1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 9 REPORTER'S TRANSCRIPT 10 DECEMBER 12, 2017 11 (Prepared from audio recording) 12 13 14 15 SALES AND USE TAX APPEAL HEARING 16 APPEAL OF 17 FIRST AMERICAN TITLE INSURANCE COMPANY 18 NO. 612003 19 AGAINST PROPOSED ASSESSMENT OF 20 SALES AND USE TAX 21 22 23 24 25 26 27 REPORTED BY: Jillian M. Sumner 28 CSR NO. 13619 1 1 P R E S E N T 2 For the Board of Equalization: Diane L. Harkey 3 Chair 4 Fiona Ma, CPA Member 5 Jerome E. Horton 6 Member 7 Sen. George Runner (Ret.) Member 8 Yvette Stowers 9 Appearing for Betty T. Yee, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Chief Board Proceedings 13 Division 14 For California Department of Tax and 15 Fee Administration: Robert Tucker 16 Tax Counsel 17 Kevin Hanks Legal Division 18 19 For Appellants: Joseph Vinatieri Attorney 20 Stan Tarbell 21 Taxpayer 22 Karri Rozario Representative 23 Leighton Anderson 24 Attorney 25 26 ---oOo--- 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 DECEMBER 12, 2017 4 ---oOo--- 5 MS. RICHMOND: Good morning, Members. Our 6 first item this morning is Item C, Sales and Use Tax 7 Appeals Hearings; Item C4, First American Title 8 Insurance Company, please come forward. 9 Board Proceedings has received 10 contributions, disclosure forms for today's hearings 11 from the parties, participants and agents. All forms 12 were properly completed and signed, and no 13 disqualifying contributions were disclosed. 14 All parties, participants, and agents are on 15 the alpha listings provided to your office. 16 Each person sitting at the table will be 17 asked to introduce themselves, and if necessary, 18 their affiliation with the taxpayer for the record. 19 Ten minutes is allocated for the taxpayer's 20 opening presentation, followed by ten minutes for the 21 Department's presentation, and five minutes is 22 allocated to the taxpayer for rebuttal. 23 Chairwoman. 24 MS. HARKEY: I already -- I just want to do 25 a little segue. 26 We do have a memo here from Robert Tucker 27 saying we should not be hearing this case. I believe 28 First American has responded via memo saying they 3 1 wish to have the case heard. They feel there were 2 undue delays by the Department, and, basically, I 3 think the memo said, running the clock out. And so 4 they wish to be heard. 5 They requested this. They were supposed to 6 be heard, I believe, in February. 7 MR. VINATIERI: July -- excuse me. It was 8 actually in January of this year. 9 MS. HARKEY: January of '17. It got pushed 10 back. And they felt like they were -- that there was 11 plenty of time to ascertain information, and they 12 requested a hearing. 13 So I think this Board has agreed that if a 14 hearing is requested, we will continue with the 15 hearing, and let the chip fall where they may after 16 we hear. 17 Okay. Thank you. 18 Okay. Thank you very much. 19 Mr. Angeja, will you please introduce the 20 items of this appeal. 21 MR. ANGEJA: Good morning, Madam Chair and 22 Members. I'm Jeff Angeja on behalf of the Appeals 23 Bureau. 24 The appeal before you involves one 25 unresolved issue, which is whether claimant is 26 entitled to a refund for amounts it paid to lessors 27 during the claim period. 28 MS. HARKEY: Thank you. 4 1 Welcome. You have ten minutes. And so 2 please -- then the Department will have ten minutes. 3 So please -- and you'll have five minutes on 4 rebuttal. Sorry. 5 So please introduce yourself for the record, 6 and you may begin. 7 MR. VINATIERI: Good morning, Members of the 8 Board. 9 First of all, let me introduce you to 10 Stan Tarbell, who is the VP of tax at First American. 11 We also have Karri Rozario, from -- Senior Manager at 12 Deloitte. As well as my partner Leighton Anderson 13 from our law firm. 14 So it's good to be in front of you this 15 morning for this one last time on a business tax 16 case. And it's been a long run for myself and for 17 the Board. 18 The case we present this morning has been 19 thoroughly analyzed, maybe, in fact, over-analyzed. 20 Because the fundamental issue presented is both 21 simple and easy to decide under the circumstances 22 that prevail now. 23 Some might say it would take courage for 24 this selected Board to reach its decision in this 25 case. But in my experience, the Board has never 26 lacked the courage to do the right thing. And we ask 27 that you do that today. 28 In our review of the petition and the briefs 5 1 filed over the course of over two years, demonstrate 2 clearly that the insurance company exception in 3 Reg. 1660 is facially unconstitutional and contrary 4 to the R&T code. 5 The reg. classifies the use tax becomes the 6 sales tax only for insurance companies, and only to 7 avoid the effects of the applicable constitutional 8 exemption. That's enough to decide the case. 9 But we've also pointed out that the 10 reclassification simply cannot apply to transactions 11 in this case, because sales tax cannot apply to 12 sales, let alone leases from outside the state of 13 California. The Board could find no tax be due even 14 without reaching the constitutional issue, but we 15 believe the Board should squarely acknowledge the 16 defect in the reg. 17 Finally, it's undisputed that this Board has 18 jurisdiction over all these issues until the end of 19 this month. Hence, it would be a denial of our due 20 process of law for the Board to deny a determination 21 on the merits of this case, which has been ripe for 22 adjudication since last January. 23 We began with a Board hearing summary of the 24 code. The summary observes that leases of TPP are 25 continuing sales and continuing purchases. The 26 analysis sites several R&T sections, 606, etc., etc. 27 We agree with all that. But those provisions are 28 merely definitional provisions, which do not, 6 1 themselves, authorize the levy of any tax. 2 Since sales and use tax will not both apply 3 to TPP leases, the code must still answer the 4 question, well, what kind of tax applies? Is it the 5 sales tax or is it the use tax? 6 The staff asserts, quote, "Thus, the tax 7 applicable to a lease as a continued sale and 8 purchase could be either sales tax or use tax, but 9 both taxes will not be imposed in the same lease," 10 close quote. 11 Members of the Board, "could be" and "is" 12 are two different things. The tax on TPP leases has 13 already been classified by the statute as use tax. 14 Section 6203(b) states, quote, "As respects leases 15 constituting sales of tangible personal property, the 16 tax shall be collected from the lessee at the time 17 amounts are paid by the lessee under the lease," 18 closed quote. 19 The section I just quoted is found within 20 Chapter 3, which, of course, we all know is the use 21 tax law. The Legislature knew that a tax on in-state 22 TPP leases could be a sales tax collected from the 23 retailer or a use tax collected from the end user. 24 But the Legislature decided -- they elected 25 in 6203(b) to impose the use tax on, quote, "leases 26 constituting sales of TPP." They made that decision. 27 And, by the way, there's no similar 28 provision in Chapter 2, which we all know is the 7 1 sales tax law. 2 The Legislature elected to impose the use 3 tax only, not the sales tax, on TPP leases. This 4 also allows leases on equipment from out of state to 5 be captured in the use tax, which would not be 6 subject to sales tax as factually the situation in 7 this case. 8 As a matter of consistent practice, TPP 9 leases are always taxed as use tax. So it follows 10 that uniquely different treatment of insurance 11 companies in Reg. 1660 was intended as an end run 12 around the constitutional in lieu exemption. That is 13 just not constitutionally allowable. 14 There's no dispute that First American and 15 other insurance companies are constitutionally exempt 16 based on the substation of the in lieu tax. Treating 17 TPP leases as sales tax is contrary to that statute. 18 Which is Rev and Tax Code Section 6352, which allows 19 exemption where the state is prohibited from 20 otherwise taxing under the constitution of this very 21 state. 22 The bottom line is that the insurance 23 company exception in Reg. 1660 is unfair to insurance 24 company taxpayers since they're being deprived of the 25 benefit of their constitutional exemption. 26 Anyone who looks at that sentence in the 27 reg. will recognize immediately that the sentence is 28 written to collect the same tax at the same time in 8 1 the same amount as would be collected if the 2 constitutional exemption did not even exist. 3 It's an end run, and everyone here knows it. 4 My client knows it, Appeals Division knows it, CDTFA 5 knows it, and I think you, as the Board Members, know 6 it, too. It's nothing more than a device to get 7 around the constitution. 8 And now here's the kicker. As the staff is 9 aware, the attempted re-class of the use tax and the 10 sales tax simply doesn't work either in this 11 situation, since the leases here were made all 12 outside of California. 13 We provided extensive detail, which is not 14 discussed in the Board's summary, to show that First 15 American had entered into a series of equipment lease 16 agreements with two suppliers, two lessors, and their 17 respective lease finance affiliates. 18 First was EMC Corp., a Massachusetts 19 corporation with offices in Hopkin Town -- 20 Hopkinton -- there we go -- Massachusetts, and its 21 financing affiliate by the name of Banc of American 22 Leasing Capital out of Tucker, Georgia. 23 And, secondly, Forsythe/McArthur Associates, 24 which is an Illinois corp., with offices in Skokie, 25 Illinois, and it's financing affiliate, First Bank of 26 Highland Park, Illinois. 27 Those lessors are out-of-state businesses 28 that are not registered in California for the 9 1 collection of sales tax. But they are lessors who 2 are registered for purposes of use tax. 3 In fact, the CDTFA permit for EMC says, 4 quote, "Certificate of registration use tax." 5 Likewise, the permit for Banc of America leasing a 6 capital is as a, quote, "Certificate of registration 7 use tax." 8 And the permit for Forsythe affiliate -- 9 Forsythe Solutions reveals only out-of-state Skokie, 10 Illinois business address. 11 So there's -- no other active registration 12 has been found. And it follows that the records for 13 these supplies now maintained by CDTFA don't identify 14 them as sales tax collectors. 15 Accordingly, it's legally and factually 16 inconsistent to classify these non-California 17 business entities as engaged in transactions subject 18 to the sales tax merely because they're leasing to 19 tax exempt insurance companies in California. 20 Now, even assuming for sake of argument that 21 the reg. could validly transform a lease of use tax 22 into a sales tax transaction, the transaction 23 analysis supplied by First American to the staff 24 showed that the equipment leases could not be taxed 25 as sales tax transactions with the tax attributable 26 to the seller, since the transactions themselves were 27 for goods entering California from other states and 28 without any in-state sales participation. 10 1 And I might add that the CDW transaction is 2 the same situation. 3 So the staff has had this information for 4 over eight months. The only response has been to ask 5 for more time. They're not researching anything, 6 because we've provided everything that they need. 7 They're just trying to run out the clock on this 8 Board's jurisdiction from our vantage point. 9 The Board needs to say enough games -- 10 enough games. The case has long been ripe for a 11 decision. A decision must be reached in fairness and 12 in due process. 13 The regulation is unconstitutional on its 14 face, and this Board has jurisdiction to decide that 15 issue. But even if there's any doubt about that, 16 these transactions cannot be sales tax transactions, 17 and the audit should have recognized that no tax was 18 due. The Board can and should decide that issue, 19 too. 20 Now, just as an aside, I heard the 21 discussion yesterday. I watched it on the Internet 22 regarding the GovOps memo, etc. I just heard Chief 23 Counsel discussion. A decision can't be final 24 because of petition for rehearing. I just want to 25 give you some of my experience. 26 I was involved in the formulation of the 27 Rules for Tax Appeals. And it was 1992 or 1994 when 28 counsel Don Hennessy, a great, great man that we had 11 1 here, Matt Fong, when he was on the Board, and that's 2 when RTA was started. Over the years it has morphed 3 and changed in that. And I've been involved in much 4 of that as time has gone by. I've got to tell you, I 5 never recall a time where there was any discussion of 6 a petition for rehearing being filed by the staff. 7 And the reason why is because the staff 8 worked for the Board. And so you can't have a case 9 in front of the Board, and the Board hear the case, 10 and then a petition for rehearing being filed by the 11 staff, because the staff worked for the Board. 12 And the fact of the matter is, the petition 13 for rehearing was laid out with those specific 14 grounds so that taxpayer's could basically say for 15 whatever reason, they weren't aware of some facts or 16 whatever. But it was never anticipated the staff 17 would have the right to file a petition for 18 rehearing. It makes lots of sense from that 19 standpoint. 