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 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 REPORTED BY: JULI PRICE JACKSON 24 CSR NO. 5214 25 26 27 28 1 1 P R E S E N T 2 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 Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane G. Olson Chief, Board 13 Proceedings Division 14 15 ---OOO--- 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 SEPTEMBER 15, 2010 4 ---o0o--- 5 MS. OLSON: Our next item are those items taken 6 under submission. 7 MS. YEE: Okay. Members, are we ready to move 8 to the items taken under submission? 9 Okay, what's our first item? 10 MS. OLSON: Our first item is B5, Thomas 11 Litawa. 12 ---o0o--- 13 B5 THOMAS LITAWA 14 NO. 522390 15 ---o0o--- 16 MS. YEE: Okay, item B5, Thomas Litawa. 17 Do we have a motion? 18 MR. HORTON: Move to sustain the Franchise Tax 19 Board. 20 MS. YEE: We have a motion by Mr. Horton to 21 sustain the Franchise Tax Board. 22 Is there a second? 23 MS. MANDEL: second. 24 MS. YEE: Second by Ms. Mandel. 25 Discussion? 26 Okay. Without objection, motion carries. 27 ---o0o--- 28 3 1 MS. YEE: Next item. 2 MS. OLSON: Our next item is C9, Cities of 3 Los Angeles, Roseville, San Diego and Santa Clara. 4 ---o0o--- 5 C9 CITIES OF LOS ANGELES, ROSEVILLE, 6 SAN DIEGO AND SANTA CLARA 7 NO. 422182 8 ---o0o--- 9 MS. YEE: Okay, next item is C9 the Local Tax 10 Reallocation Appeal, Cities of Los Angeles, Roseville, 11 San Diego and Santa Clara. 12 May I have a motion, please? 13 MS. STEEL: Sustain the staff recommendation. 14 MS. YEE: Okay, motion by Ms. Steel to adopt 15 the staff recommendation. 16 Is there a second? 17 MS. MANDEL: I'll second. 18 MS. YEE: Okay, second by Ms. Mandel. 19 Discussion? 20 Hearing none, without objection -- 21 MS. ALBY: I do have. 22 MS. YEE: Okay, please call the roll. 23 MS. OLSON: Madam Chair? 24 MS. YEE: Aye. 25 MS. OLSON: Ms. Alby? 26 MS. ALBY: No. 27 MS. OLSON: Ms. Steel? 28 MS. STEEL: Aye. 4 1 MS. OLSON: Mr. Horton? 2 MR. HORTON: Pass for a minute. 3 MS. OLSON: Ms. Mandel? 4 MS. MANDEL: Aye. 5 MR. HORTON: Quick minute. 6 MS. MANDEL: I seconded the motion, so -- 7 MR. HORTON: Soft no. 8 MS. OLSON: Motion carries. 9 ---o0o--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 MS. YEE: Okay.. 2 MS. OLSON: Our next item is C10, Jaswant S. 3 Sra. 4 ---o0o--- 5 C10 JASWANT S. SRA 6 NO. 437185 (UT) 7 ---o0o--- 8 MS. YEE: Item C10, Jaswant S. Sra, is there 9 a motion, please? 10 MS. MANDEL: I move to redetermine. 11 MS. YEE: Motion by Ms. Mandel to redetermine. 12 Is there a second? 13 MS. ALBY: Second. 14 MS. YEE: Second by Ms. Alby. 15 Discussion? 16 MS. STEEL: This one has the documents that 17 they delivered to Ontario? 18 MS. MANDEL: Yes. 19 MS. YEE: Yes. 20 Objection? Hearing none, the motion carries. 21 ---o0o--- 22 23 24 25 26 27 28 6 1 MS. YEE: Next item? 2 MS. OLSON: Our next item is C11, Gladys 3 Lillian Martines. 4 ---o0o--- 5 C11 GLADYS LILLIAN MARTINES 6 NO. 461496 7 ---o0o--- 8 MS. YEE: Okay, item C11, Gladys Lillian 9 Martines, may I have a motion, please? 10 MR. HORTON: Move to adopt staff 11 recommendation. 12 MS. ALBY: Move -- 13 MS. MANDEL: We have a penalty form. Do we 14 have -- 15 MS. YEE: Waive the penalty? 16 MS. KIM: Correct, it does, to my view, meet 17 the requirements for penalty relief. 18 MS. YEE: Okay. 19 MS. ALBY: We had a tie on the motion. 20 MS. YEE: Yes, we did. 21 Ladies first. 22 Ms. Alby, what's your motion? 23 MS. ALBY: My motion is to award the taxpayer's 24 petition. 25 MS. YEE: Okay. Motion by Ms. Alby to grant 26 the petition. 27 Is there a second? Agency as I could. 28 MS. STEEL: Second. 7 1 MS. YEE: Second by Ms. Steel. 2 Discussion? 3 MS. ALBY: I -- it's -- to me it's absolutely 4 clear she did not buy this man's business and she did 5 not buy a stock of goods. All she did was sign an 6 agreement to get him out of his lease early. 