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 OCTOBER 25, 2012 10 11 SALES AND USE TAX APPEAL HEARING 12 APPEAL OF 13 ANDERSON AUDIO VISUAL-EAST BAY, LLC 14 NO. 511892 (CH) 15 AGAINST PROPOSED ASSESSMENT OF 16 SALES AND USE TAX 17 18 19 20 21 22 23 24 25 Reported by: Juli Price Jackson 26 CSR No. 5214 27 28 1 1 P R E S E N T 2 For the Board Jerome E. Horton of Equalization: Chairman 3 4 Michelle Steel Vice-Chairwoman 5 6 Betty T. Yee Member 7 8 George Runner Member 9 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond Chief 14 Board Proceedings Division 15 16 For Board of David Levine Equalization Staff: Staff Counsel 17 18 For Department: Kevin Smith Tax Counsel 19 Kevin Hanks 20 Chief, Headquarters Operations Division 21 Stephen Smith 22 Legal Department 23 For Petitioner: Alan Durant Representative 24 Joseph Matranga 25 Representative 26 Shane Parkes Representative 27 28 ---oOo--- 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 OCTOBER 25, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what is our next 6 matter? 7 MS. RICHMOND: Our next item is C27, Anderson 8 Audio Visual-East Bay, LLC. 9 Please come forward. 10 MR. HORTON: Mr. Levine, as the taxpayer comes, 11 would you please introduce the issues in this case? 12 MR. LEVINE: The issue in this petition of 13 Anderson Audio Visual-East Bay, LLC is whether 14 Petitioner's entitled to relief from the tax due on the 15 freight charges, which were part of Petitioner's taxable 16 gross receipts. 17 MR. HORTON: Thank you. Welcome. You have ten 18 minutes to make your presentation. We would ask that 19 you commence with your introductions for the record. 20 We will return and allow you an additional five 21 minutes on rebuttal once the Department has an also made 22 their presentation. 23 MR. MATRANGA: Good morning, Joe Matranga, CPA 24 for Anderson Audio Visual. 25 MR. PARKES: Shane Parkes for Anderson Audio 26 Visual. 27 MR. DURANT: Alan Durant, representative for 28 Anderson Audio Visual. 3 1 MR. HORTON: Just in case, I would ask that you 2 pull the microphones a little closer, just in case. 3 MR. MATRANGA: Okay. This basically has to do 4 with requesting relief under Section 6596. The taxpayer 5 had been audited previously. The auditor came in and 6 gave them advice on how to record and pay their sales 7 tax. So, upon that advice, that's how they went 8 forward. 9 Under this last audit, we -- it came up that 10 they had been doing it incorrectly. However, based on 11 the relief provision, the auditor recommended relief, 12 the -- her manager recommended relief and then the 13 San Diego District Manager recommended relief. So, 14 everybody felt -- from the State Board of 15 Equalization -- that that was the proper thing to do. 16 Then the case got transferred to Sacramento and 17 someone in Sacramento decided that they were going to 18 disagree with everyone all along the line from the State 19 Board of Equalization. 20 So, they've come up with a code section, trying 21 to find something that they can hang their hat onto to 22 go against all of the prior rulings and grant the 23 relief. 24 And, basically, if you look at that section, it 25 refers to getting written advice to the firm or any 26 person in the firm, any group or combination acting as a 27 unit. 28 So, the -- Anderson basically has a management 4 1 company and they have various entities. The one entity 2 handles all the HR, all the accounting, sales tax -- 3 everything's done from the one location. 4 Mr. Parkes was the one who handles all this. 5 So, they told him what to do and he went forward after 6 that audit and did it across the board. 7 For -- for this -- for you not to give us this 8 relief, it -- it kind of just doesn't make sense because 9 it would be like Mr. Anderson saying, 10 "Okay. Well, I'm going to do it right on 11 this entity because that's what she told me and 12 then I'm going to do it wrong everywhere else." 13 So, of course, if they came in and tell him 14 what to do, that's exactly what he did. He followed the 15 written advice. 16 So, that's pretty much -- we agree with 17 everyone from the State Board except the final people. 18 Go ahead, Shane, you want -- 19 MR. PARKES: No. I mean, you tell it exactly 20 like it is. 21 You know, we -- Anderson Audio Visual, Inc. 22 handles all of the accounting for all of the Anderson 23 entities. So, you know, when we were audited and, you 24 know, there were some changes made at that audit back in 25 2002, we adopted those changes. 