1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JULY 26, 2012 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 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief Board Proceedings Division 16 17 For Staff: David Levine Tax Counsel IV 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 JULY 26, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what's our next 6 matter? 7 MS. RICHMOND: Our next matter that was taken 8 under submission this morning is C11, Phillip C. 9 Strickland. 10 ---oOo--- 11 C11 PHILLIP C. STRICKLAND 12 NO. 480561 (UT) 13 ---oOo--- 14 MR. HORTON: Discussion, Members? 15 Member Mandel. 16 MS. MANDEL: No, I just want to make sure 17 that -- 18 MR. LEVINE: I'm on board. 19 MS. MANDEL: -- staff is ready. 20 MR. LEVINE: Yeah. 21 MR. HORTON: Oh, okay. Um -- 22 MS. MANDEL: Because I -- I -- I -- they were 23 having some discussions. I just wanted to make sure -- 24 MR. LEVINE: I was listening. 25 MR. HORTON: Okay. All right. 26 Um, discussion, Members? 27 Uh, Mr. Levine. 28 MR. LEVINE: Strickland? 3 1 Did you have some questions? 2 MR. HORTON: No, we don't. 3 MR. LEVINE: My recommendation hasn't 4 changed. 5 MR. HORTON: Okay. 6 MS. MANDEL: Just checking. 7 MR. HORTON: Member Yee. 8 MS. YEE: Uh, thank you, Mr. Chairman. 9 I, um -- this is really, I consider, an 10 unfortunate case. And I, um -- you know, I know my 11 inquiry was specific to the location of where the, um, 12 vessel had been used. But, uh, even, uh, with that 13 information, not having the requisite, um, licenses and 14 documentation, um, I'm not sure that we, uh, have seen 15 sufficient, um, evidence that, uh, the commercial deep 16 sea fishing exception is warranted here. 17 So I'm regrettably not supporting the 18 petitioner in this -- in this case. 19 But let me put a motion on the table to adopt 20 the staff recommendation and to -- to redetermine and 21 inform the petitioner of the Offer-in-Compromise 22 Program. 23 MR. HORTON: Member Yee moves to adopt staff 24 recommendation and to advise the petitioner of the Offer 25 in Compromise. Second by -- 26 MS. STEEL: Objection. 27 MR. HORTON: Member Mandel. 28 Objection noted by Member Steel. 4 1 Ms. Richmond, please call the roll. 2 MS. RICHMOND: Mr. Horton. 3 MR. HORTON: Aye. 4 MS. RICHMOND: Ms. Steel. 5 MS. STEEL: No. 6 MS. RICHMOND: Mr. Runner. 7 MR. RUNNER: Aye. 8 MS. RICHMOND: Ms. Yee. 9 MS. YEE: Aye. 10 MS. RICHMOND: Ms. Mandel. 11 MS. MANDEL: Aye. 12 MS. RICHMOND: Motion carries. 13 ---oOo--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 MS. RICHMOND: Our next item is C15, Daniel 2 Wallace and Grisel M. Wallace. 3 ---oOo--- 4 C15 DANIEL WALLACE and GRISEL M. WALLACE 5 NO. 420232 6 ---oOo--- 7 MR. HORTON: Discussion, Members? 8 Member Steel. 9 MS. STEEL: Um, you know, delaying from the 10 Department for 33 months is not acceptable. 11 But, um -- so actually my motion, I want to 12 make it, was that we going, uh, waive 18 months 13 interest. But after we heard the taxpayer's, um, 14 testimony that it seems like he knew that, uh, interest 15 was growing and he knew that that tax was owed. So I'll 16 go for staff recommendation. 17 MR. HORTON: Ms. Steel -- 18 MS. YEE: I'll second. 19 MR. HORTON: Ms. Steel moves adoption of staff 20 recommendation. Second by Member Yee. 21 Without objection, Members, such will be the 22 order. 23 ---oOo--- 24 25 26 27 28 6 1 MS. RICHMOND: Our next item is C16, Gateway 2 Auto Center, Inc. 3 ---oOo--- 4 C16 GATEWAY AUTO CENTER, INC. 5 NO. 437262 (AS) 6 ---oOo--- 7 MS. MANDEL: Is -- Mr. Horton? 8 MR. HORTON: Uh, Ms. Mandel. 9 MS. MANDEL: I think this might be one where 10 staff had additional -- 11 MR. HORTON: Thoughts. 