BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT MAY 25, 2011 FINAL ACTIONS Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chairman 5 Michelle Steel 6 Vice-Chairwoman 7 Betty T. Yee Member 8 George Runner 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 Division 14 Board of Equalization 15 Staff: David Levine Appeals Division 16 17 --oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 ITEM C3 2 Sacramento, California 3 May 25, 2011 4 ---oOO--- 5 MS. OLSON: Our last matters are those items 6 that have been taken under submission. And our first 7 one is C3, Brent Bolthouse. 8 MR. RUNNER: Okay. One moment. 9 MR. HORTON: Members, we are now on item C3. 10 And is there a motion? 11 MS. YEE: I'm going to move the staff 12 recommendation. 13 MR. HORTON: It's moved by Member Yee, second 14 by -- 15 MS. MANDEL: I'll second it. 16 MR. HORTON: -- Ms. Mandel. 17 Discussion, Members? 18 Member Steel. 19 MS. STEEL: I will go for that but the -- can 20 we ask the staff that what's the procedure of -- that 21 successor -- successor's liability versus liability 22 person, responsible person, that, you know, what we -- 23 which one we go out first and how we do it and then 24 what -- is that possible that I can ask staff to make a 25 checklist that, you know, what -- who are really 26 responsible here because I really get confused time to 27 time that some taxpayers comes to us and they really 28 didn't have a clue, sign one -- during that tax period 3 1 just sign one tax return still responsible. And 2 sometimes it's not so, you know, I -- I need a little 3 more clear guidelines here. 4 So there's two things; one is successor's 5 liability and responsible person liability and then 6 second one is little checklist that, you know, who's 7 really responsible what they did for those companies. 8 MR. LEVINE: As far as how the Department 9 handles collections they can provide you something, but 10 I -- I can give you the general thing. What the 11 Department was saying is there are two different 12 liabilities but practically speaking the primary person 13 that the Department is always going to go after if they 14 can is the person who incurred the liability. 15 You see these cases when collections against 16 that person have not been fully successful. As far as 17 who is more liable between the successor and the 18 responsible person, my personal view is the responsible 19 person. If -- if -- if they are being held liable 20 it's because they were responsible. But practically 21 speaking I think you know what I'm really going to say 22 is deep pockets. 23 MR. HORTON: Yeah. 24 MR. LEVINE: The Department is going to go 25 after who should -- they think is most liable and they 26 are definitely going to factor in ease of collection. 27 But it is -- I think they do perhaps factor in -- when 28 there's a choice they will, I think, go after who they 4 1 think is more liable. But it is not uncommon for the 2 Board when it comes up here and you actually have more 3 than one person who's being held liable where you give 4 direction and say we want you to try and collect against 5 this person first and only go after that person if 6 collection efforts fail; sometimes you've said try for a 7 year and that's because you made a judgment that this 8 person is worst, the bad guy, and that person is just on 9 the hook because that's what the law says. 10 MS. STEEL: Well, I totally agree with you that 11 we are going after liable person, is the most important 12 part. I mean, that has to go out first. But when I saw 13 the cases here that we didn't even go after those 14 taxpayers but they went after the new buyers, a lot of 15 times that, you know, those cases coming up. 16 And, you know, my question was where is the 17 taxpayer that who didn't pay us. But, you know, today 18 it's just like, okay, it's been sold, it's -- and then 19 we see a lot of cases actually they close down those 20 businesses, then I understand that. 21 But for this case that during the audit it was 22 sold, or maybe after audit started or -- I don't know 23 how it happened, but it was like 2003 they sold. Audit 24 period or the taxable major period was 2002. So, I just 25 don't understand that why they don't go after the 26 successor's liability who bought that company. 