26 But there was no mention that there was an 27 issue with freight. So, you know, we carried on with -- 28 obviously, in the accounts of the various Anderson 5 1 entities in that manner. 2 Subsequently, when we learned that we should 3 have been treating freight differently, we changed that 4 on all of the entities that we had. 5 So, you know, we've been -- we've been doing 6 what we've been told to do the whole time. 7 And it does seem Mr. Matranga is accurate in 8 saying that it does seem unfair that, you know, we 9 were -- we were doing -- we were accounting for the 10 records based on advice from the Board of Equalization 11 and then we're being penalized for that for one of the 12 entities, you know, even though we were -- we were doing 13 it as we had been informed was accurate at the time. 14 MR. HORTON: Thank you very much. 15 Does that conclude your testimony? 16 MR. MATRANGA: Yeah. And the letter did come 17 to the management company, Anderson Audio Visual, Inc., 18 it came to Mr. Parkes. 19 It didn't, you know, reference a permit number. 20 It -- 'cause they understood that there was multiple 21 entities and that's how the accounting was done was 22 through the one company. So -- 23 MR. HORTON: Okay. We'll now go to the 24 Department. The Department will have ten minutes to 25 make their presentation. 26 We would ask that you commence with your 27 introductions and address the specific allegation. 28 MR. KEVIN SMITH: Good morning, Chairman Horton 6 1 and Members of the Board. 2 I'm Kevin Smith from the Board's Legal 3 Department. 4 With me today are Steven Smith, also from the 5 Legal Department, we will be representing staff. 6 We concur with the Appeals Division 7 recommendation. Petitioner claims it is entitled to 8 relief from freight charges because of reliance on an 9 audit of Anderson Audio Visual San Diego, Inc. 10 Petitioner, an LLC, was audited for the period 11 from April 1, 2005 through March 31, 2008. During the 12 audit the Department determined that Petitioner was not 13 properly collecting tax on freight charges and found a 14 deficiency measure of $488,034. 15 At the Appeals conference, Petitioner agreed 16 that the freight charges were taxable and that the tax 17 measure was correct, excuse me. 18 However, Petitioner contends it does not owe 19 the tax because it relied on advice given to Anderson 20 Audio Visual of San Diego, a separate corporation that 21 holds its own seller's permit. During an audit covering 22 the period from January 1, 1999 through December 31, 23 2001, during that audit, the Department incorrectly 24 advised Anderson San Diego that it was properly 25 reporting tax on freight charges. 26 Petitioner contends that because Craig Parkes 27 owns 100 percent of Anderson San Diego and also owns -- 28 excuse me -- also owns 61 percent of Anderson East Bay, 7 1 the advice received during the audit was provided to the 2 same person, thus Anderson East Bay should be relieved 3 from liability. 4 Under Revenue and Taxation Code Section 6596, 5 written advice can only be relied upon by the person to 6 whom the advice was given or their legal or statutory 7 successor. Both an LLC and corporation fall under the 8 definition of "person" in Section 6005. 9 Here, because Anderson San Diego is a 10 corporation separate from Anderson East Bay LLC, the 11 advice was not received by the same person and, thus, 12 Anderson East Bay cannot reply (verbatim) upon that 13 advice when seeking relief under Section 6596. 14 Thus we concur with the Appeals Division 15 recommendation. 16 MR. HORTON: On rebuttal, please. 17 MR. MATRANGA: Well, pretty much like we said 18 before, they gave us advice and now we are not supposed 19 to rely on their advice? 20 I don't know how we -- anyone would operate a 21 business. So, it's kind of -- doesn't make sense. 22 They sat down with Shane and Craig and told 23 them what to do and that's exactly what they did. 24 MR. PARKES: And I would just like to say too 25 that, you know, we -- we handled the accounting with -- 26 you know, it's a technicality whether there is an LLC or 27 an Inc. or a limited partnership. We handle the 28 accounting for all of these entities. 8 1 And we do it the -- the same way for all of 2 them. We don't -- you know, we don't charge freight on 3 -- in one company and not on another. 