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2010 MINUTES OF THE STATE BOARD OF EQUALIZATION 46

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2010 MINUTES OF THE STATE BOARD OF EQUALIZATION 46
46
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
The Board met at its offices at 450 N Street, Sacramento, at 1:34 p.m., with
Ms. Yee, Chairwoman, Mr. Horton, Vice Chair, Ms. Alby and Ms. Steel present, Ms. Mandel
present on behalf of Mr. Chiang in accordance with Government Code section 7.9.
The Board welcomed Ms. Alby to the Board as Acting Member.
SPECIAL PRESENTATION
Special Presentation of Board Resolution to Honorable Bill Leonard
On behalf of the Board, Ms. Yee presented a Board resolution to Bill Leonard,
Member, Second District, extending its sincere and grateful appreciation for his dedicated service
to the State Board of Equalization and the State of California. Members made complementary
remarks regarding their experiences with Mr. Leonard and his exceptional work on the Board of
Equalization, and congratulated him on his appointment to Secretary of the State and Consumer
Services Agency and wished him well in his new position. Mr. Leonard thanked the Members
and his former staff. (Exhibit 3.1.)
Exhibits to these minutes are incorporated by reference.
CORPORATE FRANCHISE AND PERSONAL INCOME TAXES HEARINGS
Granite Rock Company, 420038
Bruce W. Woolpert and Rose Ann Woolpert, 420171
Bruce G. Woolpert and Mary E. Woolpert, 420181
Stephen G. Woolpert and Elizabeth M. Woolpert, 420221
Arthur Woolpert, 420187
Marianne Woolpert, 420219
Joseph Woolpert, 420222
Melissa E. Woolpert, 420223
1995, $72,173.00 Claim for Refund
For Appellant:
Bruce W. Woolpert, Taxpayer
David Colker, Attorney
For Franchise Tax Board:
Daniel Biedler, Tax Counsel
Terry Collins, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether appellant’s mining activity ended at the point at which it stockpiled
crushed, unwashed rock in stockpiles for sale to the public, so that the 2.5 mile conveyor belt at
issue was used after appellant’s asphalt manufacturing began (a qualified activity for purposes of
the Manufacturer’s Investment Credit (MIC)); or whether the mining activity ended later, at the
point at which the crushed and unwashed rock was washed and transported briefly by rail to
appellant’s hot plant, so that the 2.5 mile conveyor belt was used as part of its mining activity
(which is not a qualified activity)?
Assuming appellant’s mining activity ended at the point the crushed, unwashed
rock was stockpiled for sale to the public, so that the 2.5 mile conveyor belt was used after
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
47
Tuesday, March 23, 2010
asphalt manufacturing began, was its undisputed use removing decanted fines (waste) to the
embankment area part of the asphalt manufacturing process, and thus eligible for the MIC?
Whether the claims for refund include costs incurred before the January 1, 1994,
effective date of the MIC?
Amy Kelly, Counsel, Legal Appeals Division, Legal Department, stated for the
record that the parties are in agreement as to the third issue: whether the claims for refund include
costs incurred before the January 1, 1994, effective date of the MIC.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board submitted the
appeal for decision.
Walter B. Elcock and Laura K. Elcock, 474172
2003, $87,209.00 Claim for Refund, $21,802.25 Penalty
2004, $15,282.00 Claim for Refund, $3,820.000 Penalty
2005, $28,585.00 Claim for Refund
2006, $89,822.00 Claim for Refund
For Appellant:
William E. Taggart, Jr., Attorney
For Franchise Tax Board:
Terry Collins, Tax Counsel
Natasha Page, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether respondent's allocation methodology to source California income from
the exercise of nonqualified stock options (NQSO(s)) received from appellant-husband's
employer was proper.
Whether respondent's allocation methodology to source California income from
the vesting of restricted stock grants received from appellant-husband's employer was proper.
Whether appellants have shown reasonable cause to support the abatement of late
filing penalties for 2003 or 2004.
Action:
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board submitted the
appeal for decision.
The Board recessed at 3:49 p.m. and reconvened at 4:01 p.m. with Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
Clovus M. Sykes, 492696, 492702
2001, $2,686.00 Tax, $1,623.68 Penalty
2004, $2,831.00 Tax, $707.75 Penalty
For Appellant:
For Franchise Tax Board:
Clovus M. Sykes, Taxpayer
Jane Perez, Tax Counsel
Karen Smith, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether appellant has demonstrated error in the underlying tax assessment.