27 MR. LEVINE: There was a reference of a 28 purchase but there was actually -- I don't know if that 5 1 was just a glitch in -- in -- someone put that in 2 without knowing. But the Department, as I understand 3 it, didn't have any real evidence of a successor, 4 someone who paid money that they could go after. 5 I think if they had they would have issued a 6 billing. A successor liability is usually a clear case 7 of liability. 8 MS. STEEL: Okay. But I need a checklist that, 9 you know, what -- who are really responsible. You know, 10 what they did then they are responsible for these 11 liable -- to those taxes. 12 MR. HORTON: So be it. Could the Department 13 please provide the Board a -- let's call it a collection 14 priority and sort of prioritize those, understanding the 15 subjective nature of that decision. 16 Further discussion, Members? 17 There's been a motion and a second with -- 18 objection? 19 Hearing none, such will be the order. 20 ---oOo--- 21 22 23 24 25 26 27 28 6 1 ITEM C4. 2 MR. HORTON: Ms. Olson. 3 MS. OLSON: Our next item is C4, Andrea J. 4 Russo. 5 MR. HORTON: Is there a motion, Members? 6 MS. YEE: Move to adopt the staff 7 recommendation. 8 MR. HORTON: It's been moved to adopt the staff 9 recommendation, Ms. Yee. Second by Ms. Mandel. 10 Objection, Members? 11 MS. STEEL: Objection. 12 MR. HORTON: Objection by Ms. Steel. 13 Discussion? 14 Hearing none, Ms. Olson, please call the roll. 15 MS. OLSON: Mr. Horton. 16 MR. HORTON: Aye. 17 MS. OLSON: Ms. Steel. 18 MS. STEEL: No. 19 MS. OLSON: Mr. Runner. 20 MR. RUNNER: Aye. 21 MS. OLSON: Ms. Yee. 22 MS. YEE: Aye. 23 MS. OLSON: Ms. Mandel. 24 MS. MANDEL: Aye. 25 MS. OLSON: Motion carries. 26 ---oOo--- 27 28 7 1 ITEM D1a and D1b. 2 MS. OLSON: Our last item for today is D1a and 3 D1b, Nghia Ngoc Nguyen. 4 MR. HORTON: Is there a motion? 5 MS. STEEL: I had a motion. 6 MR. RUNNER: Do we -- were we going to get some 7 I think -- 8 MS. STEEL: Numbers? 9 MR. RUNNER: -- numbers on this one, right? 10 MR. LEVINE: Yes, I can provide you some 11 numbers. The Department has run the numbers of adding 12 two extra boxes for every documented trip to Vietnam, 13 which is between the period of April 1, 2004 and April 14 15, 2005 -- there were I think nine trips -- and 70 15 pounds each and have come to a tax reduction if you 16 accept that as sufficient evidence of export, of 17 $47,211.98 tax, which would also reduce the penalty and 18 interest. 19 And that would be applicable to case I.D. 20 351779, the other cases being outside this time line. 21 MS. STEEL: So total tax is? 22 MR. LEVINE: The total reduction would be 23 47,211 which for the third one on -- the right column of 24 the first page of the summary, which shows tax of 25 133,523.85, that would reduce the tax to 86,311.87. 26 MS. STEEL: Okay. 27 MR. HORTON: So moved. 28 MR. RUNNER: Hold on -- let me -- 8 1 MR. HORTON: Just a motion. 2 MR. RUNNER: Okay. Well, I'm just trying to 3 clarify then, how about the interest? Does it run -- 4 MR. HORTON: I need a second to do anything. 5 MR. LEVINE: It -- it would be reduced but I 6 don't have those -- 7 MR. RUNNER: Okay. So the most -- the correct 8 motion isn't to re -- oh, the motion -- 9 MS. MANDEL: Well, the -- 10 MR. RUNNER: -- would be to reduce the tax 11 determination by the 47,000? 12 MS. MANDEL: Right, because interest and 13 penalty follows -- 14 MR. RUNNER: Then it will automatically fall 15 through? 16 MS. MANDEL: -- accordingly. 17 MR. RUNNER: Okay. 18 MS. MANDEL: Right. 19 MR. RUNNER: I -- I got it. 20 MR. HORTON: Maybe the motion is to accept 21 those transactions as exempt -- 22 MR. RUNNER: Okay. 23 MR. HORTON: -- interstate commerce transaction 24 and direct staff on how to compute those as indicated by 25 Mr. Levine. 26 So, so moved. 27 Is there a second? 28 MR. RUNNER: Second. 9 1 MS. STEEL: Second. 2 MR. HORTON: Second by Mr. Runner. 3 Objection, Members? 4 Hearing none, such will be the order. 5 ---oOo--- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 1 REPORTER'SCERTIFICATE 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 May 25, 2011 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 10 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: May 2, 2011. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 11