailers are not allowed to 19 transfer products between retailers. A retail store is 20 only supposed to be buying from a wholesaler or a 21 distributor. 22 MS. STEEL: How about declaration from -- that 23 the other store that they exchanged that? 24 MR. EDWARDS: We would look at any evidence 25 that they provide. 26 MS. STEEL: Okay. 27 MS. YEE: Okay. 28 MS. STEEL: I make a motion for 30-30-30. 8 1 MS. YEE: Okay. Let me do this -- let me call 2 you, Mr. Horton, but let me just be sure that we heard 3 everything that Mr. Karajah wants to have the Board know 4 at this point. 5 And I would like to hear from the Department. 6 Mr. Horton has questions. But before we have 7 any kind of a motion for a 30-30-30, in the event there 8 are other issues, I want to be very clear what it is 9 that we're granting a 30-30-30 for. 10 Okay. Mr. Horton, did you want to ask your 11 question before I move to the Department? 12 MR. HORTON: Yeah, I just want some 13 clarification on the law. 14 The Department indicated that the taxpayer 15 could purchase this product from a nondistributor. 16 MR. EDWARDS: I'm sorry? 17 MR. HORTON: That would be taken under 18 consideration? 19 Did I -- 20 MR. EDWARDS: Well, legally they can not 21 purchase products from retailers. 22 However, if it can be established that it's tax 23 paid for purposes of the seizure, that's different from 24 the potential citation for buying from a unlicensed 25 supplier. 26 MR. HORTON: I'll reserve my questions for 27 later, Madam Chair. 28 MS. YEE: Okay. 9 1 MR. HORTON: I want to read the law. 2 MS. YEE: All right, that's fine. 3 MR. ALOTRI: Okay, he just wants to make clear 4 to the Board that he did not purchase any product. He 5 exchanged with the other shop. 6 MS. YEE: Yes, we understand, yes. 7 And the questions have related to whether there 8 were invoices that reflect what was purchased that would 9 document the tax was actually paid. 10 And I believe when that question was posed to 11 you that Mr. Karajah had indicated that the invoices 12 could be located. 13 Is that correct? 14 MR. ALOTRI: Yeah, if you can show that, that's 15 fine. Then the Board will look at it. 16 Okay. 17 MS. YEE: All right. Let us hear from the 18 Department. 19 And then I think we'll entertain further 20 questions from the Members and see if we can identify 21 the issues for what we need further documentation to 22 show. 23 Department, please? 24 MS. MASH: Thank you, Madam Chairwoman. My 25 name is Pamela Mash. I'm from the Board's Legal 26 Department. 27 I'm here with Mark Edwards and Steve Smith, 28 representing staff. 10 1 This is new information to us as far as the 2 other documents that may be appropriate and available at 3 this time. 4 The products at issue are two six-count boxes 5 of Swisher Sweets Wine-Flavored Cigarillos with a 6 manufacture date of January 11, 2010. And, to date, we 7 have not received any additional purchase invoices to 8 show that the tax has been paid on those tobacco 9 products. 10 If Mr. Karajah thinks he has documents or 11 invoices that would -- that would help us in this 12 matter, we would be happy to look at it. 13 I don't want to take any more of your time if 14 you've already -- if you're already hoping to do a 15 30-30-30 or -- 16 MS. YEE: Okay. 17 MS. MANDEL: So -- 18 MS. YEE: Ms. Mandel? 19 MS. MANDEL: -- cigars don't some with serial 20 numbers or something like that on the invoice, do they? 21 I guess not. 22 MS. MASH: On the invoice? 23 MS. MANDEL: Yeah, I mean how -- I just -- I 24 mean, is there a tie between the invoices and 25 manufacture date? 26 Is there a tie between the invoices, somehow, 27 and particular boxes other than a general description 28 and -- and the manufacture date that you pick off the 11 1 product itself? 2 MR. EDWARDS: There would be really nothing to 3 tie it together. That's why, you know, if there's 4 anything of this nature, you know, it would be kind OF 5 like is there anything that was created at the time of 6 this exchange or sale, since an exchange is a sale. 7 For instance, we've had situations where people 8 have receipts from the corner service station where they 9 bought cigarettes to sell through their store. 10 MS. MANDEL: Uh-huh. 11 MR. EDWARDS: They're not buying from a 12 wholesaler distributor but we could tell the tax is 13 paid. So, we would not seize that product, although 14 they could be issued a citation to purchasing from an 15 unlicensed person, meaning that they weren't a 16 wholesaler or distributor. 17 MS. MANDEL: Right. And I don't know what kind 18 of inventory records or bookkeeping records this place 19 -- I guess different places have different types of 20 records, whether they make any notations in them that 21 they've done things like this. 22 Okay. 23 MS. YEE: Okay, thank you. 24 Do you to take any time on rebuttal, 25 Mr. Karajah? 26 MR. KARAJAH: (Unintelligible) -- almost eight 27 times by (unintelligible). 28 MR. ALOTRI: Okay. 12 1 MR. KARAJAH: I'm working on negotiating the 2 (unintelligible) listed on the (unintelligible). 3 MR. ALOTRI: He's saying that the State Board 4 came, visited his shop eight times and never found any 5 document to state otherwise. Everything was tax paid. 6 That's -- this is the only time that the State 7 Board came in and found discrepancy in his records with 8 these two -- 9 MR. KARAJAH: The invoice on this exchange. 10 MR. ALOTRI: He said he's got the invoices, but 11 what happened the exchange with his neighbor with the 12 two boxes created all this problems. 