7 And I just -- I think this woman presented a 8 very, very compelling case. 9 MS. YEE: Okay. 10 MS. STEEL: I totally agree with Ms. Alby that 11 they don't have actual purchase agreement. It was 12 eviction notice. 13 MS. YEE: Okay. We have a motion by Ms. Alby, 14 second by Ms. Steel to grant the petition. 15 Please call the roll. 16 MS. OLSON: Madam Chair? 17 MS. YEE: No. 18 MS. OLSON: Ms. Alby? 19 MS. ALBY: Aye. 20 MS. OLSON: Ms. Steel? 21 MS. STEEL: Aye. 22 MS. OLSON: Mr. Horton? 23 MR. HORTON: No. 24 MS. OLSON: Ms. Mandel? 25 MS. MANDEL: No. 26 MS. OLSON: Motion fails. 27 MS. YEE: Okay. 28 MR. HORTON: Motion to adopt staff 8 1 recommendation. 2 MS. YEE: Okay. 3 MS. MANDEL: And the staff recommendation 4 includes deletion of the penalty? 5 MR. HORTON: Includes the -- 6 MS. YEE: Penalty relief? 7 MR. HORTON: -- penalty relief. 8 MS. KIM: Yes, staff would recommend that. 9 MS. YEE: Okay, motion by Mr. Horton to adopt 10 the staff recommendation, inclusive of the relief of the 11 penalty. 12 Is there a second? 13 I'll second that motion. 14 Please call the roll. 15 MS. OLSON: Madam Chair? 16 MS. YEE: Aye. 17 MS. OLSON: Ms. Alby? 18 MS. ALBY: Pass for a minute. 19 MS. OLSON: Ms. Steel? 20 MS. STEEL: No. 21 MS. OLSON: Mr. Horton? 22 MR. HORTON: Aye. 23 MS. OLSON: Ms. Mandel? 24 MS. MANDEL: Aye. 25 MS. OLSON: Ms. Alby? 26 MS. ALBY: No. 27 MS. OLSON: Motion carries. 28 ---o0o--- 9 1 MS. YEE: Okay. 2 MS. OLSON: Our next item is D1, Enrique Ayala 3 Rodriguez. 4 ---o0o--- 5 D1 ENRIQUE AYALA RODRIGUEZ 6 NO. 530984 (ET) 7 ---o0o--- 8 MS. YEE: Okay, item D1, Enrique Ayala 9 Rodriguez. 10 May I have a motion, please? 11 MR. HORTON: Move to adopt staff 12 recommendation. 13 MS. YEE: Motion by Mr. Horton to adopt the 14 staff recommendation. 15 Is there a second? 16 MS. ALBY: Second. 17 MS. YEE: Second by Ms. Alby. Discussion? 18 MS. STEEL: I think this is case that the 19 taxpayer had distributor's license and, you know, but 20 there is no timeline to get it. 21 And they insist that this is the tobacco 22 products on February 2nd and BOE closed it on May. So, 23 I still want to have taxpayers to report the tax and 24 file the taxes and then just pay the taxes and we return 25 the merchandise. 26 MS. YEE: Okay, Ms. Steel. 27 Other comments, discussion? 28 Okay, we have a motion by Mr. Horton, second by 10 1 Ms. Alby to adopt the staff recommendation. 2 Please call the roll. 3 MS. OLSON: Madam Chair? 4 MS. YEE: Aye. 5 MS. OLSON: Ms. Alby? 6 MS. ALBY: Aye. 7 MS. OLSON: Ms. Steel? 8 MS. STEEL: No. 9 MS. OLSON: Mr. Horton? 10 MR. HORTON: Aye. 11 MS. OLSON: Ms. Mandel? 12 MS. MANDEL: Aye. 13 MS. OLSON: Motion carries. 14 ---o0o--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 MS. OLSON: Our next item is D2, Ismail Ahmad 2 Karajah.. 3 MS. YEE: Item D2, Ismail Ahmad Karajah, is 4 there a motion, please? 5 MS. STEEL: 30-30-30. 6 MS. YEE: Okay. You want to detail what we're 7 looking for here? 8 MS. STEEL: The invoice from the next door and 9 then declaration from next door owner that they had the 10 exchange exchange merchandise. And I guess that's about 11 it. 12 And then, at the same time, that tobacco 13 products, it's only fresh for three to four months, 14 that's what I learned the first year of my Board. So, 15 they -- invoice has to be within three months period -- 16 two months before it was seized. 17 MS. MANDEL: And if they have any -- if either 18 one of them have any business records -- 19 MS. STEEL: Recommendation. 20 MS. MANDEL: -- that indicate they made a 21 swap. 22 MS. STEEL: Yeah, declaration from the other 23 store owner. 24 MS. YEE: Okay, we have a motion by by 25 Ms. Steel to -- 26 MS. KIM: I'm sorry, I just wanted to clarify 27 then, so, you're looking for an invoice then after 28 January 11th, 2010, but then within four months of that 12 1 period? 