1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 August 23, 2011 10 11 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 Michelle Steel 5 Vice-Chairwoman 6 Betty T. Yee Member 7 George Runner 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 For staff: David Levine Legal Department 15 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 August 23, 2011 4 ---oOo--- 5 MS. OLSON: Our next matters are those items that 6 were taken under submission. And our first one is B1, 7 Jeffrey T. Nolan and Vivienne Nolan. 8 ---oOo--- 9 B1 Jeffrey T. Nolan and Vivienne Nolan 10 No. 552938 11 ---oOo--- 12 MR. HORTON: Is there a motion, Members? 13 MR. RUNNER: What was the number on that? I'm 14 sorry. 15 MR. HORTON: B1. 16 MS. OLSON: B1. 17 MR. RUNNER: B1, okay. Let me slide through these. 18 Okay. 19 MS. YEE: I'll move to sustain the Franchise Tax 20 Board. 21 MR. HORTON: It's been moved by Ms. Yee to sustain 22 the Franchise Tax Board. Second by Ms. Mandel. Objection 23 noted. 24 Ms. Olson, please call the roll. 25 MS. OLSON: Mr. Horton. 26 MR. HORTON: Aye. 27 MS. OLSON: Ms. Steel. 28 MS. STEEL: No. 3 1 MR. HORTON: Mr. Runner. 2 MR. RUNNER: No. 3 MS. OLSON: Ms. Yee. 4 MS. YEE: Aye. 5 MS. OLSON: Ms. Mandel. 6 MS. MANDEL: Aye. 7 MS. OLSON: Motion carries. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 MS. OLSON: Our next item is B2, David A. Lubeck 2 and Mabel C. McNall-Lubeck. 3 ---oOo--- 4 B2 David A. Lubeck and Mabel C. McNall-Lubeck 5 No. 557788 6 ---oOo--- 7 MR. HORTON: Frivolous appeal penalty 750. 8 Members, discussion? Is there a motion? 9 MS. YEE: Move to sustain the Franchise Tax 10 Board -- 11 MR. HORTON: So moved. Second? 12 MS. YEE: -- and impose a frivolous appeal penalty 13 of $750. 14 MR. HORTON: So moved and acknowledged. Second by 15 Mr. Runner. 16 Without objection, Members, such will be the order. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 5 1 MS. OLSON: Our next item is C1 Maisa, 2 Incorporated. 3 ---oOo--- 4 C1 Maisa, Incorporated 5 No. 485794 (EH) 6 ---oOo--- 7 MR. HORTON: Is there a motion, Members? 8 MR. RUNNER: Let me -- can we get a little 9 discussion on this particular item? 10 MR. HORTON: Let's get it on the floor. Moved by 11 Ms. Yee. Second by -- 12 MS. MANDEL: What are we moving? 13 MR. HORTON: -- Chair. 14 MS. YEE: Actually, which one? 15 MR. HORTON: C1. 16 MS. MANDEL: This was the one -- 17 MS. YEE: Oh. 18 MR. HORTON: Just for discussion purposes, 19 Members. 20 MR. RUNNER: I think you had asked the staff to see 21 if they could -- this was in regards to, I think, the -- 22 the audit numbers of the year 2006, and then also the 23 concept of maybe using the six months of 2007 in the audit, 24 in the sample period. 25 MR. HORTON: Thank you very much. 26 Mr. Levine. 27 MR. LEVINE: If you simply expanded the sample to 28 the six -- the extra six months, it would reduce the 6 1 deficiency by 187,614. 2 MR. HORTON: The measure? 3 MR. LEVINE: It would reduce the measure of 4 deficiency. It would reduce it from 1.4 million to 1.2 5 million. That would reduce the disputed amount from a 6 little bit under half million to just over 300,000. 7 However, it would -- we think that you should also 8 consider the -- 9 MR. HORTON: Cigarettes? 10 MR. LEVINE: Yes. The document that they just 11 found -- 12 MR. HORTON: What impact would that have? 13 MR. LEVINE: Well, the Department did a calculation 14 based on a weekly purchase of that 800 amount. And if you 15 use the 18 months period and factored that in, that would 16 reduce the measure deficiency by very little, 4,000 17 579,000. 18 MR. HORTON: Okay. Discussion, Members? 19 MR. LEVINE: We agree with that approach. 