13 And he said if there was anything wrong before 14 that, they would have -- the Board would have found it 15 and would have confiscated. 16 Obviously, he did not intend to do anything 17 against -- illegally or to do any transaction that's not 18 according to the Board. 19 That's what he's saying. 20 MS. YEE: Okay, thank you. 21 MR. HORTON: So, the Board -- Madam Chair? 22 MS. YEE: Yes, Mr. Horton? 23 MR. HORTON: The Board's been in your operation 24 prior to now? 25 MR. ALOTRI: Eight times. 26 MR. KARAJAH: Four years. 27 MR. HORTON: Eight times? 28 MR. ALOTRI: Eight times in four years. 13 1 MR. HORTON: And found nothing? 2 MR. KARAJAH: Nothing, checked my records. 3 MS. YEE: Is that true? 4 MR. EDWARDS: Well, he's had several 5 businesses. But for Farah Smoke Shop, our records show 6 we've been there -- this last one was the fifth 7 inspection. 8 The first one, if you want me to go through 9 these, was on May 4th, 2005. And at that time there was 10 no purchase invoices at the business, but Mr. Karajah 11 provided some. So, a citation was not issued, but there 12 was some non M. S. A. product that was seized. 13 On July 11th a re-inspection was conducted. 14 And, once again, there was no purchase invoices 15 available at the business. Mr. Karajah was able to 16 provide 12 months of invoices to the investigators. And 17 then we also found more non M. S. A. product that was 18 seized. 19 On January 30th of 2008 we did an inspection 20 and again 12 months of purchase invoices was not 21 available. At that time a citation was issued and that 22 was upheld. 23 Then prior to this, on June 30th of 2008, we 24 did another inspection. And on that a citation was 25 issued for buying from an unlicensed person. 26 And then we have this current one where 27 purchase invoices were not available and then the 28 product was not supported completely. 14 1 MR. ALOTRI: He wants too rebuttal that. 2 MS. YEE: Okay, did -- he understood what 3 the -- 4 MR. KARAJAH: Yeah. 5 MR. ALOTRI: Yes, he said he did. 6 MR. KARAJAH: The first time was 7 (unintelligible) ask about my invoice. 8 MR. ALOTRI: Okay. 9 MR. KARAJAH: It was -- I have invoice 10 (unintelligible) since I opened month by month. 11 (unintelligible) State Board office claims -- 12 MR. ALOTRI: Okay, he said in the first event, 13 when that happened, when they didn't find the invoices, 14 the -- I guess inside the store he had a closet or 15 something, office, small office, was closed so they 16 couldn't -- they had no access to the records -- because 17 he wasn't available. Somebody else working for him was 18 available at the store. 19 MS. YEE: Okay. 20 MR. ALOTRI: Okay. 21 MR. KARAJAH: And the five time 22 (unintelligible) she write the citation. 23 MR. ALOTRI: He said on the second time 24 somebody by the name of Mona -- 25 MR. KARAJAH: Mona. 26 MR. ALOTRI: -- okay, came in and basically 27 inspected and she wrote her, I guess, citation. 28 But he kept in contact with her, trying to show 15 1 her that he has the invoices and finally what happened? 2 She didn't contact you back? She didn't 3 contact you? 4 MR. KARAJAH: I tell her I have all the 5 invoices after (unintelligible). 6 And the third time, one invoice is missing is 7 the issue, 12 month invoice, but 12 month is missing one 8 page is citation. 9 MR. ALOTRI: He said on the third time he had 10 12 invoices, was only missing one -- 11 MR. KARAJAH: One page. 12 MR. ALOTRI: -- one page of the invoice and he 13 got a citation for that. 14 MR. KARAJAH: And I have that 12 month. I have 15 back record for five years straight from any month you 16 want it. 17 But when she's coming like last time for this 18 citation, it was I am not have it in my hand and she's 19 write the citation 12 months. 20 But I have the 12 month, I have all of the 21 record. If I miss one page is mean I am not have all of 22 the invoice? 23 MS. YEE: Okay. All right, pleasure of the 24 Members? 25 MR. HORTON: Move to take it under submission. 26 MS. YEE: Okay, motion by Mr. Horton to take 27 the matter under submission. 28 Is there a second? 16 1 MS. ALBY: Second. 2 MS. MANDEL: Second. 3 MS. YEE: Second by Ms. Alby. 4 Without objection? 5 Motion carries. 6 MR. KARAJAH: So, if I can, just for the last 7 thing, he mention for one invoice or one citation I buy 8 from licensed -- unlicensed person. 9 The other person it was me because I have 10 distributor license and I have retailer license. And 11 there is -- State Board that day is come to me almost 16 12 person, eight in my house and eight in my store and 13 checked all over and checked (unintelligible) for me 14 This was nothing there for this citation. 15 MS. YEE: Mr. Karajah -- Mr. Karajah, I'm going 16 to stop you. 17 MR. KARAJAH: Okay. 18 MS. YEE: Okay. We have just heard your 19 testimony, heard from the Department with respect to the 20 seizure that took place in February of this year. 21 The case has been taken under submission. So, 22 we will discuss your matter later today. 23 Okay, thank you. 24 Okay, thank you. We'll let you know the 25 outcome. 26 Thank you very much. 27 ---o0o--- 28 17 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 SEPTEMBER 15, 2010 I recorded verbatim, in shorthand, to 10 the 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 17 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: December 20, 2010 17 18 19 20 21 22 23 ____________________________ 24 JULI PRICE JACKSON 25 Hearing Reporter 26 27 28 18