Whether appellant has shown reasonable cause for the abatement of penalties.
Whether the Board should impose a frivolous appeal penalty.
48
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
Miscellaneous Documents (Exhibit 3.2)
Appellant’s Exhibit:
Action:
Upon motion of Ms. Mandel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board submitted the
appeal for decision.
PUBLIC HEARINGS
Proposed Adoption of Regulation 1698.5, Audit Procedures
Robert Tucker, Tax Counsel, Tax and Fee Program Division, Legal Department,
made introductory remarks regarding staff’s recommendation to adopt additional changes to the
original text of proposed Sales and Use Tax Regulation 1698.5, Audit Procedures, pursuant to
Government Code section 11346.8. (Exhibit 3.3.)
Speakers were invited to address the Board, but there were none.
Action:
Upon motion of Ms. Mandel, seconded by Mr. Horton and duly carried, Ms. Yee,
Mr. Horton and Ms. Mandel voting yes, Ms. Alby and Ms. Steel voting no, the Board approved
further changes to the published version of Regulation 1698.5 and ordered that the changed
version be placed in the rulemaking file for 15 days.
Proposed Amendments to Regulation 4903, Innocent Spouse or Registered
Domestic Partner Relief from Liability
Carolee Johnstone, Tax Counsel, Tax and Fee Program Division, Legal
Department, made introductory remarks regarding the proposed amendments to Regulation 4903,
Innocent Spouse or Registered Domestic Partner Relief from Liability, and related crossreferencing regulations, to prescribe the requirements for obtaining innocent spouse relief from
specified taxes and fees. (Exhibit 3.4.)
Speakers were invited to address the Board, but there were none.
Action:
Upon motion of Ms. Steel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted the
amendments to Regulation 4903 and related cross-referencing regulations as published.
LEGAL APPEALS MATTERS, CONSENT
With respect to the Legal Appeals Matters Consent Agenda, upon a single
motion of Ms. Alby, seconded by Mr. Horton and unanimously carried, Ms. Yee, Mr. Horton,
Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board made the following orders:
Liberty Supplies Company, Inc., 405242 (AA)
7-1-01 to 9-30-04, $42,836.05 Tax
Action:
Deny the petition for rehearing as recommended by the Appeals Division.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
49
Tuesday, March 23, 2010
James Anthony DiPinto, 445553 (KH)
7-1-06 to 10-12-07, $22,258.34 Tax, $4,759.00 Penalty
Action:
Redetermine as recommended by the Appeals Division.
David L. Wallace, 289815 (EH)
Kris L. Wallace, 442751 (EH)
August 29, 2001, $00.00 Tax, $4,360.00 Amnesty Interest Penalty
Action:
Redetermine as recommended by the Appeals Division.
Steve and Vickie Marriott, 442732 (UT)
November 11, 2004, $4,166.25 Tax
Action:
Redetermine as recommended by the Appeals Division.
Mohammed Ali Khasksar Fard, 417571, 417575 (AC)
Alexe’s State Jewelry, Inc., 417573 (AC)
11-12-04 to 3-31-06, $62,151.42 Tax, $6,215.13 Negligence Penalty
1-1-03 to 11-11-04, $170,655.50 Tax, $17,065.57 Negligence Penalty
Action:
Redetermine as recommended by the Appeals Division.
Costa Mike Tannous, 340508 (BH)
1-1-97 to 12-31-99, $8,563.32 Tax, $0.00 Penalty
Action:
Redetermine as recommended by the Appeals Division.
Jimmy Bui, 515505 (ET)
September 9, 2009 Seizure Date, $595.00 Approximate Value
Action:
Determined that staff properly seized the tobacco products.
Charles Rehmati and Seema Ruzgani, 519676 (ET)
October 12, 2009 Seizure Date, $420.00 Approximate Value
Action:
Determined that staff properly seized the tobacco products.