20 MR. RUNNER: Well, to that issue, I guess I'm a 21 little concerned in regards to -- and see if I understood 22 this. Didn't the advocate say that they just received 23 that -- 24 MR. LEVINE: That is true. 25 MR. RUNNER: -- yesterday or something? 26 MR. LEVINE: Yes. Yes, just like -- 27 MR. RUNNER: And so they didn't have time to review 28 it? 7 1 I have -- I guess I have difficulty adding in an -- 2 on top of the audit, an item to which the taxpayer just 3 got. 4 MR. LEVINE: Okay. My understanding is this came 5 from the taxpayer. It was in a ID investigation when they 6 went to review the invoices on site to document the tobacco 7 products. 8 MR. RUNNER: But we have no idea -- what we don't 9 know is if it was a -- if it was a weekly supply, if it was 10 a -- right? We don't know. I mean, the assumption I think 11 that you're making in taking on the total is that this is 12 what happened every week during the test period, correct? 13 MR. LEVINE: That's correct. 14 MR. RUNNER: Okay. 15 MR. LEVINE: We don't have any information, just 16 the assumption that this was a vendor that was not 17 disclosed and it was not a one-time purchase. But, yes, 18 that is the assumption. 19 MR. RUNNER: Yeah. So, I mean I have difficulty, 20 at least being fair to the taxpayer, with something that 21 was just brought to -- I just don't think that disclosure 22 is fair to the taxpayer in terms of -- in terms of 23 reopening the negotiation or coming up with an assessment 24 on the fly here at that point. Even -- I mean, I know it 25 came -- I know, as you said, it came -- but I think -- I 26 think even the advocate said they don't know if that was a 27 weekly -- a weekly invoice or -- right? I mean, I'm trying 28 to think through the discussion that the advocate had. 8 1 MR. LEVINE: He is not familiar with it. We don't 2 know what the taxpayer knows or didn't know. 3 MR. RUNNER: Yeah. 4 MR. LEVINE: But, yes, he -- he did not have a 5 response for that. 6 We are talking about a taxpayer with poor records. 7 That's why we're -- we've got this problem. 8 MR. HORTON: Um, Members, at best we would be 9 moving towards a 30/30/30, I would speculate. 10 MR. RUNNER: I -- it looks -- yeah. 11 MR. HORTON: The challenge with that, the 12 Department now has an opportunity to go back and look at 13 other things that might result in a larger liability. 14 MR. RUNNER: Well, I -- for right now I'll make the 15 motion that we -- that we actually, um -- that we adopt the 16 audit and the staff recommendation with the -- with the, 17 um, addition that we go to the 18-month period. 18 MR. HORTON: Discussion, Ms. Mandel. 19 MS. MANDEL: At this point -- at this point it 20 can't go up, can it? 21 MR. LEVINE: No, I don't believe it can go up at 22 this point. 23 No, we've had the hearing, so it cannot go up. 24 MS. MANDEL: Okay. 25 MR. HORTON: Further discussion, Members? 26 MR. RUNNER: Is that -- is the point of that 27 discussion that maybe a 30/30/30 does not expose the 28 taxpayer? 9 1 MS. MANDEL: That doesn't expose him to a 2 greater -- 3 MR. HORTON: Liability. 4 MS. MANDEL: -- liability. 5 MR. RUNNER: Okay. Okay. 6 MR. HORTON: You okay? 7 MR. RUNNER: I'm okay. 8 MR. HORTON: So moved. Is there a second? 9 MS. STEEL: Second. 10 MR. HORTON: Second by Ms. Steel. Such will be the 11 order. Without objection, Members? 12 MR. LEVINE: So this is 30/30/30. We'll ask the 13 taxpayer to -- any response that he has regarding the -- 14 MR. HORTON: Cigarette. 15 MR. LEVINE: -- tobacco and anything else he wants 16 to respond to. 17 MR. HORTON: The $800 invoice. 18 MR. RUNNER: And is the assumption then that the 19 Board is satisfied with an 18-month test period or sample? 