20 And, in fact, if you look at the regulation 21 that we're talking about, 5560, I believe it is, it 22 says the taxpayer files a petition for rehearing, 23 nobody else. 24 So I just thought I'd throw that in to you. 25 I appreciate the opportunity to be heard today. And 26 this is a bittersweet time for me. But thank you for 27 listening to me. 28 MS. HARKEY: Thank you. 12 1 To the Department, you have ten minutes. 2 Please introduce yourself for the record. 3 MR. TUCKER: Yes, thank you. 4 I'm Robert Tucker with Kevin Hanks, and 5 we're here on behalf of the California Department of 6 Tax and Fee Administration. 7 Before I begin, I wish to note the following 8 objections. This matter still lacks crucial facts 9 that are necessary for the Board Members to decide 10 this case. Without the additional information, there 11 is a significant risk that party's rights to due 12 process will be violated, because there's an 13 insufficient record upon which the Members could 14 arrive at a legal conclusion for this matter. 15 Therefore, by hearing this matter, it could 16 result in unnecessary expenses for the claimant. 17 The matter is not ripe to be scheduled for 18 Board consideration, specifically, the issue whether 19 or not the transactions are subject to the sales or 20 use tax. And we need additional information from 21 vendors to determine where title passed, and whether 22 or not there was local participation by a physical 23 place of business in this state. 24 There have been numerous communications, but 25 there's still insufficient data to determine the 26 nature, whether it's sales or use tax, of the 27 transactions. Therefore, the Business Tax and Fee 28 Division of the California Department of Tax and Fee 13 1 Administration has audit staff still performing 2 investigations and have not yet received sufficient 3 information. A conclusion can't be reached until we 4 have that information, and, therefore, it's not 5 ready. 6 Finally, the notice of Board hearing was not 7 mailed at least 75 days in advance of the scheduled 8 hearing for today. And there was -- and, therefore, 9 it was not provided timely in accordance with Section 10 5522.6 of the Rules for Tax Appeals. 11 Subdivision (d) of Section 5522.6 of the 12 Rules for Tax Appeals provides a waiver of the 75-day 13 notice period when it's agreed by all parties and the 14 Chief Counsel. However, on October 13th, the 15 California Department of Tax and Fee Administration, 16 a party to this hearing, expressly refused to waive 17 the 75-day notice period, and continues to expressly 18 refuse to waive the 75-day notice period for the 19 reasons noted above. 20 Accordingly, this was not handled in 21 accordance with your own regulations. 22 As to the merits of this case, the Business 23 Tax and Fee Division noted that under Regulation 24 1660, leases are less -- pardon me -- lessees are 25 responsible for paying use tax on leases of tangible 26 personal property, unless the lease is not subject to 27 paying use tax. Which, in this case, they are an 28 insurance company, and, therefore, sales tax is 14 1 imposed on the lesser. 2 The BTFD found the claimant merely 3 reimbursed the lessors for the sales tax imposed on 4 them, and concluded that the claimant failed to 5 demonstrate there was any overpayment to which they 6 are entitled. 7 Accordingly, the claim for refund was 8 denied. 9 Normally, when it's a continuing sale and 10 purchase, use tax is imposed on the lessee measured 11 by rentals payable. The claimant is not subject to 12 use tax, because they are an insurance company. 13 Therefore, pursuant to clear and express language of 14 Regulation 1660, the sales tax applies, measured by 15 rentals payable, and is imposed on the lessor. 16 We find that the claimant lacks the 17 standing, because this is sales tax, to file a claim 18 for refund of sales tax reimbursement because any 19 claim must be obtained from the retailer. And 20 they're not the retailer. 21 Regarding the petitioner's assertion that 22 the provision of 1660 are unconstitutional, we note 23 that Revenue and Taxation Code 7051 authorizes the 24 Board to prescribe, adopt, and enforce rules and 25 regulations relating to the enforce -- administration 26 and enforcement of the sales and use tax law. And in 27 accord of that authority, the Board specifically 28 addressed leases of TPP to insurance companies by 15 1 adopting Regulation 1660 subdivision (c)(1). 2 The Board's required to be faithful to its 3 own regulations that's provided in Newco Leasing. 4 But if the Board were to conclude that Regulation 5 1660, or some portion thereof, were unconstitutional, 6 the proper remedy would be to hold any pending cases, 7 including this one, in abeyance, and amend the 8 regulation. 9 However, based on our finding that claimant 10 paid sales tax reimbursement, and the lessors, not 11 the claimant, were obligated to report that, there is 12 no immunity from taxation. It has not been 13 circumvented. And there's no unconstitutional 14 imposition of tax on this claimant. 15 Regarding claimant's assertion that the 16 regulatory switched from use tax to sales tax is void 17 as a matter of law, because it's inconsistent with 18 Revenue and Taxation Code 6203. It provides a 19 relevant part, as respect to leases constituting 20 sales of TPP, the law -- or the tax shall be 21 collected from the lessee at the time they're paid by 22 the lease -- under the lease. 23 However, this doesn't -- this section does 24 not require that tax on leases are continuing sales 25 and use taxes, that they be use tax. Instead, it 26 imposes a collection obligation on retailers doing 27 business in this state when the tax is owed. Thus, 28 we conclude there's no inconsistency between the 16 1 provisions of 1660 and the provisions of 6203. 2 We also disagree with claimant's contention 3 that Regulation 1660 subdivision (b)(1) is 4 inconsistent with 6352. What sets forth an exemption 5 from the sales and use tax when taxation is 6 prohibited under the constitution or laws of the 7 United States or under the California Constitution. 8 We note that the California Constitution, 9 Article 13, Section 28, subdivision (f), prohibits 10 the imposition of tax or sales or use tax on an 11 insurance company. But find that when sales tax is 12 imposed on a lessor retailer, the lease -- the leases 13 of tangible personal property to an insurance 14 company, the legal incidents of the sales tax is on 15 the lessor and not the insurance company. 16 In conclusion, we find that Regulation 1660, 17 subdivision (c)(1), is constitutional and consistent 18 with the relevant statutory positions. Pursuant to 19 the clear and express language of that regulation, 20 sales tax applies to the leases of equipment to the 21 claimant, amounts designated as, quote, "sales tax," 22 unquote, the claimant paid to its lessors were sales 23 tax reimbursement. 24 Due to the absence of any evidence that 25 claimant overpaid the tax to the Board, we recommend 26 the claim for refund be denied. 27 And just one point, claimant has claimed 28 that this matter was continued from the January 17 1 hearing. However, it could not have been continued 2 from the January hearing, because the Board didn't 3 hear the matter in January. Only the Board Members 4 can continue a hearing, staff cannot do so. It was 5 deferred with the consent of Mr. Vinatieri. 6 Thank you. 7 MS. HARKEY: You have five minutes on 8 rebuttal. 9 MR. ANDERSON: Board Members, I was 10 introduced earlier. My name is Leighton Anderson. 11 Mr. Vinatieri and I are going to try to divide our 12 time. 13 Unlike Mr. Vinatieri, I have not appeared 14 before this Board previously. I'm -- I'm mostly a 15 litigator. If I refer to you as Your Honors, I hope 16 you'll forgive me. 17 MR. VINATIERI: They'll like that. 18 MR. ANDERSON: What's that? 19 MR. VINATIERI: They'll like that. 20 MR. ANDERSON: Board Members, I want to 21 address the -- their jurisdictional questions that 22 have been referred to here. 23 First of all, as Mr. Vinatieri pointed out, 24 the rules only provide for rehearing by the taxpayer 25 in -- in Section 1560 -- I'm sorry -- Section 5560 -- 26 61. There has not been a lack of notice, as 27 Mr. Tucker just suggested. 28 The case was set for hearing in January, and 18 1 notice of that hearing was given on November 4, 2016 2 satisfying the notice requirement. 3 After that, the rule -- the case became 4 governed by Rule 5522.8, which is the tax appeal rule 5 for dismissals and postponement. That rule does not 6 prevent -- does not prevent the Board from resetting 7 a continued hearing at its discretion. 8 In fact, 5522.8 provides for continuance for 9 a period of 90 days or less -- a period of a maximum 10 of 90 days. There's no provision in the Board's rule 11 for stacking one 90-day continuance on top of 12 another, on top of another. Particularly not under 13 the circumstance of this case where the effort is 14 purely and evidently to run out the clock. 15 And the reason we know that is because, 16 although Mr. Tucker refers to lack of information and 17 insufficient facts, and we still don't have the 18 information we need. No. 1, they don't need any 19 additional facts on the constitutional issue. 20 And No. 2, the facts that we rely on have 21 been in the record since the audit. There's been no 22 request at all for any follow-up information at any 23 time. All there have been is requests for 24 postponement. 25 So this case is absolutely ripe for review. 26 And it would be a denial of due process for us not to 27 receive a decision of this Board at this time. 28 My colleague wants to address the merits. 19 1 MR. VINATIERI: Yeah. I just wanted to 2 follow up. 3 As Mr. Tucker, Bob, just made a statement 4 about the fact that we lack standing to even be here 5 today. And that was initially in the initial D&R. 6 The D&R -- we actually had two subsequent D&Rs 7 supplemental. And Appeals basically indicated that, 8 no, you do have standing to bring this today. So 9 apparently there's a difference of opinion relative 10 to that. 11 And I just wanted to indicate that with 12 respect to the collection obligation 6203(b), it's 13 not just a collection obligation. It's the use tax 14 law. And the levee of the use tax in leases is 15 specifically set forth in 6203(b). 16 We're always used to looking at 6203(c), 17 which is where -- that's the nexus provision that's 18 used all the time for dual determinations and that 19 kind of thing. 20 This is (b), where it talks specifically to 21 leases, and it makes the leases subject to the use 22 tax as continuing sales and uses. 23 The only other thing that I would indicate 24 is that with respect to this issue of -- of 25 information being given to the staff, we're real 26 sensitive about this, because we went back and looked 27 at our chronology of information requests. 28 And there have been information requests. 20 1 And we've turned over leases, we've turned over 2 invoices. But here's the problem. And this is 3 always bothersome so far after the fact. This goes 4 back to, what, 2007? And it's very difficult to find 5 information that late. If we had had this -- if 6 those requests had been made to us a lot earlier, 7 maybe we'd have an opportunity to get it. 8 By the way, we wouldn't normally have that 9 information. They'd have to go to the lessors, 10 because we're the lessee. 11 So the fact is this thing has dwaddled on 12 and on and on. How are we supposed to have that 13 information? And I'm going to tell you very -- my 14 view is, I don't think you're ever going to find that 15 information, because these transactions are so old. 16 The case needs to be decided on the information 17 that's been provided over the last eighth months, and 18 the case needs to be decided today. 19 Thank you. 20 MS. HARKEY: Thank you. 21 Members. 22 I have -- I have some data here. And I'd 23 just like to preface my conversation, having dug 24 through with my staff. We do not find a 25 constitutional issue. We find that the -- while 26 the -- the reg. may have been written, let's say, 27 poorly, it's -- it's -- what it should have said is 28 when a lease is not subject to use tax, for example, 21 1 insurance companies, sales tax may apply. It just 2 says sales tax applies. 3 And sales tax may apply if there's two 4 conditions met. The two conditions, sales tax -- 5 I'll read this from Regulation 1620(a). And I have 6 some copies here. 7 1620(a) -- I believe the staff can find 8 that. I'm sorry that I've only got copies for 9 Members, unfortunately. I will give copies to 10 everyone else. 11 Regulation 1620(a) is on the second page. 12 You'll see -- of what I've handed out. Or is it the 13 third page? Third page. First is general 14 application of tax and blah, blah, blah. 15 And then that's where I have that word "may 16 apply." 17 But 1620 says that from other states when 18 sales tax applies, and these leases, we found on the 19 IRIS system on black screenshots that they were 20 actually -- I believe these are use tax. So these 21 are the two leases in question. 22 One is Bank America, and the other one is 23 EMC Corp. And these have numbers. They have -- they 24 have registration with the state of California. 