2 MS. YEE: Within four mons of the date of 3 seizure. 4 MS. CHIU: Okay. 5 MS. STEEL: Yeah, February 10th, we -- is that 6 February 10th we seized? 7 MS. YEE: February 2nd. 8 MS. STEEL: February 2nd? 9 MS. YEE: I think it was, wasn't it? 10 MS. STEEL: So, it's three months -- 11 MS. YEE: No, I'm sorry, I have the wrong case. 12 We have two of these. 13 MS. STEEL: Is D2, right? 14 MS. YEE: D2, I'm sorry, February 10th, yes, 15 February 10 this year. 16 MS. STEEL: And, so, three months -- three or 17 four months between -- you know, before the February -- 18 MS. YEE: Prior to the seizure date? 19 MS. STEEL: -- prior to. 20 MS. CHIU: I do want to make a quick comment 21 about the decision to -- not to say that, you know, 22 Investigations and Taxing Fee won't review this 23 information, but the kind of precedents that this might 24 set, I have some concern that, for example, if a 25 retailer would happen to purchase from an unlicensed 26 vendor and subsequently an investigation occurred and 27 the retailer then produced information that he purchased 28 from another corner store down the street and obtained 13 1 the declaration -- 2 MS. STEEL: Ms. Chui, this is totally different 3 case. It's only one box for 10 small boxes in there and 4 he -- the taxpayer said it's only two boxes they 5 swapped. 6 So, it's totally than unlicensed distributor 7 that taxpayer is buying. 8 Thank you for your advice, but, you know, this 9 is the different. So, that's why I ask for declaration 10 from the owner and invoice. 11 Aren't they supposed not do it and I think 12 taxpayer to learn that they supposed not to swap it. 13 MS. MANDEL: Right and Investigations 14 themselves said during this hearing that they have gone 15 in and people have had invoices from the corner store 16 and that the rules on seizure had do with having untaxed 17 cigarettes, which wouldn't necessarily get them out of 18 citation or something with respect to whatever the rules 19 are on buying from someone you are not supposed to buy 20 from to then sell the stuff in your store. 21 But then on this slip -- 22 MS. STEEL: That's the reason that I give them 23 that three months prior to the seizure, the invoice has 24 to be, plus declaration that I'm asking. 25 MS. MANDEL: And I think the gentleman made a 26 comment that -- that the -- that his neighbor -- 27 neighboring store -- I remember him saying that the 28 neighboring store bought the product on like the 5th or 14 1 something of February. 2 So, you know, without Investigations having 3 said they do that when they inspect if the guy had had 4 something -- 5 MS. STEEL: Well, another thing is this 6 taxpayer, this is second time, so, if he -- we going to 7 just go forward to seizing them, products, means he's 8 going to lose his licenses. 9 So, I just want to give one more chance here 10 that -- that if he can provide all these documents that, 11 you know, I'd rather help taxpayer that -- I think he 12 already learn that he supposed not swap and he has to 13 keep all of the invoices. 14 This is last chance that he has. 15 MS. YEE: Okay, we have a motion by Ms. Steel 16 for 30-30-30. 17 MR. HORTON: Madam Chair? 18 MS. YEE: Second? 19 MR. HORTON: Just a quick comment, Madam Chair. 20 I think it's -- 21 MS. YEE: Let me second that motion just to get 22 it on the table. 23 MR. HORTON: -- I think it's incumbent upon us 24 to also disclose so all of the parts of the Revenue and 25 Taxation Code, I can't remember the number, 30 26 something, 3020, also imposes a penalty on individuals 27 who are distributing product without a distribution 28 license. 15 1 And, so, the transfer of this product, even 2 though it's a barter, it's an exchange, he's still 3 acting as a distributor in some ways. 4 And, so, I think -- so, thank you. 5 MS. MANDEL: That shows another avenue of 6 education for the cigarette and tobacco retailers, that 7 they -- 8 MS. YEE: Yeah. 9 MS. MANDEL: -- shouldn't be swapping with each 10 other. 