20 MR. LEVINE: We'll bring it back -- 21 MR. RUNNER: Okay. Okay. That's fine. 22 MR. LEVINE: -- with a recommendation which will 23 probably be in that area. 24 MR. HORTON: 18-month. 25 MR. RUNNER: Okay. Thank you. 26 MR. LEVINE: I think the Department was comfortable 27 with 18-month. 28 MR. RUNNER: Yeah. 10 1 MR. LEVINE: It's just -- 2 MR. RUNNER: Not the whole period. 3 MR. HORTON: Yeah. The only outstanding issue was 4 the cigarettes at this point. 5 MR. RUNNER: Okay. 6 ---oOo--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Next item is C2, Jason H. Walker and 3 Stephen Wayne Sundes. 4 ---oOo--- 5 C2 Jason H. Walker and Stephen Wayne Sundes 6 No. 445416, 462500 (EH) 7 ---oOo--- 8 MR. HORTON: Discussion, Members? Is there a 9 motion? 10 MS. YEE: Move to adopt -- 11 MR. HORTON: Move by -- 12 MS. YEE: -- the staff recommendation. 13 MR. HORTON: Move by Member Yee. Second by 14 Ms. Mandel. 15 Without objection, Members? 16 MS. MANDEL: Oh, wait. Which -- I'm sorry. 17 MS. YEE: C2. 18 MS. MANDEL: Oh. Um, why did I write "do 19 30/30/30"? 20 MR. RUNNER: There is -- the next one is the 21 30/30/30. 22 MS. MANDEL: I might have written it on the wrong 23 one. 24 MR. HORTON: This is the one, Members, where the 25 taxpayer basically concurred, was a little bit 26 concerned about responsibility. 27 MS. MANDEL: Oh. Yeah, yeah. I wrote the note on 28 the wrong one. Sorry. 12 1 MR. HORTON: Okay. We good to go? 2 MR. RUNNER: Mm-hmm. 3 MR. HORTON: All right. 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 13 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Next item is C3, Gurmail Singh. 3 ---oOo--- 4 C3 Gurmail Singh 5 No. 487083 (AR) 6 ---oOo--- 7 MR. HORTON: Is there a motion, Members? 8 MR. RUNNER: This one it seemed to be the potential 9 for a 30/30/30 because it seemed the taxpayer had thought 10 they had -- that he had the ability to come up with some 11 documentation for his -- 12 MR. HORTON: Is that a motion, Mr. Runner? 13 MR. RUNNER: Yes, move for a 30/30/30. 14 MR. HORTON: So moved. 15 MS. YEE: Second. 16 MR. HORTON: Second by Ms Yee. 17 Objection, Members? 18 Hearing none, such will be the order. 19 ---oOo--- 20 21 22 23 24 25 26 27 28 14 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Our next one is C4. This was the 3 waived appearance, Akbar Ferdousi Bayrami. 4 ---oOo--- 5 C4 Akbar Ferdousi Bayrami 6 No. 473205 (CH) 7 ---oOo--- 8 MR. HORTON: Is there a motion, Members? 9 MS. MANDEL: Um, I have a question -- 10 MR. HORTON: Ms. Mandel. 11 MS. MANDEL: -- about the materials. He did leave 12 materials before he had to leave. And this is a taxpayer 13 who was not at the conference, as I understand it, and did 14 not provide additional material after the conference. 15 And his -- this is an auto -- auto dealer. And a 16 large part of the audit was based on purchases from auction 17 houses where, I guess, his check stubs showed that he 18 bought those cars from the auction houses. Um, and these 19 are a bunch of different ROSes that are marked "wholesale" 20 or "could not sell" and "void". And I -- since he had 21 hadn't been at the conference, I'm wondering if this is new 22 stuff that someone hadn't looked at and whether these cars 23 are somehow picked up and shouldn't be picked up or -- 24 So can you maybe -- did you look at this? 25 MR. LEVINE: I don't know if -- the Department did 26 review that. The Department -- it does not change the 27 Department's view. The Department mentioned one the 28 taxpayer was complaining about. For example, there was a 15 1 void there and the void is not included in the deficiency. 2 MS. MANDEL: Okay. 3 MR. LEVINE: But that car is, under someone else's 4 name that I believe they got from -- cuts got through DMV. 5 So they apparently voided the transaction. It wasn't 6 picked up. And then they picked up the second sale that 7 stuck. 