25 What it says is that -- so sales tax only 26 applies if -- okay. Sales tax applies when the order 27 for the property is sent by the purchaser to, or 28 deliver -- a delivery of the properties made by any 22 1 local branch, office, outlet or other place of 2 business of the retailer in this state, or agent, or 3 representative operating out of or having connection 4 with such local branch office or other place of 5 business. And as two conditions -- and the sale 6 occurs in the state. 7 Now, this is the point of contention. I -- 8 the sale did not occur in this state. And I don't 9 think anyone can say that the sale did occur in this 10 state. And since that condition is not met, sales 11 tax can't apply. 12 So the regulation, I find, is solid. The 13 problem that I have is it does not meet the 14 definition of when sales tax can apply. 15 And I will be happy -- this is -- and I 16 think what's happening here is trying to prove a 17 negative. And we've got the data here right on our 18 IRIS system that shows the registration numbers. 19 I'll be happy to -- let me forward this to the 20 Department. That's kind of going to the pertinent 21 parts of this. 22 But I think -- I think this is the core 23 issue. And so I'd like also the taxpayer to have a 24 copy of that. So let's get a couple copies of that 25 going. I've given them to the Members. 26 But take your time, read that while she gets 27 some copies. And then we can probably have a 28 discussion that's not constitutional here. 23 1 MR. HORTON: Madam Chair, as those copies 2 are being made, I'd like to ask clarifying 3 questions -- 4 MS. HARKEY: Sure. Go ahead. 5 MR. HORTON: -- of the Appeals. 6 The Department has stipulated that this -- 7 that the appellant does not have standing. And that 8 the Appeals believe that they -- believes that they 9 do. What are your thoughts on that? 10 MR. ANGEJA: So a taxpayer that only pays 11 sales tax reimbursement doesn't have standing to file 12 a claim for refund, because they haven't paid tax. 13 Right? 14 To the extent that if the Department -- if 15 the trier of fact determined that what they paid was 16 sales tax reimbursement, they don't have standing to 17 be here to make that claim. Their argument is what 18 they paid was use tax. 19 So we've concluded from abundant caution for 20 purposes of this Board to decide it, to the extent 21 that they prevail showing that they paid use tax, 22 then they clearly have standing. 23 So that's why they concluded that it's an -- 24 it's an argument, but it's -- the whole -- it goes to 25 the merits of the dispute. So they should be 26 entitled to make that argument. We concluded they 27 have standing. 28 MR. HORTON: Thank you. 24 1 The Department has also testified that it's 2 their belief or position -- excuse me -- that 3 Regulation 1660 and appropriate subdivisions of that 4 is unconstitutional. 5 Who has the authority to determine whether 6 the regulation is constitutional or not, and does the 7 Board have the authority to interpret the regulation? 8 MR. ANGEJA: It's the Board's regulation. 9 So if the Board were to decide that it was 10 unconstitutional, it could change the regulation. As 11 Mr. Tucker said, the appropriate procedure -- and we 12 said in our summary -- hold it in abeyance and change 13 it, short of -- the Board can decline to fall -- the 14 Case Law says the Board's supposed to follow its own 15 regulations. But if the Board determines that the 16 regulation is incorrect, the Board can change that 17 regulation. 18 MR. HORTON: Does the Board have the 19 authority to interpret the regulation -- 20 MR. ANGEJA: Yes. 21 MR. HORTON: -- given the statute. In 22 concert with the statute, I should say. 23 MR. ANGEJA: It's the Board's regulation. 24 So the Board can interpret its own regulations, yes. 25 MR. HORTON: All right. Thank you. 26 MS. HARKEY: And those IRIS printouts that 27 you've got on the back pages there, those are 28 certificates of registration of use tax. So that's 25 1 why I'm saying I think this is use tax. 2 You -- yes. 3 MS. STOWERS: Okay. Thank you, Madam Chair. 4 Couple of questions. I want to go -- the 5 claimant talked about the -- never having a petition 6 for rehearing from staff. And I agree with you, in 7 the past, you would never have staff saying, "Board, 8 rehear this case." 9 But to the Department, can you clarify for 10 me under the new rules that we're under, under -- 11 MR. HORTON: Those don't -- 12 MS. STOWERS: -- emergency regulations. Are 13 you guys looking -- do you feel that you have a right 14 to file a petition for rehearing under your new 15 regulations since you are apart of CDTFA and not BOE? 16 MR. TUCKER: Under the rules, the emergency 17 regulations put forth by the Office of Tax Appeals, 18 there's an express provision that allows CDTFA to 19 file a petition for rehearing beginning January 20 1st. 21 MS. STOWERS: Okay. Okay. 22 MR. HORTON: When you say the -- my 23 apologies. 24 MS. STOWERS: Not a problem. 25 MR. HORTON: When you say beginning 26 January 1st, is it effective January 1st? Meaning 27 that all of the issues, January 1st, prospective, or 28 is it retroactive, you can actually go back three 26 1 years? 2 MR. TUCKER: Any matter that is not yet 3 final. You can only -- the petition for rehearing 4 has to be filed within 30 days. So -- or it 5 wouldn't -- and under these circumstances, for any 6 matter that's not yet final, which presumably is this 7 matter, we would have the option of filing a petition 8 for rehearing. 9 MR. HORTON: The question is does the law go 10 into effect prospectively or retroactively? 11 MR. TUCKER: It's for any matter -- I 12 believe it says for any matter that's not yet final. 13 It's -- I don't have that in front of me. 14 MS. HARKEY: And we debated that -- pardon. 15 We debated that yesterday what constituted final. 16 So -- 17 MS. STOWERS: I just want -- I mean, I think 18 it's up to them to decide -- 19 MR. TUCKER: Correct. 20 MS. STOWERS: -- if they have the legal 21 ability to file a petition for rehearing. 22 But I just wanted to kind of put that out 23 there that what happened in the past is not what's 24 currently happening now. Because we are in a 25 different environment. 26 MR. VINATIERI: And may I respond to that? 27 MS. STOWERS: Mm-hm. 28 MR. VINATIERI: We're in a different 27 1 environment, but AB 131 has some specific statements 2 made that I think touches on this issue. And that is 3 in Section 15, which relates to Section 15679.5 of 4 the Government Code. It says specifically that to 5 the extent applicable, not in conflict with this 6 part, the regulations contained in Division 2.1 of 7 Title 18, and that's the Rules for Tax Appeals, shall 8 continue to enforce and apply to all appeals, 9 hearings and proceedings. 10 If you take AB 131, and then you take Rules 11 for Tax Appeals to 5560, it says specifically, 12 taxpayer files a petition for rehearing. 13 So I'm just -- I realize there are some 14 inadequacies. I think you discussed it yesterday in 15 the drafting of AB 131 and some of the things that we 16 see there. But if you look at -- if you look at what 17 it says, it talks about making sure that you have 18 your hearing before 12-31. And then it goes through 19 and says the word "decision," it says "heard," it 20 says -- etc. etc. And then it says "or." So it is 21 disjunctive, not conjunctive. 22 And so I'm just saying to you, the Rules for 23 Tax Appeals are very clear that they're to be 24 followed under AB 131. But that doesn't mean, then, 25 the staff has the right to file a petition for 26 rehearing, because only taxpayers can do it under 27 that rule. Which is supposedly still invoke 28 according to what the Legislation says. 28 1 MS. STOWERS: Okay. Thank you. Let me -- I 2 want to move -- I don't want to get hung up on 3 that. 4 MS. HARKEY: Right. It's not our job. 5 MS. STOWERS: Yeah. I really don't. But I 6 do want to kind of -- just for clarification for me, 7 I have a couple more questions. I respect your 8 argument. Don't know -- I mean, I will kind of refer 9 to BOE Chief Counsel on how AB 131 works. I mean, he 10 is our counsel, and he is who I'm looking to. 11 But for the case before us, to the 12 Department, in your brief you talk about not having 13 proper notification, not having the 75-day notice. I 14 believe the claimant referenced another rule of tax 15 appeal saying that there was a 75-day notice. 16 MR. VINATIERI: I referenced the rule on 17 postponements, which does not require a 75-day 18 notice. 19 MS. STOWERS: So I would like for the 20 Department to address that. 21 Do you agree with them that 5522.8 is the 22 rule that we're looking at, and there was 23 notification? Or are you still under the prior -- 24 MR. TUCKER: It's -- there clearly was not 25 notification. That does not apply. 26 In order for -- when a matter is deferred 27 before it's brought back on calendar again, there 28 requires a separate notice. And that didn't occur. 29 1 If this had been continued, then that -- we 2 might be looking at a different circumstance. But as 3 I said before, it was not continued. It was deferred 4 from the January hearings. 5 MS. STOWERS: Okay. 6 MR. TUCKER: So it would require -- and as 7 they attempted to do, they sent out a notice of Board 8 hearing; however, it was deficient in that it was 9 late. 10 MS. STOWERS: When was it sent out? 11 MS. HARKEY: It was sent out one day after 12 the 75 days, if you use that. 13 MR. TUCKER: It was -- actually it was more 14 than one day. 15 MS. HARKEY: No, it was one day. I checked 16 this all out. It was one day. It was one day. 17 MS. STOWERS: Do we have a copy of that 18 notification with the -- with the -- with the date 19 stamp or something? Because I do believe that the 20 claimant indicated that it was sent out on 21 September 29th, which would be one day. 22 But I also believe that the Department 23 claims it was sent out after October 2nd. 24 So, Chief Counsel -- 25 MR. NANJO: I'm sorry. I have to go around. 26 MS. STOWERS: -- I'm assuming that you were 27 made aware of this issue. 28 MS. HARKEY: Yeah, it's been talked about. 30 1 MR. NANJO: Yes, I was. 2 MS. STOWERS: So can you -- will you please 3 clarify when the notice was sent out? 4 MR. NANJO: The information I have from 5 Board Proceedings is it was mailed out on 6 October 2nd, 2017. 7 MR. TUCKER: Correct. 8 MS. STOWERS: Okay. 9 MR. TUCKER: Correct. 10 MS. STOWERS: So that is more than one day 11 beyond the 75-day requirement. 12 MR. NANJO: That is correct. 13 MS. STOWERS: So, Chief Counsel, um -- 14 MS. HARKEY: Where do I get the one day? We 15 had a one-day discussion. I know that's in an 16 e-mail. It was, like, the 29th. 17 MR. NANJO: I -- I believe that's when the 18 notice was prepared. But the information that I just 19 received from Board Proceedings indicates that it was 20 actually mailed on the 2nd. I believe Board 21 Proceedings can verify that. But that's the -- 22 MS. HARKEY: Okay. There's been some 23 discussion, then, since I was made aware. And -- and 24 more to the point -- more to the point -- we're still 25 debating one issue over another, and not the facts of 26 the case. 27 MS. STOWERS: I -- I -- I was going to get 28 there, too. 31 1 MS. HARKEY: Oh, okay. 2 MS. STOWERS: For me, I agree with you, we 3 need to get to the merit of the case. But I really 4 want to make sure that we're not -- we're not 5 violating the rules of tax appeals. Or if we are, 6 we're just going to say it's okay because we're under 7 a different environment. 8 I just -- and so I really think as 9 Chief Counsel, I'm looking to you, to, you know -- if 10 it was mailed October 2nd, that's not a 75-day 11 notice. I think that's lacking by about five days 12 when I did my quick calculation. So -- 13 MR. NANJO: That's correct. 14 So the reason this matter is in front of 15 this Board is -- what happened was a notice went out 16 on, as I understand it, late. There has been some 17 discussion and some variance on how late it was. But 18 clearly it was at least a day late, if not up to five 19 days late. 20 At the time that the notice went out, the 21 Department did object and say that it was in 22 violation of the 75-day rule. We received a legal 23 argument from the taxpayer representatives stating 24 that they believe that the 75-day rule didn't apply. 25 And given the fact that this matter has 26 been -- has been stated -- has been on -- ongoing for 27 quite some time, and given the unusual circumstance 28 of this Board losing jurisdiction at the end of this 32 1 month, we felt it was fair for all parties to be able 2 to vet their issues here, and for the Board to make a 3 determination on how they want to handle this matter. 4 Because arguably, I can see both arguments. 5 MS. STOWERS: So then as the trier of fact, 6 we could individually decide whether or not we have 7 75-day notice, and then we can also decide the merit 8 of the case. 9 MR. NANJO: You can decide whether or not 10 the 75-day notice is -- it was appropriately met. Or 11 given the circumstances as been stated by the 12 taxpayer, that, you know, this matter has been 13 ongoing and what have you, that sufficient notice was 14 given to the Department, you're gonna -- you can move 15 forward. 16 Alternatively, in fairness to the 17 Department, the Department has made allegations that 18 factually this matter is not ripe, and those factors 19 need to be considered by this Board as well. 20 MR. VINATIERI: So might I object? 21 MS. STOWERS: Wait a minute. Wait a minute. 