12 MR. LEVINE: Yes. 13 MS. MANDEL: Yes. 14 MR. LEVINE: Two things. First thing is on 15 whether to go re-audit or not. On further reflection, 16 the Department advises me that the taxpayer advised it 17 that it wants you to decide on the record. 18 MR. RUNNER: Okay. 19 MR. LEVINE: Which I think is a good idea for 20 them. 21 MR. HORTON: Okay. 22 MR. LEVINE: An additional item is the 23 Department is recommending an adjustment to the interest 24 of $11,985.48. And, in short, it's because the 25 Department made an incorrect refund of -- an incorrect 26 refund and this is the amount of debit interest that is 27 included in the assessment net of credit interest that 28 during the period that the Department had the money that 7 1 really shouldn't have been billed because the Department 2 had the money. 3 MS. YEE: Okay. 4 MR. HORTON: Okay. I want to, uh, thank the 5 Department for their reconsideration of the issues in 6 the case. 7 Discussion, Members? 8 MR. RUNNER: Yeah, I have a question. 9 MR. HORTON: Mr. Runner. 10 MR. RUNNER: This goes back to what I was 11 dealing looking at before and my concern in regards to 12 these issues of the using the, uh, bank deposits. 13 Um, you know, I mean, I guess I'm concerned 14 because we did not give any credit for when the -- 15 again, this is my -- as I look at my sheet here, we -- 16 we did not give the taxpayer any credit for when the 17 deposits were higher than what the sales were. We only 18 took away and added liability when they were lower. We 19 didn't net it out. 20 Um, and this is extremely clear, it seems to 21 me, in that the first quarter '04 and the second quarter 22 '04. Um, you know, where the taxable sales in the first 23 quarter were 109,000 and the second quarter they were 24 914,000. 25 Um, and we -- we didn't -- we didn't -- I mean, 26 normally we would say, hey, you know, things come in and 27 out. We just average it together and it comes out at 28 the end; we net it out. 8 1 There -- there was no netting out of that, uh, 2 which then created the liability that we figured on of 3 695,000, whereas if we had just netted it out -- 4 MS. YEE: Mm-hmm. 5 MR. RUNNER: -- it would have been a hundred 6 and -- my understanding is 103,000. 7 And so my -- I guess my motion at that point 8 would be to -- well, let me ask -- I'm going to ask 9 Mr. Levine to fashion my motion based upon those, those 10 issues in regards to how it is that we would then 11 readjust to the -- to the netted bank balances as 12 opposed to the, um, the differences. Is that -- do you 13 understand where I'm going? 14 MR. LEVINE: If you want the Department to 15 accept -- 16 I have to think about this because I'm getting 17 it backwards. 18 MR. RUNNER: Okay. 19 MR. LEVINE: I may give you a backwards motion. 20 MR. RUNNER: Okay. 21 MR. LEVINE: So I'd have to think about it. 22 MR. RUNNER: Well, let me -- let's have the 23 discussion, and then we can go -- while you're thinking 24 about it. 25 I'm fine with having the discussion first 26 before the motion. 27 MR. HORTON: Um, further discussion, Members? 28 MS. MANDEL: I -- sure. I -- I thought that if 9 1 you -- I thought that the material said that if you took 2 the, um, lower figures from the bank deposits rather 3 than the reported numbers for those two quarters, that, 4 um, taxable sales would wind up being less than 5 everything off the deal jackets. 6 Am I -- 7 MR. LEVINE: I -- I think it was that the 8 Department accepted returns as filed. Wasn't it returns 9 as filed? 10 MS. MANDEL: Right. 