8 MS. MANDEL: Okay, but -- 9 MR. LEVINE: So the Department believes that 10 confirms its view. There's also discussion about theft of 11 vehicles that, based on what the taxpayer -- I'm sorry, 12 theft of documents. 13 MS. MANDEL: Yes. 14 MR. LEVINE: A hundred to a hundred fifty. And he 15 was reporting very few sales. So that would be a theft of 16 many years of documents, which isn't really reasonable 17 under the facts we have. 18 Anyway, I didn't personally review them. We 19 haven't reviewed them. I don't know if it's new, but the 20 Department did, and the Department's views -- 21 MS. MANDEL: The Department doesn't think -- so the 22 Department -- so basically the Department seems -- your 23 sense is that they think, because of the one void that they 24 were able to track, is that car itself was sold but to 25 someone else -- 26 MR. LEVINE: That's right. 27 MS. MANDEL: -- through the DMV, that their 28 supposition is that these other voids are probably -- 16 1 MR. LEVINE: That's -- that's as much of a 2 conversation I was able to have with the Department about 3 it. But that -- yes. The best I can tell you at this 4 point is the Department did review it and it didn't change 5 their mind. 6 MR. RUNNER: Yeah, I kind of -- I wish that -- I 7 had questions about the auction issue and the wholesaler 8 and cars that were turned back and forth, and who has 9 records for that if we went out and actually went out to 10 the DMV to see and followed some records around. 11 It's difficult, though, with the taxpayer -- he 12 could have had -- he could have had a postponement. 13 MS. MANDEL: Right. 14 MR. RUNNER: And -- 15 MS. MANDEL: I just wanted to make sure someone 16 looked at it. 17 MR. RUNNER: Yeah. 18 MS. MANDEL: And considered it. Because I don't 19 have the audit work paper. So I wasn't sure that I -- 20 MR. HORTON: Mr. Levine has responded to that. 21 MS. MANDEL: Yeah. So thank you. 22 MR. HORTON: I see the Department coming forward. 23 You can't do that. 24 MS. MANDEL: Well, no, the taxpayer is not here 25 so -- 26 MR. HORTON: Yeah. Okay. 27 MR. LAMBERT: I was just gonna -- 28 MS. MANDEL: No, you're not gonna. 17 1 MR. HORTON: You can take the nearest seat, right 2 there. 3 Okay, Members. Desire of the body? I believe 4 there was a motion. 5 MS. YEE: Not quite yet. But I'll move to adopt 6 the staff recommendation. 7 MR. HORTON: Move by Ms. Yee to adopt staff 8 recommendation. 9 Second by Mr. Runner? 10 MR. RUNNER: Hmm-mm. 11 MR. HORTON: No? 12 Second by Ms. Mandel. 13 Objection? 14 MR. RUNNER: Mm-hmm. 15 MR. HORTON: Please call the roll. 16 MS. OLSON: Mr Horton. 17 MR. HORTON: Aye. 18 MS. OLSON: Ms. Steel. 19 MS. STEEL: Aye. 20 MS. OLSON: Mr. Runner. 21 MR. RUNNER: No. 22 MS. OLSON: Ms. Yee. 23 MS. YEE: Aye. 24 MS. OLSON: Ms. Mandel. 25 MS. MANDEL: Aye. 26 MS. OLSON: Motion carries. 27 ---oOo--- 28 18 1 MS. OLSON: Our next item is D1, Wahid Ahmad 2 Taki. 3 ---oOo--- 4 D1 Wahid Ahmad Taki 5 No. 547438 6 ---oOo--- 7 MR. HORTON: Is there a motion, Members? 8 MS. YEE: Move to adopt the staff recommendation. 9 MR. HORTON: Move by Member Yee to adopt staff 10 recommendation. Second by Ms. Mandel. 11 Without objection -- hearing none, such will be the 12 order. 13 ---oOo--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 August 23, 2011 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the above-entitled 11 hearing; that I transcribed the shorthand writing into 12 typewriting; and that the preceding pages 1 through 19 13 constitute a complete and accurate transcription of the 14 shorthand writing. 15 16 Dated: August 25, 2011 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 20