22 Wait a minute. 23 Claimant, go ahead. 24 MR. VINATIERI: Sorry. The 29th is the 25 date, but that was a Friday. You had Saturday the 26 30th, then you had Sunday, October 1, and then you 27 had Monday, October 2. So this period of time in 28 between relates to the weekend. And the fact of the 33 1 matter is it's not as if it's some long period of 2 time. It was the weekend. 3 And I would point out to everyone -- and we 4 need to -- I didn't bring this up in my opening -- 5 MS. HARKEY: Bring your microphone closer to 6 you. 7 MR. VINATIERI: I'm sorry. 8 This case was set for hearing in September 9 2016. It was ready to go. Appeals pulled it off 10 because they found a problem in their analysis. 11 They corrected that analysis. We then 12 received notice for the hearing in January of 2017, 13 which we replied to. And it was set for hearing in 14 January of 2017. With discussions with staff, it was 15 mutual. 16 We had information relative the out-of-state 17 nature of the leases. So now instead of just on the 18 constitutional issue, you now have a factual issue, 19 so that the Board could rule on either one. 20 So we agreed. Okay. We're going to provide 21 you the information as much as we can, which we 22 started doing. That was shortly after January 2017. 23 And here we are in December 2017. 24 And I would point out to you, 5522.8 talks 25 about deferral, and talks about specifically that a 26 Board Member, Appeal's staff, or any party to a 27 matter may request of a hearing or the due date of 28 any brief be deferred or postponed for reasonable 34 1 cause. And that's where you get into the 90 days. 2 There is a 90 day -- but then after that 90 days, it 3 has to come back up in front of this Board. 4 Well, what happened here is there was a 5 further 90-day deferral given without us even knowing 6 it. 7 But my view was they were asking for 8 information, and I assumed they were looking at it. 9 So we were giving them information so that they could 10 have everything in front of them. 11 Then there was another 90-day deferral. And 12 this thing then -- that's after July 1st. And that's 13 when, to me, I started asking, "Well, what's going on 14 here?" Why has this thing been deferred -- it was 15 September of 2016, now it's January of 2017. Now 16 it's whenever is it going to be. 17 MS. STOWERS: Okay. 18 MR. VINATIERI: And that's -- when I talk 19 about due process, this thing has gone on and on. 20 MS. STOWERS: I understand what you're 21 saying. If you don't mind, I'd like to kind of 22 change gears and get to the merit of the case now. 23 Um, so EMC, and I think it's, Forsythe, are 24 those the only two leasors -- leasors -- lessors -- 25 excuse me? 26 MR. VINATIERI: I think -- I believe it was 27 Banc of America, B-a-n-c of America -- 28 MS. STOWERS: Uh-huh. 35 1 MR. VINATIERI: -- EMC, and then Forsythe. 2 MS. STOWERS: And those are it? 3 MR. VINATIERI: Yes. 4 MS. STOWERS: And if I kind of get down, 5 you're basically saying that these are out-of-state 6 vendors, and so it must have been use tax, is the 7 simplest way of putting it. Based on -- even based 8 on Ms. Harkey's screen print. 9 MR. VINATIERI: Well, I don't have it in 10 front of me. But -- but -- 11 MS. HARKEY: You should have it right there 12 in front of you. 13 MR. VINATIERI: Okay. 14 MS. HARKEY: It was just handed out to you. 15 Back page. 16 MR. VINATIERI: Back page. Okay. 17 What we're primarily relying on is the 18 Department's own characterization of those lessors. 19 MS. STOWERS: Okay. 20 MR. VINATIERI: And their use tax. 21 MS. STOWERS: Okay. I understand. 22 MR. VINATIERI: Their use tax. 23 MS. STOWERS: That's the simplest way of 24 putting it. 25 To the Department, have you verified whether 26 or not it is use tax? Have you verified where title 27 passes? 28 MR. TUCKER: We've been trying to do so 36 1 since January, and we've been unable to do so. We 2 don't have sufficient information. 3 MS. STOWERS: And based on the law, if title 4 passes in California versus out of state, what type 5 of tax do we have? 6 MR. TUCKER: Assuming there's title passage 7 and there is participation, it would be a sales tax 8 transaction. 9 MS. STOWERS: And when you say you're trying 10 to verify, who are you reaching out to to verify it? 11 MR. TUCKER: Both Mr. Vinatieri and 12 Ms. Rozario. Staff has been -- and since then 13 they've been -- some of the district offices have 14 been working with different vendors. 15 MS. STOWERS: Okay. 16 MR. TUCKER: They're trying to get -- go 17 directly to the source. 18 MS. HARKEY: May I ask just one question for 19 clarification? Does title pass on a lease? 20 MR. ANGEJA: You've got -- a lease is a 21 continuing sale and purchase. The property is here. 22 So with each renewal of a lease term, title passes 23 wherever that property is. It's in this state. So 24 with each new lease term, you've got title passage in 25 this state. The question would be whether -- 26 MS. HARKEY: What -- what evidence, then, 27 exists that there was any in-state participation? Do 28 we have any in-state participation? 37 1 The Department has been looking at this for 2 a long time. Do we have any evidence of in-state 3 participation? 4 Because if you're asking for the taxpayer to 5 provide evidence of a negative, they're saying they 6 don't have in-state participation. We're saying they 7 need to provide evidence that they don't have 8 in-state participation. And this is where the 9 problem -- and this is why our screenshots, although 10 these did not turn out in color for you all -- these 11 are our screenshots, and we have them registered for 12 use tax. 13 MR. TUCKER: We do have in-state 14 participation with one vendor. 15 MS. HARKEY: Which one? Which one? 16 MR. TUCKER: CDW. 17 MS. HARKEY: Please -- please come forth. 18 Come forth. And what do you -- 19 MR. TUCKER: CDW. 20 MS. HARKEY: CDW. And what do you have with 21 CDW? How did you -- how did you prove that up? What 22 do you have that's in-state participation? 23 MR. HANKS: Ms. Harkey, we have information 24 from that vendor. We know how they report their 25 transactions to the Board. They're reporting a 26 substantial portion of their sales subject to sales 27 tax. 28 They also have other transactions that 38 1 they're reporting to us, though, that appear to be 2 subject to use tax. But we know that they're 3 reporting -- a substantial portion of their 4 transactions is subject to sales tax from the various 5 locations where they're engaged in business in 6 California. 7 MS. HARKEY: Okay. Do we have the lease? 8 Where was the lease negotiated? 9 MR. HANKS: These are purchases. 10 MS. HARKEY: These are purchases. So these 11 are not subject to this appeal, or they are? 12 MR. VINATIERI: They are part of the appeal, 13 but they are not -- they're a secondary part of this. 14 They are not the leases that I've been talking about, 15 although I did refer to CDW as one item. 16 MS. HARKEY: Okay. So CDW is part. And are 17 you acknowledging that they may be subject to sales 18 tax? 19 You're not. 20 I see somebody in the back shaking her head. 21 Could you come forth, please, and add some clarity 22 here? 23 MR. VINATIERI: Introduce yourself. 24 MS. ROZARIO: Good morning. I'm 25 Karri Rozario, I'm a Senior Tax Manager with 26 Deloitte. And I will address the CDW transactions. 27 We're not in dispute that CDW had a sales 28 office in California, and does have transactions that 39 1 could be subject to sales tax. The contract that 2 First American had with CDW was a master supply 3 agreement negotiated in the state of Illinois. Their 4 sales representative is based in the state of 5 Illinois. The goods that they purchased, they 6 purchased through an online portal with -- that is 7 routed through a server located in the state of 8 Illinois. That's where CDW is headquartered. And 9 the goods are all shipped into California from this 10 out-of-state warehouse. 11 This is another situation of it's not 12 meeting both prongs of the test to be a sales tax. 13 Title passes by terms, FOB destination in California, 14 however there is not in-state participation. 15 Everything that was negotiated, the general business 16 terms related to the master supply agreement, was 17 negotiated out of state at the Illinois headquarters. 18 So we failed to hit both of the two prongs 19 for it to be sales tax versus use tax. 20 MS. HARKEY: What information was provided 21 to the Department to support that assertion? 22 MS. ROZARIO: They have a copy of the master 23 supply agreement. And in there, under the governing 24 state of law, it's the state of Illinois, not the 25 state of California. It is signed by a 26 representative showing an Illinois address. Their 27 corporate office address is also the address of 28 record with respect to the contract. 40 1 MS. HARKEY: Thank you. 2 Do you dispute that, or you have something 3 to say regarding that? 4 MR. TUCKER: We disagree. 5 MS. HARKEY: You disagree? You have a 6 document that's different than the one that's being 7 described? 8 MR. HANKS: We have a copy of the master 9 sales agreement. What we indicate, though, is that 10 doesn't necessary -- that isn't indicative of where 11 title transfers or of where the sale originates. We 12 have information from the vendor that indicates that 13 their transactions are subject to use tax -- or 14 excuse me -- sales tax. And the title transfer is in 15 California. It specifically transfers in California. 16 Based -- based on how they report to the Board, we 17 know that that's occurring. 18 MS. HARKEY: So we have evidence that 19 they're either paying a tax, collecting a tax -- 20 MR. HANKS: Yes. 21 MS. HARKEY: -- on this transaction? We 22 should have both sides of this, I guess is what I'm 23 saying. 24 MR. HORTON: Well, they're two different 25 types of transactions. 26 MS. HARKEY: Yeah, but if they -- if they 27 understand the CDW, then they ought to have CDW 28 information, which this taxpayer would not have. 41 1 MS. ROZARIO: Madam Chair, I believe he said 2 they report both sales tax transactions and use tax 3 transactions on a single return. And we're sedating 4 that -- we're not contesting title passage. It's FOB 5 destination, passes in California. We're contesting 6 in-state participation. 7 Their contract is a master supply agreement 8 negotiated out of state. Everything is run through 9 the Illinois headquarters. There is no in-state 10 participation in their transactions. 11 MS. HARKEY: Okay. Well, that seems to be a 12 bone of contention. However, I don't see the Banc 13 America, Bank of America or EMC are contended. So 14 I'm trying to figure out where we are here. Because 15 I do have -- we do have showing that they're use tax. 16 MS. MA: How do you know they're use tax? 17 MS. HARKEY: Because that's what the 18 certificates say. This is the screenshot. These are 19 use tax permits. 20 MS. MA: Oh, okay. 21 MS. HARKEY: California gives them a permit 22 for use tax. So they pay use tax to our state. So 23 this is off of our IRIS system. 24 Okay. Does anybody else want to -- 25 MR. HORTON: Couple of questions, Madam 26 Chair. 27 MS. HARKEY: Yes, sir. 28 MR. HORTON: I'm still a bit concerned about 42 1 clarifying the undue delay issue. 2 Question of the Department, when was the 3 Department first made aware of the title passage 4 issue? Whether or not title passed, the Department 5 indicated that they were seeking to see if there was 6 local participation. They were circulating vendors, 7 for the purpose of determining whether or not it was 8 a use tax or sales tax. 9 MR. TUCKER: We started looking in January. 10 And that's why it was deferred from the January 11 calendar. 12 MR. HORTON: That's when it was first 13 brought up? 14 MR. TUCKER: Mm-hm. 15 MR. HORTON: The appellant, you agree with 16 that? 17 MR. VINATIERI: Yes, it was raised in 18 January. 19 MR. HORTON: And how many vendors are we -- 20 are you looking at? Four? Two? 21 MR. TUCKER: Two. 22 MR. HORTON: Two vendors? 23 MS. HARKEY: But what about CDW? That's a 24 third. 25 MR. VINATIERI: That's -- 26 MR. HORTON: A separate issue. 27 MR. VINATIERI: Yeah, that's a second issue 28 on the sale and purchase. That's not the lease 43 1 issue. 2 MS. HARKEY: Oh, okay. 3 MR. HORTON: The Department testified that 4 they circulated vendors? When did you first 5 circulate the vendors? 6 MR. TUCKER: We first tried to rely on the 7 claimant. 8 MR. HORTON: I'm not -- I'm not -- the 9 question I was asking was, the Department indicated 10 that they circulated vendors. And when did you 11 circulate the vendors? And I'm presuming there's 12 been no response? 13 MR. TUCKER: It's been later in the year, 14 because initially we attempted to rely -- it's -- 15 this is a claim for refund. And so it's the 16 responsibility of the claimant to show that they are 17 due a refund of the taxes. So we tried to work with 18 claimant and the claimant's reps. And only later 19 this year -- it's probably -- looks like July, 20 September. 21 MR. HORTON: So despite the claim that 22 the -- that the -- the respondent has claimed that 23 these vendors are available, these vendors are use 24 tax, they provided all the documentation that they 25 could provide, and apparently, based on the 26 Department's review, analysis, and so forth, there 27 was some presumption that it could have been -- could 28 have been -- otherwise you would not have acted -- 44 1 I'm presuming. 