11 MR. LEVINE: Or off the deal jackets. I'm 12 sorry, I'm a little confused about the facts. But the 13 Department, where the deposits were less -- 14 MS. MANDEL: They accepted the records. 15 MR. LEVINE: -- than the amounts that were on 16 the records, the Department accepted the records because 17 the Department found that they would not have deposited 18 less -- 19 MR. RUNNER: Right. 20 MR. LEVINE: -- than the records. So that 21 would be whichever the motion under what you were asking 22 is -- 23 MR. RUNNER: Right. 24 MR. LEVINE: -- is to accept the records -- 25 whether it was the returns or the deal jackets, which I 26 don't remember -- 27 MS. MANDEL: Okay. Because -- 28 MR. LEVINE: -- which produced the lower 10 1 figure, to accept them as the audited figure for that 2 quarter. 3 MS. MANDEL: Well, what I had was that they 4 accepted reported taxable sales for the first quarter of 5 '04 and '05. Because the reported amounts exceeded 6 adjusted bank deposits. And those are the ones that I'm 7 now understanding the request is to take the bank 8 deposits -- 9 MR. LEVINE: Okay. 10 MS. MANDEL: -- rather than -- 11 MR. LEVINE: That's why I was afraid of doing 12 this because I'm getting it backwards. 13 MS. MANDEL: -- why the -- to take the bank 14 deposits instead of what was reported, which was what I 15 understood that the taxpayer, was one of the things they 16 were asking for. But I understood that the response to 17 that was that then you'd be talking about amounts lower 18 than off the deal jackets. 19 MR. RUNNER: Only -- only -- I guess the issue 20 was that we penalized the taxpayer when the -- when the 21 deal -- when the jackets indicated higher sales than 22 deposits. But we didn't credit the taxpayer when it is 23 that we had higher deposits than we had sales. I -- I 24 think. I mean, that was my understanding. 25 And all's I'm saying is, hey, let's just wash 26 it off -- out. Let's just go ahead and decide that 27 during this whole period of time -- and, again, it 28 was -- I think it was clear when I asked the question, 11 1 Could, indeed, a deposit have been made that applied to 2 the first quarter but wasn't recorded until the second 3 quarter? And the answer was, yes. 4 May -- maybe the -- maybe the motion is as 5 simple as saying reduce the measure of assessment by 6 600, uh -- from 695,404 to 103,230. Because that 7 becomes then the net during the -- during the -- during 8 the, uh -- the time. 9 MS. STEEL: Mr. Levine, is that the same amount 10 came out from the, uh, the second audit, too? So it was 11 about hundred thousand dollars from the second audit. 12 MR. LEVINE: I believe so. 13 MS. STEEL: Second re-audit. 14 MR. LEVINE: But I don't have intimate 15 recollection of the facts of this case. 16 MR. HORTON: We, um, could move to accept bank 17 deposits as reported taxable sales, and direct the 18 Department to reconcile reported -- audited reported 19 taxable sales to reported -- 20 MR. RUNNER: As reflected in the bank 21 deposits. 22 MR. HORTON: -- and only pick up the 23 difference. 24 MR. RUNNER: That satisfies -- that's -- rather 25 than using the specific numbers, that's fine. 26 MR. HORTON: I'm not -- I'm not necessarily 27 proposing that. I'm just -- 28 MR. RUNNER: But that's the -- that is the 12 1 objective, so -- 2 MR. HORTON: Put -- put it on the table. I 3 still have some concerns that the total sales were 4 estimated from the onset and the, uh, credits and the 5 bank deposit were significantly high and actually rather 6 consistent, which typically is not reflective of a 7 situation that would exemplify a wash, is what we're 8 basically saying. 