11 MS. YEE: Right, right. 12 Okay. We have a motion by Ms. Steel, second by 13 Yee. 14 Appeals, are we clear on this? 15 MS. CHUI: So, we're looking for the invoice 16 after January 11th, 2010 and within three to four months 17 of the seizure and also some evidence of the transfer, 18 including -- 19 MS. YEE: I'm not sure where the January date 20 comes from. 21 MS. STEEL: February 10th was the seizure. 22 They -- so, three months prior. 23 MS. CHUI: But it has to be after January 11th, 24 that's the -- 25 MS. MANDEL: That's the manufacture date. 26 MS. CHUI: -- manufacture date of the tobacco 27 products at issue. 28 MS. STEEL: Oh, is that the one that was seized? 16 1 MS. CHUI: Yes. 2 MS. MANDEL: Yes. 3 MS. STEEL: How long they keep it at the 4 distribution -- distributors, that how long they kept 5 it? 6 MS. CHUI: I'm not aware of how long a 7 distributor -- it takes for the distribution of the 8 products after the manufacture date. 9 I believe that Swisher Sweets is a Florida 10 company. So, I'm not exactly sure on the timeline of 11 when it goes from the manufacturer to the distributor 12 then to the retailer. But I imagine with shipping it 13 would take a bit of time. 14 MS. STEEL: Okay, so, January 10th is fine. 15 MS. YEE: Okay, all right. 16 I'm sorry, Ms. Chui, I interrupted you. 17 You spoke to the invoices and then we're alos 18 looking -- 19 MS. CHUI: For transfer records, documentations 20 the declaration and also record of transfer -- of the 21 swap. 22 MS. YEE: Right, okay, very well. 23 Motion by Steel, second by Yee for the 30-30-30 24 to pursue those items. 25 Without objection? 26 MS. ALBY: I object. 27 MS. YEE: Ms. Alby? 28 MS. ALBY: I'm a no vote. 17 1 MS. YEE: Okay, all right. 2 Please call the roll. 3 MS. OLSON: Madam Chair? 4 MS. YEE: Aye. 5 MS. OLSON: Ms. Alby? 6 MS. ALBY: No. 7 MS. OLSON: Ms. Steel? 8 MS. STEEL: Aye. 9 MS. OLSON: Mr. Horton? 10 MR. HORTON: Aye. 11 MS. OLSON: Ms. Mandel? 12 MR. HORTON: It's 30-30-30? 13 MS. YEE: Yes, it is. 14 MS. MANDEL: Aye. 15 MS. OLSON: Motion carries. 16 MS. YEE: I think, just for clarification, 17 Ms. Steel you spoke to this, but my expectation here is 18 that once the documents are produced and the 30-30-30 19 has run its course, the item would come back before the 20 Board as a nonappearance item? 21 MS. STEEL: Right. 22 MS. YEE: Okay, thank you. 23 ---o0o--- 24 25 26 27 28 18 1 MS. YEE: Next item? . 2 MS. OLSON: The next item is C4, Ristoranti 3 Piemontesi, Incorporated. 4 ---o0o--- 5 C4 RISTORANTI PIEMONTESI, INC. 6 NO. 488832 (BH) 7 ---o0o--- 8 MS. YEE: Okay, item C4, Ristoranti Piemontesi, 9 Incorporated, is there a motion? 10 MS. ALBY: Move to grant the taxpayer's 11 petition. 12 MS. YEE: Okay, motion by Ms. Alby to grant. 13 Is there a second? 14 MS. STEEL: Second. 15 MS. YEE: Okay. Second by Ms. Steel. 16 Discussion? 17 MS. ALBY: I think this was discussed. 18 MS. YEE: Yes, we did. 19 Please call the roll. 20 MS. OLSON: Madam Chair? 21 MS. YEE: The Chair's an aye. 22 MS. OLSON: Ms. Alby? 23 MS. ALBY: Aye. 24 MS. OLSON: Ms. Steel? 25 MS. STEEL: Aye. 26 MS. OLSON: Mr. Horton? 27 MR. HORTON: No. 28 MS. OLSON: Ms. Mandel? 19 1 MS. MANDEL: No. 2 MS. OLSON: Motion carries. 3 MS. YEE: I'm going to just make a statement on 4 this. I really do want to look at the implementation of 5 the new audit regulation to just try to have us do 6 better here. 7 This one really frustrated me. And, if nothing 8 else, just documentation on the audit work papers would 9 be helpful. 10 Okay. 11 ---o0o--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20 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 20 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: September 29, 2010 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 21