2 So, again, when did you, again, circulate 3 vendors? 4 MR. HANKS: So, Mr. Horton, this became an 5 issue, as we indicated, in January. What we 6 attempted to do was -- was to gather the information 7 from the taxpayer, because they're the folks in the 8 best position to know where the property came from 9 that they either purchased or lease. So we attempted 10 to work with them. 11 MR. HORTON: I gave you testimony as to -- 12 did the appellant provide testimony to the Department 13 as to where they believed the information came from 14 and whether or not it was use tax, sales tax and so 15 forth? 16 MS. HARKEY: Anyone can respond that has 17 information. 18 MR. VINATIERI: I have a timeline, because I 19 assumed this was going to be an issue. I'm not going 20 to go through it. But we have timeline of 21 communications with staff, March 14th, April 5th, 22 May 4th, May 15th, May 18th, May 23rd, June 6, 23 June 15, June 15, July 14, September 5. 24 MR. HORTON: Yeah. I'd like to hear that, 25 Members, only because I believe that the Department 26 has -- if there's an undue delay, and they didn't 27 exercise their fiduciary responsibility to do what 28 they can to try to resolve this, it becomes a little 45 1 unreasonable to -- to -- to further delay this. But 2 I don't know what the facts are. I mean -- 3 MS. HARKEY: Would you mind reading what 4 occurred during those? I think this all should be 5 part of the record. I'm sorry. Because we haven't 6 heard this before. 7 MS. STOWERS: It's in their briefs. 8 MR. VINATIERI: March 14th, 2017, 9 description -- 10 MR. HORTON: Well, the Department is not 11 being forthcoming with the information. I asked the 12 question about that. When did they start the 13 circulation looking for local participation. They 14 provided every testimony as to why they shouldn't say 15 anything. Maybe you can shed some light. 16 MR. VINATIERI: I can just tell you, I have 17 the dates and I have the description of what 18 happened, the follow-up, and the response. 19 MS. HARKEY: Please -- please -- please go 20 forth. 21 MR. VINATIERI: Description, March 14th, 22 e-mail from Karri at Deloitte to Steve Sisti at the 23 Board to provide a brief update on the issues around 24 use tax versus sales tax as a result of discovery 25 that the vendors hold certificate of registration use 26 tax permits, and not sales tax permits. 27 Follow up, second request for update on 28 March 21st, 2017, response, e-mail from Steve Sisti 46 1 at the Board indicating they were meeting with Legal 2 on Wednesday March 22nd, 2017. 3 April 5th, 2017, description, e-mail from 4 Karri at Deloitte to Steve Sisti to provide a brief 5 update on the sales, lease-back issue inquired by 6 Steve on 3-22-17. 7 May 4th, 2017, description, e-mail from 8 Karri to Steve describing master lease with EMC, and 9 confirming this is not a sale, lease-back 10 transaction. 11 May 15th, 2017, description, e-mail from 12 Karri to Steve to request for a status update. 13 May 18th, description letter from Evita 14 Lopez at Deloitte to Steve Sisti providing invoices, 15 copies of leases, contracts, and other supporting 16 documentation for lease transactions. 17 May 23rd, description, e-mail from Steve 18 Brower at Board to Evita Lopez at Deloitte confirming 19 the receipt of CD containing supporting documentation 20 for lease transactions for refund periods 10-1-07 21 through 9-30-11 and 10-1-11 through 12-31-14. 22 June 6, 2017, description, e-mail from 23 Steve Sisti to Karri at Deloitte regarding meeting 24 with Legal to discuss sales tax on the lease 25 receipts, questions about CDW vendor contact person, 26 and whether agreement is a purchase agreement or 27 supply agreement. 28 June 15th, description, e-mail from 47 1 Steve Sisti indicating that his Department will be 2 meeting with Legal on Friday June 16th, 2017 to 3 discuss sales tax and lease receipts. In addition, 4 he had a couple questions on the CDW contract. 5 July 14th, 2017, description, e-mail from 6 Karri to Steve outlining use tax statutes and 7 regulations, arguing that just because a lessee is 8 exempt from use tax does not mean that sales tax 9 applies. 10 July 14th -- now next one is September 5th, 11 2017, description, letter from Kevin Hanks at CDTFA 12 stating that Deloitte has failed to provide 13 sufficient support for the refund claim. 14 MR. HORTON: Question of -- of maybe the 15 Department. 16 When did you -- you -- the notice was issued 17 on October 2nd, 2017. When did you respond 18 indicating that you thought that wasn't sufficient 19 time for you to have the hearing? 20 MR. TUCKER: October 13th. 21 MR. HORTON: Is there a reason you responded 22 ten days later? 23 MR. TUCKER: I believe we're allowed 15 24 days. 25 MR. HORTON: I mean, given the circumstances 26 that this case has been around for a while, is there 27 a reason that you waited ten days? 28 MR. TUCKER: No. It was well within the 48 1 appropriate time period. 2 MR. HORTON: Well, that seems to be further 3 delay. I would think that considering the -- 4 considering the initial delays as of January, the 5 subsequent delays, that the Department would have 6 been on this to say, "Hey, listen, we're not ready. 7 Let's make sure everyone knows that we're not ready 8 so that we can respond and act accordingly." 9 MR. TUCKER: Responding within the time 10 period -- the allotted time period is well within the 11 appropriate means. 12 MR. HORTON: I'm not arguing form over 13 substance. Just question about the intent of the 14 parties. 15 Question of Appeals, relative to the 5 days 16 in which -- the delay of the 5-day notice -- I mean, 17 5-day delay of the 75-day notice, is it within the 18 Board's jurisdiction to determine that that was 19 unreasonable? That there's been an unreasonable 20 delay and to hear this case? 21 MR. ANGEJA: That is a question that the 22 Chief Counsel for Board of Equalization should 23 answer, not Appeals. 24 MR. HORTON: Okay. 25 Chief Counsel. 26 MS. HARKEY: He just did. 27 MR. HORTON: I know he did. But in the line 28 of questioning -- 49 1 MR. NANJO: Member Horton, as I had 2 mentioned earlier, I think we're in somewhat 3 unprecedented ground based on the fact that we've had 4 some transfer -- there will be an upcoming transfer 5 to the Office of Tax Appeals. 6 As the Board has heard, when I was involved 7 in this, there was -- or got involved with this 8 through e-mails and various letters, there's quite a 9 bit of factual dispute going on here. And I wanted 10 to make sure that the Board had the opportunity to 11 fully explore that. 12 One concern I had was the -- what appeared 13 to be a delay in this case coming to fruition. My 14 records, again, from the Board Proceedings office 15 indicated that the original deferral from this case, 16 although it was done by Appeals, was back in June -- 17 on June 14th of 2016. 18 Given the fact that this matter has been 19 handled by the various -- either Appeals or the 20 Department, I was concerned about some of the 21 representations made by the taxpayer that there was 22 an unreasonable delay. Which is why I thought it was 23 appropriate to bring this to the Board, and let the 24 parties basically argue their positions. 25 MR. HORTON: My -- my -- my concern is that 26 irrespective of the regulation, which I believe goes 27 into effect January 1st, has no retroactive 28 effectivity -- effectiveness. You know, this is a 50 1 little unusual. 2 I mean, let's forget about the regulation. 3 Let's forget about the changes. For the Department 4 to not allow the taxpayer's case to come forward just 5 on the 75-day provision, however, lack of local 6 participation, circulation of vendors, and so forth, 7 those are factual cases that typically would be 8 reasonable for the Department to ask for additional 9 time in order to track down that information, in 10 order to obtain that information. 11 However, in this case, it appears that 12 they've had sufficient time to do that. And that 13 there's been participation on all party's side in 14 order to circulate two vendors. I mean, it has never 15 taken us, that I can recall -- what, January, 16 February, March, April, May, June, July, August, 17 September, in order to circulate two vendors. I'm 18 having a difficulty understanding the complexity. 19 In particularly, when these are vendors. 20 They're not hiding anything. These are -- what 21 was -- what was the challenge in circulating? They 22 failed to respond? 23 MR. HANKS: Mr. Horton, this isn't just a 24 matter of circulating vendors. 25 MR. HORTON: Well, that was the testimony. 26 I'm just -- circulating vendors was -- 27 MR. HANKS: Yeah. We're not -- we're not 28 circulating vendors in the typical sense. We do that 51 1 in a markup situation where we need to determine what 2 purchases are. 3 MR. HORTON: I'm just restating what I 4 heard. 5 MR. HANKS: In this case, what we're trying 6 to do is to work with the taxpayer and determine what 7 property was acquired, what evidence they have to 8 indicate where that property came from, how it was 9 purchased. 10 The CDW transactions that we're talking 11 about are ones that can either be subject to sales 12 tax or use tax. We know how CDW reports to the 13 Board. That influences our decision in knowing, you 14 know, whether or not sales tax applies to the vast 15 majority of these purchases. 16 But what we're trying to rely on is 17 information from the taxpayer to document what 18 property they received, how they contract for it. 19 The master agreement that we're looking at 20 that they provided to us isn't a purchase agreement. 21 It doesn't identify where a title to this property 22 transfers. 23 So for our own intensive purposes, it 24 doesn't indicate that there's a person that they're 25 working with in Illinois. We know differently just 26 with our involvement with CDW in other work that we 27 do. So we know information perhaps that's not 28 commonly known by -- by claimant. 52 1 MR. HORTON: When did the audit began? When 2 did this all start? 3 MR. HANKS: I don't have a timeline. 4 MR. VINATIERI: 2012. 5 MR. HORTON: 2012. 6 MR. TUCKER: Mr. Horton, this is a claim for 7 refund, not an audit. 8 MR. HORTON: I know it is. 9 MR. TUCKER: Which means that they're 10 required to provide the information that they are due 11 the money back. There's a big distinction between 12 the two. 13 MR. HORTON: I know where the responsibility 14 lies. 15 MR. VINATIERI: I have -- I have a timeline 16 on the audit if the Board would like to hear it. 17 MS. HARKEY: Please. 18 MR. VINATIERI: Original claim was filed 19 10-26-11, acknowledged by staff 1-23-12. 20 Started a fieldwork providing of the 21 documentation, which was provided 6-28-12. 22 Request received from the auditor for 23 additional information, all invoices on 9-7-2012, 24 trying to negotiate a sample, appeals and shipping 25 docs requested, September 20, '12. 26 First indication denial on the lease issue 27 and the CDW issue -- issue was on 3-13-13, refund 28 claim was split, a new case ID was open for the 53 1 leases. 2 Then there were ten-day meetings, and then 3 appeal date, which was, we discussed, Appeals and 4 Board hearing was requested on 7-8-2015, 5 two-and-a-half years ago. 6 MR. HORTON: Question to the Department. 7 I mean, we still treat -- as far as trying 8 to resolve, expedite things in a timely matter -- we 9 still treat the claim for refund the same as we do 10 liabilities in trying to expedite the resolution of 11 it. We don't allow claims for refunds to hang around 12 for six years. 13 MR. HANKS: We do, but there has to be 14 evidence that they're entitled to that refund. 15 MR. TUCKER: Correct. 16 MR. HORTON: So -- so we just deny it. I 17 mean, the agency could have -- they denied it, said 18 no, then it went through the process. 19 When you -- did you examine IRIS -- the 20 information that the chairwoman has provided, were 21 you privy to this information? 22 MR. HANKS: I'm aware of some of the 23 information with respect to Bank America, yes. 24 Yes. 25 MR. HORTON: And what about EMC Corporation? 26 MR. HANKS: I'm not aware of that 27 information. 28 MS. HARKEY: Those are IRIS screenshots. 54 1 MR. HORTON: These are our own screenshots. 2 MR. HANKS: Yes. 3 MR. HORTON: I mean, the Department's 4 screenshots. 5 Okay. Thank you. 6 Thank you, Madam Chair. 7 Thank you. 8 MS. HARKEY: Thank you. 9 Member Runner. 10 MR. RUNNER: Yeah, I just want to tell 11 you -- again, I'm a little foggy on some of the 12 timeline in terms of some of the issues in regards to 13 the request for information from the taxpayer. 14 After the -- at the postponement of the 15 January hearing, at least what I'm hearing is that 16 there was some -- there was specific conversation -- 17 and I didn't quite necessarily think I heard that in 18 the timeline discussion asking specifically for that 19 information regarding these vendors. 20 MR. HANKS: Yes. 21 MR. RUNNER: Okay. 22 MR. HANKS: Yes. 23 MR. RUNNER: Let me go back to the taxpayer. 24 And was that clear in that communication? 25 I'm trying to remember here -- recall back what you 26 had read through there, and what your response was 27 when they asked for that information. 28 MR. VINATIERI: Yes. The matter was put 55 1 over from January. 2 MR. RUNNER: Right. 3 MR. VINATIERI: Because we had these new -- 4 these facts. 