9 And so, typically in a wash you don't find 10 credits overlapping consistently and from one month to 11 another. They usually carry forward like a beginning 12 and ending inventory situation. 13 Um, and the challenge that the recorded sales, 14 the auditor actually conducted a test that impeached 15 both the bank deposits and the records, uh, and that the 16 recorded sales, uh, and the dealer's jacket was less 17 than the actual sales that took place, which is 18 teetering on a fraudulent act. Uh -- 19 MR. RUNNER: Did it impeach it altogether or 20 did it just -- it just indicated that the deposits did 21 not correlate at the quarters. 22 MR. HORTON: Uh, it impeached the records of 23 the taxpayer in saying that the taxpayer's reporting to 24 us a $5,000 sale; but when we go to the customer, the 25 customer says that the sale was actually 7,000. And so 26 there's an intentional understatement of the sales which 27 sort of leans to the intent. 28 MR. RUNNER: That -- that was -- 13 1 MR. HORTON: And if -- I mean, if -- I mean, if 2 the, uh -- let me -- let me look at the amounts. But if 3 the -- if the credits were, um, consistent, uh, to some 4 degree, um, and there was some continuity in there, the 5 aggregate amounts, I could kind of get a sense that that 6 would be the case. But this could also indicate that 7 the money never made it to the bank account. Uh, it 8 actually was used to purchase additional cars or -- or 9 other activities. So bank deposits themselves may not 10 be legitimate. 11 And then the other -- which was part of the 12 reason that we asked the taxpayer to confer with the 13 Department because that concern that you expressed, 14 Mr. Runner, could be indicative of -- that the auditor 15 underestimated the actual tax liability and should be 16 much higher. And so, if they were -- that's why the 17 taxpayer was asked to reconsider whether or not they 18 wanted the auditor to open up Pandora's box again. 19 MR. RUNNER: Right. Or they felt that the tax 20 before them right now are their -- you know, puts 21 them -- benefits them at that point, so -- 22 MR. HORTON: Right. 23 MR. RUNNER: Again, on the issue of the sales, 24 the cars -- 25 MR. HORTON: Which may be the conclusion that 26 they came to. 27 MR. RUNNER: Um, the issue of the underpayment 28 of a car or wrong, uh -- again, what we talked about in 14 1 regards to the -- what they said they sold a car for, 2 what the person said they bought the car for, again, 3 that went to a survey that we only got five responses 4 on, right, out of 350 transactions of which -- 5 MR. HORTON: I don't recall we tested all 6 350. 7 MS. STEEL: They sent out 30. 8 MR. RUNNER: We sent 350 letters. 9 MS. STEEL: No, 30. 10 MR. RUNNER: No? Isn't that what they said? 11 MR. HORTON: Thirty. 12 MS. YEE: Thirty. 13 MR. RUNNER: Oh, 30. I'm sorry. Thirty 14 letters, okay. 15 MR. HORTON: Block test. 16 MR. RUNNER: Thirty letters and five came 17 back. 18 MS. STEEL: Mm-hmm. 19 MR. HORTON: Right. 20 MR. RUNNER: Okay. 21 Well, I -- I just have difficulty for us to be 22 able to create a liability by only looking at one side 23 of the ledger. 24 MS. STEEL: Mm-hmm. 25 MR. RUNNER: You know, we're only looking at 26 what it is that they under -- that they -- that they, 27 um -- that they, um -- you know, when they 28 overdeposited, not when they underdeposit, or the 15 1 reverse of that, forgot which way it goes. But we -- 2 we -- we're not -- we're ignoring the fact that 3 somehow -- I just don't know how we create liability 4 just on one side of that ledger and say, therefore, this 5 is the total now, without taking in some kind of 6 consideration for the other side of the ledger when 7 deposits were -- were, uh -- were not matching. 