4 So, it's -- it seems -- it seems to make sense 5 that, you know, we be given relief for this tax, given 6 that we were relying on previous incorrect advice from 7 the Board of Equalization the whole time. You know, we 8 weren't -- we didn't seek that advice and then decide to 9 disregard it. 10 We were trusting that it was accurate at the 11 time. And now that it's -- now that it's been 12 determined that it's not, we're being penalized for 13 that. 14 MR. HORTON: Discussion, Members? 15 Member Runner. 16 MR. RUNNER: Let me just see if I can kind of 17 get my head around this particular issue. And I'm -- 18 I'm going to try to make this as simple as possible 19 without a lot of details to what the company is and all 20 that. 21 You have controlling interest in two different 22 -- two different entities? 23 MR. PARKES: Mr. -- my brother, Craig Parkes, 24 has -- 25 MR. RUNNER: Okay, the taxpayer has interest -- 26 MR. PARKES: Yes. 27 MR. RUNNER: -- in two different entities? 28 MR. PARKES: Correct. 9 1 MR. RUNNER: Controlling interest? 2 MR. PARKES: Correct. 3 MR. RUNNER: Uhm, these entities do exactly the 4 same thing? 5 MR. PARKES: Correct. 6 MR. RUNNER: The nature of their business is 7 exactly the same? 8 MR. PARKES: Identical. 9 MR. RUNNER: Okay. So, uhm, in one of these 10 businesses there was written advice that proved to be 11 erroneous. And as a result of that, then upon audit, 12 the -- the taxpayer -- let me go back to the Department, 13 the taxpayer then was relieved of some liability because 14 of the -- because of the -- the incorrect advice? 15 Is that -- is that what happened? 16 MR. HANKS: Yes, yes. 17 MR. RUNNER: Okay. 18 MR. HANKS: Yes. 19 MR. RUNNER: So, in one of these companies? 20 So, he then takes that written advice -- 21 MR. STEPHEN SMITH: Excuse me -- 22 MR. RUNNER: -- on -- 23 MR. STEPHEN SMITH: -- excuse me, I think what 24 happened is in the first audit of the other entity, the 25 other taxpayer failed to report tax on freight 26 charges -- 27 MR. RUNNER: Right. 28 MR. SMITH: -- and what happened was the 10 1 earlier auditor failed to catch that they were making a 2 mistake. 3 I don't think the staff ever told them that 4 inbound freight is nontaxable. 5 Do you see what I'm saying? 6 MR. RUNNER: I don't -- is that the case? 7 You do -- do you actually -- is there protection if you 8 just aren't told something in audit? 9 I thought that the protection actually had to 10 come when it is that you were given direction and -- 11 MR. STEPHEN SMITH: Prior audit work papers can 12 constitute written advice. 13 MR. RUNNER: Okay, okay. 14 MR. STEPHEN SMITH: And what happened here is 15 the prior auditor said that they looked at the invoices 16 on an actual basis. 17 MR. RUNNER: Okay, okay. 18 MR. STEPHEN SMITH: So -- 19 MR. RUNNER: So, the prior -- it may not be 20 written, but it -- but it passed the test? 21 MR. STEPHEN SMITH: It did pass the -- 22 MR. RUNNER: Okay. 23 MR. STEPHEN SMITH: -- test. 24 MR. RUNNER: And that's -- I guess that's the 25 key issue. 26 MR. STEPHEN SMITH: But it wasn't the case that 27 in the prior audit they were acting on written advice. 28 MR. RUNNER: Okay. 11 1 MR. SMITH: They were -- the prior auditor 2 botched the audit. 3 MR. RUNNER: But it passed to the -- to the -- 4 to the effect that the taxpayer was not held liable for 5 the tax? 6 Is that -- 7 MR. STEPHEN SMITH: No. 8 MR. RUNNER: -- no? 9 MR. STEPHEN SMITH: In the prior audit what 10 happened is the auditor simply failed to note that a 11 mistake had been made. 12 MR. RUNNER: Right. 13 MR. STEPHEN SMITH: That would constitute 14 written advice that they could rely on in a subsequent 15 audit for the same person or a successor to the same 16 person. 17 MR. RUNNER: Okay. Well -- 18 MR. HORTON: Well, Mr. -- Mr. Levine, can you 19 please bring a little clarity to -- 20 MR. LEVINE: For the record -- 21 MR. HORTON: -- the question from Mr. Runner? 22 MR. LEVINE: -- I wish we would have done a 23 better job because we did not examine whether we think 24 that that first audit was sufficient for that taxpayer 25 who was audited to rely on. 26 We accepted that it was not disputed. So, we 27 did not examine it at all. I cannot tell you that I 28 agree -- 12 1 MR. RUNNER: Okay. 2 MR. LEVINE: -- that if the first taxpayer came 3 up today we would sustain relief. 4 MR. RUNNER: Okay. 5 MR. LEVINE: But what's required is the auditor 6 had to look at -- he -- the Department accepted it 7 because the Department -- the auditor looked at every 8 invoice. 9 But the -- there had to be enough information 10 in that invoice that the auditor understood that there 11 was a freight in charge that was not being taxed and no 12 tax reported on it. 13 And, if so, then -- that -- then the blessing 14 of it by not picking it up in the audit would be 15 regarded as written advice that that taxpayer could rely 16 on until it was reversed. 