5 MR. RUNNER: Right. 6 MR. VINATIERI: There was some discussions 7 going on in, I believe, February. 8 MR. RUNNER: Mm-hm. 9 MR. VINATIERI: But the first -- the first 10 entry I have here is March 14th, 2017, e-mail from 11 Karri to Steve Sisti to provide brief update on the 12 issues around the use tax versus sales tax. As a 13 result, discovering that the vendors who we're 14 talking about here hold, quote, "certificate of 15 registration use tax," closed quote, permits from the 16 Department. 17 MR. RUNNER: Right. 18 MR. VINATIERI: And not sales tax permits. 19 MR. RUNNER: Right. 20 MR. VINATIERI: And then there was a second 21 request for an update on that a week later. And then 22 there was a response -- 23 MR. RUNNER: That's a request from them to 24 you? 25 MR. VINATIERI: No, it was a request from us 26 to them. 27 MR. RUNNER: To them. 28 MR. VINATIERI: Because we asked them on 56 1 March 14th, did not hear anything. We asked them 2 again on March 21, that's a week later, we're trying 3 to push things along -- 4 MR. RUNNER: And with that information, what 5 would you do with it when you got it? 6 MR. VINATIERI: We basically say, "Well, why 7 in the records of the Board does this say use tax?" 8 MR. RUNNER: Okay. 9 MR. VINATIERI: If you think it's a sales 10 tax, what do you -- information do you have of the 11 records of the Board -- 12 MR. RUNNER: Okay. 13 MR. VINATIERI: -- that makes you believe 14 it's use tax? Which is in our favor. 15 MR. RUNNER: Okay. 16 MR. VINATIERI: And it's your own records. 17 It's not ours; it's yours. 18 MR. RUNNER: Okay. 19 MR. VINATIERI: So -- so we then receive an 20 e-mail back from Steve Sisti indicating that they're 21 meeting with Legal on Wednesday, March 22nd. And I 22 think it was to talk about not only the 23 constitutional issue, because I remember Karri 24 talking to me about this -- 25 MR. RUNNER: Mm-hm. 26 MR. VINATIERI: -- but also the issue on the 27 information. 28 And here's the real kicker here, how can 57 1 something -- 1660 says specifically, well, if you're 2 exempt from use tax, then we're gonna make it -- as 3 an insurance company, we're going to make the sales 4 tax on you. That's a problem. We think that's 5 unconstitutional. 6 MR. RUNNER: Right. 7 MR. VINATIERI: But the facts here show that 8 it came from outside the state into California. So 9 now, by statute, by regulation -- excuse me -- trying 10 to make something sales tax that's use tax, but the 11 facts themselves apparently show that there's no way 12 it can be sales tax; it has to be use tax. To heck 13 with what the regulation says, here's what the facts 14 say. That's what was going on here. 15 And I think there was some concern on the 16 part of the Department; both Legal and -- and sales 17 and use tax Department, Well, you got this reg. that 18 says this, but it looks like we have some facts that 19 show otherwise, how do we harmonize? 20 MR. RUNNER: But their -- their request 21 was -- was some specific information from the 22 vendors, correct? At least that's what they're 23 telling us. 24 MR. VINATIERI: That's -- what they did, we 25 don't -- I'm not privy to. All I know is all the 26 times -- 27 MR. RUNNER: You don't -- well -- 28 MR. VINATIERI: -- requests they made, we 58 1 gave them contracts -- 2 MR. RUNNER: Maybe I misunderstood. Let me 3 ask the Department. 4 Was your request to them for specific 5 information about the purchase contracts with the 6 vendors? 7 MR. HANKS: Yes, that was -- yes, that was 8 part of it. 9 MR. RUNNER: Okay. 10 MR. VINATIERI: And that was given to them 11 on, let's see, May -- April 5th, May 4th -- May 4th 12 there was discussion of a master lease with EMC 13 confirming it wasn't a sales lease pack. And then 14 see description, May -- May 18th, letter from 15 Evita Lopez at Deloitte to Steve Sisti providing -- 16 providing invoices, copies of leases, contracts and 17 other supporting documentation for lease 18 transactions. That was May 18th. 19 Then on May 23rd, e-mail from Steve Brower 20 at the Board to Evita confirming the receipt of CD 21 containing the supporting documentation for the lease 22 transaction for the refund periods. 23 MR. RUNNER: Okay. Let me go to the 24 Department. 25 Why was that deficient? 26 MR. HANKS: Right. So the taxpayer provided 27 us with a master agreement between itself and CDW. 28 We indicated to them it wasn't a purchase agreement, 59 1 so it doesn't answer the questions as to whether or 2 not we're talking about sales or use tax. 3 So we asked, "How are orders placed by first 4 American Title? Are POs issued for that property? 5 Are there Internet orders made for -- for this 6 property? Are they phone orders? How exactly do 7 you -- do you order the -- the property that's -- 8 that's in question?" 9 So we attempted to -- to work with them, 10 because we thought they were the best people to go 11 to, had a -- had clearly more information about these 12 purchases than -- than we've got. So we thought 13 going to them first would -- would -- 14 MR. RUNNER: And that request was done when? 15 MR. HANKS: So that request was in follow-up 16 to their providing us a master agreement in March. 17 MR. RUNNER: It was the May 23rd? 18 MR. HANKS: And so it was actually in June 19 that we actually sent an e-mail to them and raised 20 these other questions relative to that master 21 agreement. 22 MR. RUNNER: Okay. 23 And then to our taxpayer, and then your 24 response to that was? 25 MR. VINATIERI: Let's make sure we bifurcate 26 this. There's CDW -- 27 MR. RUNNER: Right. 28 MR. VINATIERI: -- and then there's the 60 1 leases. 2 MR. RUNNER: Right. 3 MS. HARKEY: So our case is the leases right 4 now right, right? 5 MR. VINATIERI: The lease -- CDW is part of 6 this. 7 MS. HARKEY: Oh, okay. 8 MR. VINATIERI: It is part of this. But we 9 have been emphasizing the leases. So -- 10 MR. RUNNER: The lease is what's relevant to 11 what it is that they're looking for. 12 MR. VINATIERI: As I understand it. 13 MR. RUNNER: Okay. Okay. So -- 14 MR. VINATIERI: From what I heard. 15 MR. RUNNER: Right. 16 MR. VINATIERI: So it says here on June 6 17 there was another meeting with Legal to discuss the 18 sales tax and the lease receipts. And then there was 19 some questions apparently about CDW. And we gave 20 them the information of the -- a CDW vendor contact 21 person for them to contact whoever the person is at 22 CDW. Which is separate, obviously, than the 23 leases. 24 MR. RUNNER: Mm-hm. 25 MR. VINATIERI: Um -- 26 MR. RUNNER: So you gave them the contact 27 person for that other -- for -- 28 MR. VINATIERI: For the CDW. 61 1 MR. RUNNER: Uh-huh. 2 MR. VINATIERI: For all the leases. 3 MR. RUNNER: Mm-hm. 4 MR. VINATIERI: They had all the contracts, 5 they had invoices, and everything that we had in our 6 file, they got it. 7 MR. RUNNER: Okay. And then how about for 8 the leases? A contact person or anything else? Or 9 did you -- 10 MR. VINATIERI: No. No, we didn't have -- 11 this -- on here I just -- we have all the 12 documentation, the contracts, etc. 13 I don't see anything about a CDW or a 14 lease-type person. 15 MS. HARKEY: EMC and the Bank America, you 16 had the state's use tax registration? 17 MR. VINATIERI: Right. Right. 18 MS. HARKEY: And you also had the master 19 contracts? 20 MR. VINATIERI: Yeah, they were master -- I 21 believe the C -- 22 MS. HARKEY: Yeah, the master contracts were 23 also contracts -- 24 MR. VINATIERI: -- contracts sent earlier. 25 MS. HARKEY: -- that was at the -- 26 MR. VINATIERI: Yeah, that was done -- that 27 was done on, I believe -- I think we had -- we had 28 paper, and I think we had the -- 62 1 MR. RUNNER: Did we ever get -- I'm sorry, 2 but I'm gonna --- I missed it. Did we ever get when 3 it is that we reached out to the vendors? The date 4 that the Department reached out to the vendors? Did 5 we ever get that date? 6 MR. HANKS: So I think that's starting after 7 our communication in June. 8 MR. RUNNER: Well, don't we have 9 documentation -- we have any documentation, we have 10 any e-mail? What -- what -- do we have dates on 11 those? 12 MR. HANKS: Um, I don't have the specific 13 dates. 14 MR. RUNNER: Let me -- how -- how do I know 15 that we reached out to the vendors? 16 MR. HANKS: Steve Sisti would have e-mails 17 to our internal staff asking for information relative 18 to -- to those vendors, because we have -- 19 MR. RUNNER: But we don't have that here 20 right now? 21 MR. HANKS: Correct. Correct. 22 MR. RUNNER: Okay. Thank you. 23 MR. HORTON: Are you saying you did 24 circulate vendors? Reached out -- 25 MR. HANKS: We contacted -- 26 MR. TUCKER: We reached out. 27 MR. HORTON: Say it. 28 MR. HANKS: So, yes, we have reached out. 63 1 MS. HARKEY: Reached out. What does that 2 mean? 3 MR. HANKS: To staff. 4 MS. HARKEY: Either you called, you -- you 5 sent an e-mail, you sent a letter. This "reach out" 6 term has got me nuts. 7 MR. TUCKER: Ms. Harkey. 8 MS. HARKEY: That's not proper language. 9 It's not legal. 10 MR. TUCKER: Ms. Harkey, "circulate vendors" 11 has a certain connotation. And we did not circulate 12 vendors. That's all I'm saying. 13 MS. HARKEY: Okay. Thank you. 14 MR. HORTON: Circulate vendors doesn't have 15 any connotation. It's just a term that you use to 16 reach out and -- reach out -- to verify something. 17 That's it. That's all it is. That's what it means 18 in Webster as well. BOE, too. 19 But the Department is correct. Yeah, I 20 mean, to the extent that the burden of proof is on 21 the appellant. So what's your proof that this was, 22 you know, this was a use tax transaction? And I get 23 that they have the -- 24 MS. HARKEY: There's nothing contrary. 25 MR. HORTON: They have this, uh -- they have 26 use tax. 27 MR. VINATIERI: We gave -- we gave them -- 28 we gave them all the contracts. They all indicate 64 1 out of state. We gave them -- we -- we looked at the 2 Board's own IRIS system, which is their own 3 characterization of those out-of-state finance 4 companies. 5 And -- and we said, if you -- if there's 6 something else that you want, let us know. We gave 7 them everything. They told us they're gonna start 8 reaching out, or doing whatever they're going to do. 9 We don't know what they've done. But all we know is 10 it's been going on for a long time. And with two 11 particular vendors only, you would think that that 12 could have been done by now. 13 And -- which leads me to a -- a supposition, 14 and that is that they can't get that information. 15 Why? Because these leases are so old. And that was 16 the whole point of trying to do this. 17 And -- and, you know -- and I'm -- I'm -- 18 I'm shocked, because I had forgotten that we had a 19 June 2016 hearing set. And this has been going on 20 for that long. So I -- I just, you know -- what else 21 can a taxpayer do? 22 MR. HORTON: You provided the purchase 23 contract? 24 MR. VINATIERI: We gave them everything we 25 had. We gave them our -- our contracts, our -- our 26 leases, um, whatever invoices that we had, we gave 27 that to them. 28 MS. STOWERS: But yet the Department said it 65 1 was not sufficient? They felt like it did not prove 2 the title transfer? It did not prove whether there 3 was participation? 4 MR. HANKS: Exactly. Yes. 5 MR. VINATIERI: It's -- it's -- it's having 6 to prove a negative. And we have made a 7 representation that we've given them everything we 8 had. 9 The kicker here is that we gave them the 10 contracts, the lease agreements, the whole bit. But 11 they have in their own records that those 12 out-of-state vendors are use tax. Which prima facie 13 means, when they set it up -- when they set up those 14 permits, they -- somebody at the Board of 15 Equalization made a reasonable determination and 16 looked into it and said, "Hey, they don't have nexus 17 in California, they don't have a physical presence, 18 therefore, it has to be use tax." 19 So between what we've given them and their 20 own characterization, their own records, it's -- 21 it's -- how can we say we haven't met our burden of 22 proof? How do you meet a burden of proof in a 23 situation like that? 24 I mean, this -- this is probably more than 25 what would be necessary possibly even in a court of 26 law. I -- I mean, it's -- it's very frustrating. 27 Especially when this has gone on and on and on and 28 on. 66 1 MR. HORTON: So is your -- is your testimony 2 the lessor is located out of state? 3 MR. VINATIERI: Yes. 4 MR. HORTON: Contract is negotiated out of 5 state? 6 MR. VINATIERI: I believe the contract -- 7 MS. HARKEY: Yes. 8 MR. VINATIERI: I believe the contract is 9 out of state -- 10 MS. HARKEY: That's what she said. 11 MR. VINATIERI: -- telephone stuff. 12 MR. HORTON: Your payments, you're paying 13 out of state? 14 MR. VINATIERI: Um, I think so. Bank of 15 America goes to Georgia. 16 MR. HORTON: Any in-state capacity to -- to 17 lease this? 18 MR. VINATIERI: When you -- when you -- 19 MR. HORTON: Just asking. 20 MR. VINATIERI: -- say "capacity," what do 21 you mean? 22 MR. HORTON: Capacity meaning that could 23 the -- could the -- could the taxpayer had negotiated 24 the lease with someone in state? 25 MR. VINATIERI: You mean, a different 26 finance company? 27 MR. HORTON: Okay. No, the same -- could 28 they have gone into the local bank and negotiated 67 1 this? 2 MR. VINATIERI: I -- I think it's a matter 3 of where you get the best deal. I mean, Banc of 4 America, that's the Bank of America's, one of their 5 leasing arms that are specifically not in California. 