8 MR. HORTON: Yeah, that's where we, in the 9 past, have sort of cautioned the Department when they 10 are making an assessment and adjustments, to have a more 11 liberal amount of tax as opposed to the higher amount of 12 tax. It often puts us in this position where, uh, their 13 adjustment is sometimes as arbitrary as if inaccuracy of 14 the -- of the books and records. But, unfortunately, 15 that's where we end up. 16 MR. RUNNER: Wasn't that cured over a time 17 though if you take a large enough period of time? Like 18 this is two years. 19 MR. LEVINE: The problem is the nature of these 20 deposits and the disparities; it's just not what you 21 expect from a business like this. It's more reflective, 22 in my experience, of deposits into other accounts 23 because we're not talking about a company with huge 24 contracts that get paid by -- well, the State of 25 California. 26 MR. RUNNER: Mm-hmm, mm-hmm. 27 MR. LEVINE: So all bets are off when you're 28 going to get your check. 16 1 MR. RUNNER: Mm-hmm. 2 MR. HORTON: Yeah, they get the check before 3 the car leaves the lot. 4 MR. RUNNER: Okay. 5 MR. HORTON: Further discussion, Members? 6 Is there a motion? 7 MR. RUNNER: Well, the motion was the same, 8 right? To -- to, um -- to, uh, reduce the liability -- 9 MS. STEEL: Interest. 10 MR. RUNNER: Let's see. Measure assessment 11 by -- to do -- let's see, it would be credited -- is it 12 reduction of the credit adjustments? To reduce the 13 credit adjustments from 695 to the 404 to 103,230, which 14 is basically netting that out -- 15 MS. STEEL: And -- 16 MR. RUNNER: -- over the two-year period. 17 MS. STEEL: And abate the interest for 18 11,000. 19 MR. RUNNER: Uh, and abate the interest as -- 20 as the staff recommendation. 21 MR. HORTON: Um, Mr. Runner moves to adjust for 22 credit deposits reflected in total deposit and, um -- 23 and to, uh, adopt stipulated, uh, credit interest. 24 Uh, second by -- 25 MS. STEEL: Second. 26 MR. HORTON: -- Member Steel. 27 Objection, Members? 28 MS. YEE: Objection. 17 1 MR. HORTON: Objection noted. 2 Uh, Ms. Richmond. 3 MS. RICHMOND: Mr. Horton. 4 MR. HORTON: No. 5 MS. RICHMOND: Ms. Steel. 6 MS. STEEL: Aye. 7 MS. RICHMOND: Mr. Runner. 8 MR. RUNNER: Aye. 9 MS. RICHMOND: Ms. Yee. 10 MS. YEE: No. 11 MS. RICHMOND: Ms. Mandel. 12 MS. MANDEL: No. 13 MS. RICHMOND: Motion fails. 14 MR. HORTON: Subsequent motion, Members? 15 MS. YEE: Uh, move to adopt the revised staff 16 recommendation to reflect the, uh, interest 17 adjustment. 18 MR. HORTON: Member Yee moves to adopt staff 19 recommendation, reflecting interest adjustment 20 recommended by the Department. Second by Member Mandel. 21 Uh, objection, Members? 22 MR. RUNNER: Yeah. 23 MR. HORTON: Uh, objection noted, Mr. Runner. 24 Ms. Richmond, please call the roll. 25 MS. RICHMOND: Mr. Horton. 26 MR. HORTON: Aye. 27 MS. RICHMOND: Ms. Steel. 28 MS. STEEL: No. 18 1 MS. RICHMOND: Mr. Runner. 2 MR. RUNNER: No. 3 MS. RICHMOND: Ms. Yee. 4 MS. YEE: Aye. 5 MS. RICHMOND: Ms. Mandel. 6 MS. MANDEL: Aye. 7 MS. RICHMOND: Motion carries. 8 MR. HORTON: Thank you. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 1 MR. HORTON: Ms. Richmond. 2 MS. RICHMOND: Our next item is C19, DKL 3 Intertrading, Inc. 4 ---oOo--- 5 C19 DKL INTERTRADING, INC. 6 NO. 436179 (AP) 7 ---oOo--- 8 MR. LEVINE: The Department does have a revised 9 recommendation in this. The Department has concluded 10 that maybe those two individual sales were nonrecurring. 11 And therefore, it proposes to assess those on an actual 12 basis. 13 The Carpet, Inc. sales were clearly recurring 14 sales. There were several during this period, and the 15 son mentioned many deliveries. 