17 MR. RUNNER: Okay, okay. That being said, the 18 taxpayer applied what he understood in that audit to his 19 second business; is that correct? 20 MR. STEPHEN SMITH: Correct. 21 MR. KEVIN SMITH: Correct. 22 MR. RUNNER: Mr. Levine, you don't believe it 23 is correct? 24 MR. LEVINE: I'm just -- your use of "the 25 taxpayer," because it's very -- we had -- we have two 26 taxpayers -- 27 MR. RUNNER: Let me rephrase that. 28 MR. LEVINE: -- here that are related. 13 1 MR. RUNNER: Let me rephrase that. 2 The -- the owner of the two companies applied 3 that to his second company; is that -- is that right? 4 MR. LEVINE: I agree with that. 5 MR. RUNNER: Thank you, okay -- applied that to 6 a second company. 7 If, indeed, he would have had both of these 8 stores under one company, he could have correctly 9 applied it to that second store; is that correct? 10 MR. HANKS: Arguably, yes. That's -- 11 MR. RUNNER: Okay. 12 MR. HANKS: -- correct because we 13 have determined, as was stated, that these transactions 14 were examined -- 15 MR. RUNNER: Okay, again if you would have -- 16 MR. HANKS: -- and accepted in the audit prior 17 to -- 18 MR. RUNNER: -- if he would have had two 19 different stores -- if he would have had two different 20 stores under one company, then he -- then -- then he 21 could have then applied the issue to that second store? 22 He doesn't have two different -- he -- but -- 23 but the fact is that these are two different corporate 24 companies held differently. 25 And as a result of that, we are saying that 26 because they are -- even though it's the same owner, 27 even though he got the advice from the BOE, even though 28 all that happened or he got that indication from the 14 1 BOE -- all that happened because the ownership was 2 unique between both of those, even though he had 3 controlling interest in both of those. Therefore, it 4 didn't apply then to the San Diego store? 5 Is that a fair statement? 6 MR. LEVINE: (Whereupon he nods head.) 7 MR. RUNNER: Okay, okay. And then, upon 8 looking at that, our field offices looked at that and 9 said, "Boy, you know, I guess it is okay because --" 10 and, so, both -- not only the auditor, but all the way 11 up to the San Diego District office there said, "You're 12 right, this ought to go ahead and be given -- given the 13 nature of the -- given to the nature of the --" I'm 14 afraid to use the word "advice," "but the direction or 15 the -- or the activities of the BOE at that point." 16 You know, I -- I guess I'm struggling in terms 17 of the common sense here in regards to what in the world 18 is a business supposed to do -- or an owner supposed to 19 do -- an individual supposed to do -- when they feel 20 like they've gotten some direction and, therefore, they 21 apply the direction and we end up nuancing it to the 22 point -- and I'll be careful with nuancing, because I 23 understand that we're trying to deal with the -- what we 24 think is -- as we interpret the exact letter of the law, 25 we -- do we get to the point where we're willing to go 26 ahead and say, "Well, you know, if you would have just 27 held those differently." 28 It seems to me the point is still the same, we 15 1 gave the advice. And as the result of that advice, a 2 businessman made certain decisions. 3 And for us to then hold him to this -- to this 4 level of liability, even though, again, it wasn't his 5 guess, he just tried to conform his business to what we 6 told them. 7 And, in fact, if we say, "Well, because you 8 ended up having one as a --" I forgot what it was, one 9 as a corporation, one as an LLC or whatever -- "it 10 doesn't apply." 11 Seems to me to be very unfair to taxpayers who 12 depend on the government for clarity when it comes to 13 their responsibility in paying taxes. 14 Thank you. 15 MR. HORTON: Further discussion? Member Yee. 16 MS. YEE: Thank you, Mr. Chairman. 17 I have a question for Mr. Levine. I mean, I 18 guess one could argue that the relationship that we have 19 here between the two entities in some ways is much 20 stronger than the legal or statutory successor 21 relationships that are required under law. 22 But how strict is the law with respect to 23 granting relief relative to that relationship? 24 MR. LEVINE: I view it pretty strictly. 25 We're also not talking about affirmative 26 relief, we're talking -- I mean, advice -- we're talking 27 about default advice. 