6 They're in Georgia. And that's where they got the 7 best deal. 8 MS. HARKEY: It's very similar to the car 9 leases. I mean, they have a thing, and then -- so 10 you pay -- 11 MR. HORTON: I'm asking leading questions -- 12 MS. HARKEY: I -- I understand that. 13 MR. HORTON: -- like I don't know the 14 answers, too. 15 MR. HANKS: That's what we're trying to 16 investigate, though. Your very question. 17 MS. HARKEY: You have a use tax permit for 18 both of those entities. I assume that when you 19 issued those use tax permits that the Department did 20 some investigation. Otherwise, they wouldn't have 21 been issued a use tax permit. 22 So I think -- I think that's kind of done. 23 And these are older transactions. What I'm wondering 24 if, you know -- and the Department says that CDW 25 reports sales tax. So they must have collected sales 26 tax. Then why can't we say that EMC and Bank America 27 only collected use tax, so those transactions would 28 be use tax? I mean -- 68 1 MR. TUCKER: Because we would have to look 2 at the tax as a transitional tax. And it could 3 change. And we have to look at the facts and 4 circumstances at the transaction. That's why we have 5 to -- 6 MR. HORTON: Did they report any sales tax? 7 Any? 8 MS. HARKEY: Did EMC -- 9 MR. TUCKER: We're not examining them, we're 10 trying to determine based on -- 11 MR. HORTON: Can we just look that up? 12 MS. HARKEY: Let's just look that up. See 13 if these guys collected any sales tax. I mean, 14 because this is getting really ridiculous. I mean, 15 we have our own records saying it's use tax. And 16 I'm -- 17 MR. HANKS: You can't tell. 18 MR. HORTON: You can't tell -- 19 MR. HANKS: Can't tell. 20 MR. HORTON: -- by IRIS whether it was -- 21 MR. HANKS: Sales tax or use tax, right. 22 You can't tell. 23 MR. HORTON: And they're filing 24 electronically, so there's -- there's no way to 25 distinguish whether or not it's sales or use tax. 26 MR. HANKS: Well, that's what we're trying 27 to -- to explore. But I think what's -- 28 MR. HORTON: No, I mean, in our system. In 69 1 our -- in our system. Our system can distinguish it, 2 too. 3 MR. HANKS: And it's all dependent on how 4 the taxpayer reports to us. They could report 5 amounts on line one or line two or -- or vice versa. 6 Sometimes taxpayers confuse what -- what -- 7 MR. HORTON: No, I'm not asking if they made 8 a mistake. 9 MR. HANKS: -- reporting a sales tax -- 10 MR. HORTON: I'm asking is there any way to 11 distinguish in our system whether or not it's a sales 12 tax that they're reporting or a use tax that they're 13 reporting? 14 MR. HANKS: No, not for these purposes. 15 MS. ROZARIO: Mr. Horton, can I interject a 16 little bit? 17 When you are a registered certificated use 18 tax taxpayer, the type of return you get allows you 19 for an allocation for the local tax based on 20 county-wide pools. Because you do not have a 21 physical location in the state. So you can't report 22 sales tax to a selling location, because you don't 23 have one on record. You will simply go to the 24 state-wide pool or to a county-wide pool, depending 25 upon if you have -- you know, how your registration 26 is set, and the dollar amount of local tax that you 27 report, dictates what schedule you have. 28 MR. HORTON: Is the Department going to 70 1 submit to that as fact? 2 MR. HANKS: I haven't seen how -- how these 3 lessors have reported to us, so I -- I cannot. 4 MR. HORTON: No, I mean, she's -- she's 5 testifying that they don't have a means in which to 6 report sales tax when they have the use tax 7 permits. 8 MR. HANKS: I don't know if they have other 9 permits. 10 MR. TUCKER: And we don't know if the 11 transactions have changed. We're not going to agree 12 with that. 13 MR. HORTON: You -- you -- you don't know if 14 they have other permits? 15 Does this -- can someone check the Board -- 16 the CDTF's (sic) file to see if this particular 17 taxpayer has other permits? Maybe we can get that 18 done in, like, a couple of minutes, can we? 19 MR. TUCKER: No, we don't have it here. 20 MR. HORTON: The system's not working? 21 Can't -- can't you put the name in there -- 22 MR. TUCKER: I don't have a -- 23 MS. HARKEY: Does not want to verify it 24 here. 25 MR. TUCKER: And it's immaterial. 26 MS. HARKEY: No, it's -- it is the material 27 point of two of those cases, on EMC and Bank America. 28 That is the material point. They have use tax 71 1 registration with the state of California; therefore, 2 they do not have sales tax registration. 3 You're saying they could or they couldn't, 4 or it could have changed. 5 MR. TUCKER: Correct. 6 MS. HARKEY: But what we're dealing with 7 here is something back in 2011, 2012. 8 MS. ROZARIO: And, Madam Chair, a lessor 9 that has physical locations as well is coded a 10 different type of permit to where they -- it's either 11 an SS or -- 12 MR. HORTON: Why are we getting this from 13 you? 14 MS. ROZARIO: A former state employee -- 15 MR. HORTON: I appreciate you providing that 16 information. But what about the Department? I mean, 17 she's telling us what the Department does. Which is 18 accurate, by the way. 19 MR. HANKS: Mr. Horton, we were talking 20 about CDW a few minutes ago. We know that those 21 sales were reported as sales tax transactions. 22 MR. HORTON: I know. I'm talking about 23 Bank -- Bank of America and -- 24 MS. HARKEY: EMC. 25 MR. HORTON: -- EMC. 26 MR. HANKS: With the $800,000 claim for 27 refund, you know, it encompasses both. It has all 28 those transactions combined. 72 1 MR. HORTON: Okay. Let's submit to the one 2 that you want to talk about, and let's talk about the 3 one I'm asking the questions about. 4 Those two, that you verify whether or not 5 they had the ability to report and pay sales tax 6 given that they do have the ability to report and pay 7 use tax. They have another permit that allows them 8 to do that? 9 I mean, they're cooperating with us. It 10 would seem that if they're collecting sales tax, they 11 would cooperate as well. 12 You know, I wonder what would happen if I 13 just got on the phone and called these individuals. 14 MS. HARKEY: Modern technology. 15 MR. HORTON: Question out of curiously to 16 Appeals. 17 What happens if the appellant is right, that 18 the tax that they did pay was a use tax? 19 MR. ANGEJA: They would prevail. If they 20 can establish that it is -- let me rephrase it. If 21 they show it wasn't subject to sales -- 22 MR. HORTON: I mean, later on. Later on -- 23 let's say the evidence isn't necessarily here to 24 establish that, and it turns out that this is a use 25 tax -- 26 MS. HARKEY: They presume court. 27 MR. HORTON: Yeah, and it goes -- 28 MR. ANGEJA: I think that's where it would 73 1 have to go. Because it will have -- your 2 hypothetical assumes it would have been denied here, 3 so the next step would be court. 4 MS. HARKEY: I'm prepared -- because I 5 think -- I think it is very obvious if somebody has a 6 use tax permit, they have that for a reason. And 7 they don't have a sales tax permit. The state has 8 acknowledged they pay use tax. 9 Um, but CDW seems to be the one that we 10 can't get around. That the Department has some 11 verification that, you know, it may be sales tax. 12 And I'm willing to concede that, because I don't 13 think that's been really in dispute. We seem to be 14 just for the EMC and Bank of America. 15 So I'm prepared to offer a motion to a 16 partial grant to deny the CDW portion and to grant 17 for EMC and Bank America, the refund. 18 MR. VINATIERI: And the Forsythe Bank -- I'm 19 sorry -- it's Bank of America, EMC, and the second is 20 Forsythe McArthur, and their bank is First Bank of 21 Highland Park, Illinois. 22 MS. HARKEY: What -- we didn't even get into 23 that. 24 MR. VINATIERI: Same -- same -- same 25 facts. 26 MS. HARKEY: Same -- well, do we have -- do 27 we have a -- 28 MS. ROZARIO: Yes. So three of them hold 74 1 certificate of registration use tax. One has a old 2 traditional single location sales tax permit, but 3 only has an out-of-state location. May have just 4 been a coding error when the account was set up. 5 MS. HARKEY: We did -- what we dealt here 6 with at this hearing was with EMC and Bank America -- 7 Bank of America -- Banc of America. 8 MS. STOWERS: Banc of America. 9 MS. HARKEY: Okay. Those are the two that I 10 was able to verify, that the staff could verify 11 easily, had use tax permits. 12 CDW had potential for sales tax. So what is 13 the Forsythe one? 14 MR. VINATIERI: There -- there are two lease 15 transactions; one is EMC/Banc of America. The other 16 one is Forsythe McArthur Associates out of Skokie, 17 Illinois, and their finance affiliate is First Bank 18 of Highland Park, Illinois. 19 On that one, Forsythe has a certificate of 20 registration of use tax -- excuse me -- hold on. 21 Let's see, yeah, for Forsythe, has 22 (inaudible) group has a permit. And then the other 23 bank out of Skokie, Illinois, we don't have any 24 certificate on them, but we understand that they're 25 out of state. 26 MS. HARKEY: Okay. Well, I'm -- I'm 27 prepared to grant for the two. I -- I just don't 28 know about the other one. I don't have any in-depth 75 1 verification of that. I -- If you could provide 2 something in your file that you can exhume for me. 3 MS. ROZARIO: I can pull it up on my laptop. 4 I have a copy of their printout. 5 MS. HARKEY: Yeah, I'd like to see that, 6 too. I don't know if I'll get support for my motion, 7 but I -- I think we can -- if we can get something, 8 please forward it to maybe -- 9 MR. RUNNER: Why don't you get it to Chief 10 Counsel. 11 MS. HARKEY: Yeah, to the clerk. Forward it 12 to the clerk, so she can print it out. 13 If we had verification of use tax, then I 14 think we -- it makes our issue a little -- or, you 15 know, simpler. 16 MS. STOWERS: Madam Chair. 17 MS. HARKEY: Yes. 18 MS. STOWERS: I think I'm following where 19 you're going. I'm not saying I agree. But basically 20 looking at our own screen print showing that they are 21 registered for use tax, I'm looking at the Banc of 22 America leasing. Looks like it was created 23 January 21st, 2000. 24 And so if I'm reading this right -- and 25 anybody can jump in -- when they got their permit, 26 they said they were use tax requirement, that they 27 did not have presence in California. 28 The problem I'm having is that business 76 1 practices change. And considering that we're looking 2 at claim for refunds that start in 2007, it is 3 possible that they -- they are participating in 4 transactions, and they are located in California. 5 MS. HARKEY: Well, I think these -- these 6 use tax permit gets renewed. And that's why the 7 screen shot is not, you know -- may not have a 8 current date. I don't think they're in perpetuity. 9 MS. STOWERS: Well, let me say this, just 10 listening to everybody, I've done a Google search, 11 and VNA Internet Bloomberg is basically saying that 12 Banc of America Leasing Capital has an office in 13 California, 555 California Street. 14 MR. VINATIERI: As of what year? 15 MS. STOWERS: Well, this -- well, my search 16 is dated today. 17 MR. VINATIERI: 2017, right? 18 MS. STOWERS: Well, that's my point. We 19 don't know when they got into California. This says 20 in 2000, they weren't. 21 MR. VINATIERI: My -- my understanding of 22 Banc of America leasing was prior to 2000 they had a 23 sales and use tax permit because of San Francisco. 24 They apparently did something, a re-org or something, 25 and in 2000 they opened up that permit there. 26 I have no reason to believe anything other 27 than that information there. Nothing's come to our 28 attention to say that their practices are different, 77 1 when those practices might have changed. 2 The best evidence we have -- and once again, 3 this is in the records of the Department. These are 4 their records. We're relying on the contracts, the 5 leases, everything we gave you, and their 6 characterization. That's the issue here. 7 MS. STOWERS: Okay. 8 To the Department. 9 I think a Member just said that the permits 10 are renewed every -- 11 MR. HORTON: No -- no. 12 MS. HARKEY: Do they get renewed, do they 13 get updated, or are they the same, same, same? 14 MR. TUCKER: They do not. They're based on 15 information provided by the taxpayer. 16 MR. HORTON: Well, if there's a change. If 17 he does begin to operate in California, it's 18 incumbent upon them to notify the -- 19 MR. TUCKER: Right. And that may or may not 20 happen. 21 MR. HORTON: Yeah. 22 MR. HANKS: I did receive an e-mail from 23 staff indicating that Banc of America had a seller's 24 permit back prior to July of 2008. So it's -- it's 25 part of the time period that we're talking about. 26 And then there was a subsequent change in that 27 permit. 28 MR. TUCKER: Right. Right. 78 1 MR. HANKS: So at least they're registered 2 one way. 3 MR. HORTON: Apologies, I didn't get the 4 dates. 5 MR. HANKS: So the closeout for that 6 date -- or for that permit, and it's a seller's 7 permit -- it's an SR permit, is 7-9-2008. 8 MR. HORTON: So part of the period in 9 question. 10 MR. HANKS: Yes, looks like that would 11 overlap part of the period. 12 MR. HORTON: Why is this so easy to do now? 13 MR. VINATIERI: We're just hearing about 14 this. This is the first I've heard this. 15 MS. HARKEY: First time we've heard it. 16 It's not in the file. So somebody -- this is -- this 17 doesn't smell right. 