16 So with -- so the Department proposes to 17 continue projecting that. And the bottom line figure 18 is -- the bottom line measure is a reduction to 19 $71,070. 20 MR. HORTON: From? 21 MR. RUNNER: Ninety-seven. 22 MR. LEVINE: That was from 97 -- 23 MR. HORTON: Just for the record. 24 MR. LEVINE: Ninety -- 25 MS. YEE: Ninety-seven six -- 26 MR. LEVINE: Sorry, 97,653 which was the re -- 27 prior revised recommendation. 28 MS. YEE: Okay. 20 1 MR. HORTON: Discussion, Members? 2 MS. STEEL: Just question. So you mean that, 3 uh, those two nonoccurring, two individuals, that we 4 dropping it. And then from just Carpet, Inc. itself 5 that we are using hundred percent of the, uh, retail -- 6 nonretail use? Is that what you're talking -- 7 MR. LEVINE: Yes. The Carpet, Inc., it would 8 be to project the error from Carpet, Inc. to the -- I 9 think it was sixth quarters -- 10 MR. HORTON: Sixth quarters. 11 MS. STEEL: Right. 12 MR. LEVINE: -- until they went out of 13 business. And the other two aren't dropped completely. 14 They're just dropped from the projection. 15 MS. STEEL: From projection. 16 MR. LEVINE: So they're picked up, just those 17 two. 18 MS. STEEL: But Carpet, Inc. itself is not just 19 personal use. I mean even it -- name like Carpet, 20 Inc. -- okay. 21 MR. LEVINE: You have weird things like that. 22 We had the guy a couple meetings ago that started doing 23 one thing, and then was -- I can't remember. It was a 24 weird conversion and he kept his old name. 25 MR. RUNNER: The -- I guess the question is, 26 um, whether or not -- and, again, I think this is what I 27 heard some of the discussion, whether or not the 28 taxpayer in -- in -- in good faith thought that a 21 1 company named Carpet, Inc. was indeed a legitimate 2 retailer. 3 MS. STEEL: Retailer. 4 MR. RUNNER: As opposed to a -- a, uh, place 5 of -- you know, of use, right? I mean, that would be 6 the -- that would be the -- 7 MR. HORTON: Yeah, this, um -- this is one of 8 those situations where six and a half, a dozen or the 9 other. But we end up in the same place at the end of 10 the day. 11 Um, so I don't necessarily agree with the logic 12 of the Department, but I do agree with the end results. 13 It would be the same basically. 14 I agree with your logic, Mr. Runner. 15 MR. RUNNER: Let me -- and just to -- to 16 educate me, is -- is the individual who's selling to 17 somebody like that, is it -- are they 100 percent then 18 responsible for collecting that, seeing and having that? 19 Or -- or is there room for good faith on the part of the 20 taxpayer who feels like, gee, this is a legitimate group 21 who's going to go out and resale. 22 MR. LEVINE: If there had been room, the 23 Department wouldn't have brought it and we certainly 24 would have recommended granting. 25 I don't think there's any doubt about her, um, 26 good faith, attempt to do what she was told. We all 27 recognize the CPA gave her very bad advice. 28 And yes, it's basically strict liability. 22 1 There's a presumption that a sale is at retail and the 2 only good faith involved is in accepting a valid resale 3 certificate. It's presumed -- it has to be taken in 4 good faith, but we presume good faith unless the 5 opposite is shown. 6 We don't reach that here because she didn't 7 take the resale certificate. So then she's got to show 8 it was actually for resale, which is why the Department 9 went and looked at what this company was doing -- 10 MR. RUNNER: Okay. 11 MR. LEVINE: -- and whether it reported tax or 12 not. 13 MS. STEEL: But, um, seller's -- she kept all 14 the seller's permit, and we assume that name like 15 Carpet, Inc. -- you're not going to think about Carpet, 16 Inc. is going to sell some liquor stores or, you know, 17 some going out there, something else; always thinking 18 about carpets and floor -- you know, wood floor -- what 19 they call, wood floorings. 