28 And we're not talking about someone, I don't 16 1 think, who affirmatively did something based on what 2 they were told. We're talking about someone who was 3 doing it and just was not told it was wrong, so, 4 continued doing it. 5 MS. YEE: Uh-huh. 6 MR. LEVINE: And there's also a history to the 7 audit advice, which I won't get into unless you ask. 8 But the reason for the successor is -- I 9 believe it's in the statute and because it's a -- 10 MS. MANDEL: Well, it's in the reg. 11 MR. LEVINE: Okay, just in the reg. 12 MS. MANDEL: -- because when I was on the 13 outside -- 14 MR. LEVINE: Okay. 15 MS. MANDEL: -- I had a case where the Board 16 did not want to apply advice to companies other than the 17 exact company, even though you were a legal or statutory 18 successor of the company was one of the things that we 19 had a problem with, as well as at that time the Board 20 didn't want to do audit advice. 21 So, we -- the Board amended -- there was a reg 22 project and we amended the reg. 23 MR. LEVINE: There were reasons for that -- 24 MS. MANDEL: Yeah, there were reasons. 25 MR. LEVINE: -- too. The successor -- the 26 concept with the successor is it was given literally to 27 that business. And if it's someone who takes over that 28 business, then they get the relief. 17 1 But the main reason is it's in the reg. It's 2 in the reg. And the Supreme Court has regularly said 3 there are consequences to having a business that is run 4 in two separate entities -- two corporations, a 5 corporation, LLC -- and one that's run as a corporation 6 with divisions. There are benefits and burdens. 7 So, it's -- one of the burdens is that you 8 recognize you are a separate person and that's why they 9 do it, so that they can be a separate person. 10 But -- so, yes, because of the wording of the 11 reg, it allows the successor. It talks about one 12 person. These entities are not the same person. So, I 13 would view it as the letter of the law in the 14 regulation. 15 The Board has amended the regulation a couple 16 times beyond what we had interpreted before, but as -- 17 it's the reg -- it's the law because it's the Board's 18 regulation, the Board can change the regulation. 19 MR. DURANT: But there's a common sense element 20 to those arguments as well is that -- 21 MS. YEE: Yeah. 22 MR. DURANT: -- excuse me. 23 MS. YEE: I think we all -- 24 MR. DURANT: Oh, okay. 25 MS. YEE: -- are kind of struggling with that. 26 Okay. 27 MS. MANDEL: And per -- and person is -- one of 28 the things I heard them say was that they were asserting 18 1 that -- that person ought to be Mr. Craig Parkes, who 2 the letter was written to that enclosed the audit, care 3 of the Inc. company. 4 MR. LEVINE: Thirty years ago in law school my 5 income tax professor talked about the court case that 6 the IRS wished now it had lost. And I think this is 7 something that many taxpayers would be angry. 8 I haven't thought of all of the implications, 9 but there are many implications to moving up "person" 10 one level. And it may have been written to him, but it 11 was written to the taxpayer who was audited, care of 12 whoever they were dealing with. 13 I don't have the facts, but I'm sure that's -- 14 it was the audit report of that taxpayer. 15 MR. MATRANGA: Mr. Levine, wouldn't you 16 think -- 17 MR. HORTON: I'm sorry. 18 MR. MATRANGA: -- I'm sorry, can I speak to 19 Mr. -- no? Okay. 20 MR. HORTON: Ms. Yee? 21 MS. YEE: Yeah, please comment. 22 MR. MATRANGA: Oh, I was just going to say 23 that, you know, it does say "person," you know, it says 24 combination acting as a unit. 25 It doesn't say permit number. It seems that if 26 they only wanted it to the one entity, it would be just 27 a permit number, not person. 28 MR. RUNNER: I'm trying to find that letter in 19 1 my stuff. Do you -- can you get a copy of that letter 2 to -- can I get a copy of that? 3 MR. KEVIN SMITH: Which letter? 4 MR. MATRANGA: You have it there. 5 The letter there? 6 MS. MANDEL: Yeah, 'cause your stuff is -- 7 yeah, they have all your stuff. 8 MR. HORTON: Members -- 9 MR. RUNNER: They just brought -- okay. 10 MR. HORTON: -- Members, you guys might want to 11 hold -- 12 MS. STEEL: I just want to make one comment 13 here that, you know, giving some -- 14 MR. HORTON: Excuse me? 15 MR. RUNNER: I got it, thanks. 