18 MR. HORTON: Well, I mean, I believe the 19 Department. 20 MS. HARKEY: I don't understand. I, um -- 21 MR. HORTON: I just kind of question why 22 they couldn't -- 23 MS. HARKEY: Okay. The taxpayer provided -- 24 MR. HORTON: -- have said this years ago. 25 MS. HARKEY: -- the leases -- 26 MR. HORTON: I understand the obligation, 27 but we -- we, too -- 28 MS. HARKEY: -- provided the contracts, 79 1 provided what they could, provided where they were 2 making payments, where it's negotiated. And then we 3 have use tax permits. 4 MR. VINATIERI: Right. Yes. That was done 5 in May -- May 18th and May 23rd. 6 MR. HORTON: Okay. 7 So my challenge, Members, is that I don't 8 believe it's the responsibility of the Board to do 9 the work of the Department or the appellant, for that 10 matter. 11 And so other than our own -- the agency's 12 own IRIS system that indicates that they have a use 13 tax permit, is there any other information that the 14 appellant has that will demonstrate that this was a 15 use tax transaction? 16 MR. VINATIERI: We've given everything that 17 we have. 18 MS. HARKEY: Would you describe what you've 19 provided? I think the other person that just left 20 the room was very articulated with what was 21 provided. 22 MR. VINATIERI: Yes. Well, I'm reading off 23 her timeline, because she was in charge of all the 24 documentation. 25 MS. HARKEY: Please do so for the record, 26 again. Mr. Horton asked for some clarification as to 27 what else you provided. I did not -- I just always 28 like to -- I trust, but verify. And that's why we 80 1 got the screenshots. We wanted to verify. Okay. 2 But you provided what to the Department? 3 MR. VINATIERI: My description here is on 4 May 18th, 2017, a letter from Evita Lopez at 5 Deloitte, works with Karri, to Steven Sisti, the 6 Board, providing invoices, copies of leases, 7 contracts and other supporting documentation for the 8 lease transactions. 9 May 23rd, 2017, e-mail from Steve Brower, 10 the Department, to Evita Lopez at Deloitte, 11 confirming the receipt of the CD containing 12 supporting documentation for lease transactions for 13 refund periods 10-1-07 through 9-30-11, 10-1-11 14 through 12-31-14. That was May 23rd. 15 And then the next is June 6th is an e-mail 16 from Steve Sisti at the Department to Karri regarding 17 a meeting between the Department and Legal to discuss 18 sales tax on the lease receipts. 19 MR. HORTON: And to the Department, in 20 receiving these documents, you -- you -- when did you 21 communicate to the taxpayer that they were 22 insufficient? And on what grounds did you conclude 23 that the invoice, lease receipts, contracts, 24 supporting -- other supporting documents were 25 insufficient to verify the claim for refund? 26 MR. HANKS: Mainly in July of '17, we had -- 27 we had sent an e-mail to them confirming that the 28 information that they had supplied just wasn't 81 1 sufficient for us to determine if -- if the sale had 2 happened in California versus a sale in Interstate 3 Commerce. 4 MR. HORTON: Was the -- did the invoice come 5 from somewhere in California? 6 MR. HANKS: I don't have that information in 7 front of me. 8 MR. HORTON: Did you examine it to determine 9 whether or not someone did? 10 MR. HANKS: Well -- and that's -- that's why 11 I think we had made the argument initially that we 12 weren't really prepared for the hearing, because -- 13 MR. HORTON: I mean, you've had these since, 14 you say, July '17. Did the invoice come from 15 somewhere in California or did it come from an 16 out-of-state location? The invoice. 17 MR. HANKS: I don't know. 18 MR. TUCKER: We don't have that in front of 19 us. 20 MR. HORTON: The lease agreement, was the 21 lease agreement signed by someone from out of state? 22 Out of state -- did the -- anything on the lease 23 agreement indicate the -- where the document was 24 generated from? 25 MR. TUCKER: We don't have that information 26 in front of us. What we do know is staff 27 communicated that to claimant. 28 MR. HORTON: Communicated that. What is 82 1 that? 2 MR. TUCKER: That the documentation was 3 insufficient. And that was done in July of this 4 year. 5 MR. HORTON: And you're saying that by 6 insufficient, none of these documents indicated the 7 origin of the document? 8 MR. TUCKER: I'm just saying that the 9 communication was that the documentation was 10 insufficient. I'm not making specific claims about 11 each document. 12 MR. HORTON: Can we see those documents? Do 13 you have them? Does somebody have them? 14 MR. TUCKER: We don't -- 15 MR. HORTON: Where are they? 16 MR. TUCKER: I'm assuming they're some 17 place. As I said, this matter was scheduled -- 18 MR. HORTON: One second. 19 MR. TUCKER: May I complete my response? 20 MR. HORTON: You -- you did. You said you 21 assumed they were some place. That was my question. 22 MR. TUCKER: Well, but -- 23 MR. HORTON: I understand the matter was 24 scheduled -- 25 MR. TUCKER: This was scheduled -- 26 MR. HORTON: I get all that. 27 MR. TUCKER: We haven't had time to complete 28 our investigation. 83 1 MR. HORTON: Okay. 2 Question of the taxpayer. 3 Did you provide -- you have these documents? 4 MR. VINATIERI: We do. We have them on the 5 laptop right here. 6 MR. HORTON: Can you print them out and 7 provide us with a copy of these documents? 8 MR. ANDERSON: It's about 96,000 9 kilobytes. 10 MR. HORTON: I mean, just the front page. I 11 mean, this has gotta -- 12 MR. ANDERSON: There are literally so many, 13 that would be difficult. They're very large Excel 14 spreadsheets. There's multiple PDF files. 15 MR. HORTON: Okay. 16 When the Department reviewed these 17 documents, did they specifically indicate that the 18 documents did not -- the young lady's back. 19 MS. STOWERS: Can I interject? 20 MR. HORTON: Yeah, sure. 21 MS. STOWERS: We asked about documentation. 22 Since July, all of the records, the files from the 23 parties have been provided to the Board Members 24 through the Board Proceeding drive. I'm just curious 25 if there -- if someone can go to the Board Proceeding 26 drive and look under the tab. It would probably have 27 their name. And you have a lot of folders, and maybe 28 all that documentation would be there. This would be 84 1 internal. 2 MR. HORTON: I mean, there's a lot of 3 documents. And I've seen those documents. 4 But it seems to me that -- maybe we can put 5 this over where the Department can go and take a look 6 at those invoices and just respond to that question 7 as to whether or not any of the documents provided 8 indicates that the origin of those documents -- which 9 would be an indication of where the document came 10 from, the activities and so forth -- was California 11 based or somewhere from out of state. 12 Do you think you guys can do that? You 13 can't -- or you can't answer or -- what -- what -- 14 what -- you don't want to do it? Any answer is a 15 good answer. 16 "No, I don't want to do it. We're not going 17 to do it. We want to delay the case." Any answer 18 or -- there you go. 19 MS. HARKEY: I -- I have a second for my 20 motion. I just got informed I have a second for my 21 motion. So I'm just -- I'm just saying that this 22 is -- if we can -- 23 MR. HORTON: I would just like for the 24 record for the Department to respond. I 25 appreciate -- 26 MS. HARKEY: The Department chooses not to 27 respond. They don't want to have the hearing. 28 MR. HORTON: They can say they don't want to 85 1 respond. 2 You don't want to respond? Say -- 3 MS. HARKEY: They're not going to respond. 4 They're -- 5 MR. HORTON: They're obligated. 6 MS. HARKEY: They're attorneys. 7 MS. STOWERS: Maybe they don't want to 8 respond because it's their argument that they were 9 still in the midst of their investigation. 10 MR. TUCKER: Yes. 11 MS. STOWERS: And to -- to -- that question 12 is part of the evidence that they're trying to 13 evaluate. 14 MR. TUCKER: Correct. 15 MS. STOWERS: Which is their argument on 16 why, in their opinion, we don't have enough evidence 17 to decide this case. 18 MR. HANKS: Correct. And need more time to 19 look around. 20 MR. VINATIERI: Might I indicate, I have a 21 letter here. It's September -- 22 MR. HORTON: Well, first let me thank the 23 Chairwoman for responding. 24 MS. STOWERS: No, not Chair. Deputy 25 Controller. 26 MR. HORTON: The Deputy Controller for 27 responding on behalf of the Department. 28 All right. 86 1 MR. VINATIERI: We have a letter, 2 September 5th, 2017, to me from Kevin, "Thank you for 3 your July 31st letter regarding this case. As you 4 know, there are two outstanding issues for this 5 claimant. Those issues are leases to First American, 6 if they're sales and use tax transactions, and 7 purchases of computer-related products received, 8 either of those purchases were sales or use. 9 Relating to leases of TPP to First American, 10 we do not have enough information on a transaction 11 level basis to determine if the leases are sales tax 12 or use tax transactions. 13 We have enlisted the assistance of one of 14 our offices in an attempt to gain this information. 15 Similarly, we do not have enough 16 documentation regarding the purchases from CDW to 17 determine if there was any California participation. 18 The requirements contract that Karri 19 provided does not provide any information as to 20 participation of the sales by CDW. 21 We have enlisted the assistance of one of 22 our offices in an attempt to gain this information. 23 The offices are aware of the time sensitivity of this 24 case, and are attempting to resolve these issues. 25 If you wish to discuss further, please 26 contact me." September 5th. 27 October 5th, November 5th, December 5th, 28 three months. I started with the wrong date. Three 87 1 months. 2 I don't know what more we have to do. What 3 we can do. We're frustrated, Members of the Board. 4 We're really, really frustrated. 5 MR. RUNNER: Madam Chair. 6 MS. HARKEY: Yes. 7 MR. RUNNER: I -- I -- I was -- you had made 8 a motion, and then there was a discussion about 9 different accounts. So I'm not actually sure what is 10 the items that are on the -- 11 MS. HARKEY: We were getting something -- I 12 was prepared to grant for EMC and Banc America. 13 MR. RUNNER: Mm-hm. 14 MS. HARKEY: There was -- CDW, not willing 15 to grant on that. 16 MR. RUNNER: Mm-hm. 17 MS. HARKEY: And there's one for -- what is 18 this one? 19 MR. VINATIERI: Forsythe. 20 MS. HARKEY: Forsythe, is that what we're 21 getting now? 22 MR. VINATIERI: Yes. 23 MS. HARKEY: This says -- what's this? 24 MR. VINATIERI: It's the last page. 25 MR. RUNNER: First ones are Banc of 26 America. 27 MS. HARKEY: Okay. Here we go. Forsythe 28 Solutions Group, Frontage Road, Skokie, Illinois, 88 1 mailing address, appliance stores consolidated. 2 And this is what type of a permit here? 3 Sales and use tax permit verification. 4 So Forsythe appears to have a sales and use 5 tax. 6 MR. VINATIERI: Yes, that was discussed by 7 Karri with Steve Sisti. We think that this was done 8 in error by the Board's staff. 9 MS. HARKEY: Well, I'm not -- I'm not 10 prepared to grant on that. I don't have enough 11 information to grant on that. 12 My -- my motion is going to stay as is, a 13 partial grant for EMC and Banc of America as being 14 use tax and being registered for use tax. 15 And the rest -- that's what I'll grant. My 16 motion is to grant those two for the taxpayer, and 17 otherwise -- and deny the remainder of the appeal. 18 Do you second? 19 Okay. Member Ma seconds that motion. 20 MS. STOWERS: Objection. 21 MS. HARKEY: There's an objection. 22 Can we call the roll, please? 23 MS. RICHMOND: Chairwoman Harkey. 24 MS. HARKEY: Aye. 25 MS. RICHMOND: Mr. Runner. 26 MR. RUNNER: Aye. 27 MS. RICHMOND: Mr. Horton. 28 MS. HARKEY: Come on. Man up. 89 1 MR. HORTON: Aye. 2 MS. RICHMOND: Ms. Ma. 3 MS. MA: Aye. 4 MS. RICHMOND: Ms. Stowers. 5 MS. STOWERS: No. 6 MS. RICHMOND: Motion carries. 7 MS. HARKEY: Motion carries, 4/1. 8 Good luck on the rest. We did as much as we 9 can do here. 10 MR. VINATIERI: We appreciate you taking the 11 time for this. And it's been good working with all 12 of you. 13 MS. HARKEY: Thank you. Thank you very 14 much. And I -- I -- okay. Thank you. 15 MR. HORTON: You know, Members, this is a 16 classic example where the inequity in the process and 17 delay. It's just frustrating. And so it's incumbent 18 upon the Board of Equalization to bring some equity 19 and fairness to the process to make a decision based 20 on the documentation that is provided to us. 21 It's very unfortunate that the -- let me 22 leave it at that. 23 Thank you for appearing before us. 24 MS. HARKEY: Thank you, Members, for all 25 this time, and -- anyway -- attention to this 26 issue. 27 MR. VINATIERI: Thank you. Thank you for 28 more than ten minutes. 90 1 MR. HORTON: Mm-hm. 2 MS. HARKEY: We generally go back and forth 3 a lot with questions. 4 So the next item, Ms. Richmond. 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 91 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization certify 9 that from December 12, 2017 audio, I recorded 10 verbatim, in shorthand, to the best of my ability, 11 the proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 92 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: May 14, 2018 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 92