20 And, you know, it's just -- she -- she had the 21 seller's permit. You know, even without resale 22 certificate, she assume that Carpet, Inc. sells some 23 carpets. 24 I mean -- 25 MR. LEVINE: I certainly would assume that. 26 The problem is that if we went after Carpet, 27 Inc. and Carpet, Inc. says, well, she asked me -- she 28 said if I give her a copy of the seller's permit, I 23 1 don't have to pay tax. I gave her a copy of the 2 seller's permit. Well, then you owe tax. I didn't give 3 her a resale certificate. 4 And that's the problem you -- there's probably 5 not enough to hold the buyer, if we could ever find it, 6 liable for -- 7 MS. STEEL: If can I go for this, I think it 8 might be help taxpayer a little more. Move to adjust 9 the liability by 50 percent from the revised, uh, 10 recommendation, staff recommendation, to account for 11 estimate impact of satisfying for Carpet, Inc. 12 MR. HORTON: Okay. 13 MR. RUNNER: I'll second that. 14 MR. HORTON: It's been moved and second, um, to 15 adjust the liability by 50 percent, uh, given 16 consideration and weight to the stratifying of the 17 Carpeteria (verbatim) transactions and the uniqueness of 18 the balance of the two. 19 Second by Mr. Runner. 20 Uh, objection, Members? 21 MS. YEE: Yes. 22 MS. MANDEL: I'm a little confused about what 23 that is. 24 MR. LEVINE: By my count, that reduces it to a 25 measure of 48,826.50. 26 MR. HORTON: Discussion, Members? 27 Um, it -- these numbers are all estimates. We 28 just don't have the actual data. 24 1 Um, if we were to go back and stratify out the 2 Carpeteria and look at those ten transactions on an 3 actual basis, which, uh, we don't know what the number 4 would be. Uh, if we were to project the two, we don't 5 know what the number -- we know that it will reduce it 6 down and the projection would be of a 23 percentage of 7 error -- the percentage of error would drop 50 percent 8 which would be about 23 percent. And the liability 9 would be 50 percent plus whatever Carpeteria is, so it 10 would be slightly higher than 50 percent, uh, 11 theoretically if Carpeteria in itself, uh, wasn't a 12 significant amount. If it was, then you would extract 13 that out and apply that 23 percent to the balance, which 14 means it may lead us back to the 50 percent where we are 15 anyway. 16 So, you know, in this environment of 17 estimating, the courts have traditionally said one 18 estimate is just as good as another one. I have, uh, in 19 this case a real challenge, uh, not leaning in favor of 20 the taxpayer. 21 MS. YEE: Yeah. 22 MR. HORTON: So there's a motion and a second 23 on the floor. 24 Um, further discussion, Members? 25 MS. MANDEL: So it's a stratifying. 26 MR. HORTON: Objection? 27 MS. YEE: Yeah. 28 MR. HORTON: Objection noted. 25 1 Ms. Richmond, please call the roll. 2 MS. RICHMOND: Mr. Horton. 3 MR. HORTON: Aye. 4 MS. RICHMOND: Ms. Steel. 5 MS. STEEL: Aye. 6 MS. RICHMOND: Mr. Runner. 7 MR. RUNNER: Aye. 8 MS. RICHMOND: Ms. Yee. 9 MS. YEE: No. 10 MS. RICHMOND: Ms. Mandel. 11 MS. MANDEL: Aye. 12 MS. RICHMOND: Motion carries. 13 ---oOo--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 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 July 26, 2012 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 26 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: August 1, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 27