16 MS. STEEL: -- advice to the company and then, 17 you know what, it's not your company, it's wrong advice 18 for others. So, you have to do the different business 19 here. 20 And this is a wrong direction. You know, this 21 kind of business that we run -- I mean, if we call this 22 tax agency as a business. But, you know, it just 23 doesn't make any sense to me because you right and you 24 admit and you move on. 25 But you cannot say, but, you know what, this 26 letter was not to you -- even they are together. And 27 they're, you know, it's like 61 percent of your company 28 was controlled by this company that the corporation 20 1 received this letter. 2 So, you know what, this is totally wrong 3 business. Let's -- even we set aside common sense, you 4 know what, when you are wrong, just admit it and move 5 on. 6 But, you know, this -- try to bring these 7 businesses all the is way to the Board hearings just 8 wasting time, energy, money and doesn't make any sense 9 to me. 10 Thank you. 11 MR. HORTON: Further discussion, Members? 12 Member Mandel. Okay. 13 MS. MANDEL: I think we might have had them 14 where there were divisions, separate companies. 15 MR. LEVINE: If -- if they were divisions, this 16 wouldn't be here because that's the same taxpayer -- 17 assuming we agreed that it was reliable advice from the 18 audit. 19 MS. MANDEL: Right. 20 MR. HORTON: There is a common sense factor 21 that seems to permeate this transaction, but it's not 22 the fact that you have two separate corporations that 23 concern me that are held jointly. 24 In fact, in California and in practice you 25 can -- there could be one holding company that may hold 26 30 or 40 different corporations. And, so, in that 27 situation it would be a little clearer that the law 28 would prevail. 21 1 In this case what concerns me is that the like 2 kind of business and that they were operating, if I 3 understand the testimony correctly, they were operating 4 the identical type of business and it's the identical 5 type of transaction. 6 And, so, there still isn't relief for reliance 7 on advice provided to a separate corporation, but there 8 is some -- some understanding of how this could narrow 9 down. 10 And, so, my concerns goes to more the 11 precedential aspect of a decision in this regard and can 12 it be narrowed down and isolated somehow? 13 My recollection of the law, this doesn't seem 14 to find a gap in which we can accomplish that objective. 15 Member Yee. 16 MS. YEE: Unless we use this particular appeal 17 to re-visit the reg, which will be challenging. 18 But this notion of shared, common majority 19 interests or ownership and control, I mean, that might 20 be something to explore, but -- 21 MR. HORTON: You know, the -- but the inherent 22 danger is in December our cases -- cases have come 23 before us and where there are almost 800 different LLCs 24 held by the same individual and -- 25 MR. RUNNER: And the individual would have 26 controlling interest of all those LLCs? 27 MR. HORTON: -- yes. 28 MR. RUNNER: Well, then, it seems to me -- 22 1 gosh, again -- and they're duplicate business? 2 I mean, it seems to me you could -- we could 3 narrow this to the point to where it wouldn't be as 4 broad, given the fact pattern that we have before us. 5 MR. HORTON: Uh -- 6 MS. YEE: Or -- or perhaps looking at the 7 nature of the advice? 8 MS. MANDEL: The -- the statute requires it to 9 be if a person gets advice, even -- even franchisors 10 can't get it on behalf -- they have to name every single 11 franchisee they're getting it for. 12 MR. HORTON: Every single franchisee has to be 13 named. 14 MS. MANDEL: Yeah. 15 MR. HORTON: And then, you know, I mean, if it 16 was -- if it was an affirmative advice, then it would 17 be -- it's the same criteria, but that certainly would 18 be helpful. 19 All right, any further discussion, Members? 20 Hearing none, is there a motion? 21 MS. YEE: Move to take the matter under 22 submission. 23 MR. HORTON: Member Yee moves to take the 24 matter under submission. Second by Member Runner. 25 Without objection, Members, such will be the 26 order. 27 Thank you very much for appearing. 28 MR. MATRANGA: Thank you for your time. 23 1 MR. HORTON: We truly appreciate an opportunity 2 to have this discussion. 3 We will send you a written report of our 4 decision once we have concluded. 5 MR. PARKES: Thank you. 6 MR. MATRANGA: Thank you. 7 ---o0o--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 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 OCTOBER 25, 2012 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 24 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: NOVEMBER 7, 2012 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 25