CORPORATE FRANCHISE AND PERSONAL INCOME TAX MATTERS, CONSENT
With respect to the Corporate Franchise and Personal Income Tax Matters
Consent Agenda, upon a single motion of Ms. Steel, seconded by Mr. Horton and unanimously
carried, Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board made
the following orders:
Loren Berk, 483646
2002, $7,330.00 Claim for Refund
Action:
Sustain the action of the Franchise Tax Board.
Timothy W. Casarez, 476761
2005, $668.00 Assessment
Action:
Sustain the action with concession by the Franchise Tax Board.
50
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
Daniel P. Chiara and Lauren A. Chiara, 442174
2004, $3,342.00 Accuracy-Related Penalty
Action:
Sustain the action of the Franchise Tax Board.
Dwayne Daniels, 440108
2005, $599.00 Tax, $149.75 Late Filing Penalty, $1,158.50 Notice and Demand Penalty, $122.00
Filing Enforcement Fee
Action:
Sustain the action of the Franchise Tax Board and impose a $750.00 frivolous
appeal penalty.
Gloria D. Dickerson, 439517
2005, $986.00 Assessment
Action:
Sustain the action of the Franchise Tax Board.
Earnmax Mortgage Corporation, 478143
2005, $200.00 Notice and Demand Penalty, $305.00 Filing Enforcement Recovery Fee
Action:
Sustain the action of the Franchise Tax Board.
Bruce A. Freedline, 405927
2003, $1,395.00 Assessment
Action:
Sustain the action of the Franchise Tax Board.
Joyce A. Miller, 382018
2002, $26,439.00 Tax, $8,106.58 Penalties
Action:
Sustain the action of the Franchise Tax Board.
William J. O’Connell III, 426210
2000, $624.00 Claim for Refund
Action:
Sustain the action of the Franchise Tax Board.
Richard Ortega, 441636
2005, $1,989.50 Notice and Demand Penalty
Action:
Sustain the action of the Franchise Tax Board.
Rahm (Ron) Rowhani, 461572
2004, $316.00 Assessment
Action:
Sustain the action of the Franchise Tax Board.
Ruth Scherfenberg, 421723
1999, $1,207.00 Tax, $301.75 Late Filing Penalty, $286.11 Post-Amnesty Penalty
Action:
Sustain the action of the Franchise Tax Board and impose a $2,500.00 frivolous
appeal penalty.
Melanti L. Siauw, 445995
2005, $909.00 Assessment
Action:
Sustain the action of the Franchise Tax Board.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
51
Tuesday, March 23, 2010
Kurt Sondgroth, 447175
2004, $10,562.13 Innocent Spouse Relief
Action:
Sustain the action of the Franchise Tax Board.
Gregory Teeters, 467152
2006, $2,589.00 Tax, $647.25 Late Filing Penalty, $875.00 Notice and Demand Penalty, $500.00
Frivolous Return Penalty
Action:
Sustain the action of the Franchise Tax Board and impose a $2,500.00 frivolous
appeal penalty.
Charles H. Bond, 468891
2006, $3,666.00 Tax, $916.50 Late Filing Penalty, $5,000.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Shawn Mills, 441635
2003, $10,504.00 Tax, $2,626.00 Late Filing Penalty, $2,626.00 Notice and Demand Penalty,
$2,500.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Steve Olmos, 441632
2004, $2,691.00 Tax, $672.75 Late Filing Penalty, $672.75 Notice and Demand Policy,
$5,000.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Barbara Bladen Porter, 424104
1994, $81,053.37 Innocent Spouse Relief
Action:
Deny the petition for rehearing.
Marianne Pretscher-Johnson, 440770
2005, $7,005.00 Tax, $1,751.25 Late Filing Penalty, $1,751.25 Notice and Demand Penalty,
$1,000.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Marianne Pretscher-Johnson, 444214
2004, $1,304.00 Tax, $326.00 Late Filing Penalty, $1,500.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Rodney Walker, 461172
2004, $1,734.00 Tax, $433.50 Late Filing Penalty, $750.00 Frivolous Appeal Penalty
Action:
Deny the petition for rehearing.
Frank Martin, 489367
2004, $19,409.00 Assessment
Action:
Sustain the action of the Franchise Tax Board.
52
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
HOMEOWNER AND RENTER PROPERTY TAX ASSISTANCE MATTERS, CONSENT
With respect to the Homeowner and Renter Property Tax Assistance Matters
Consent Agenda, upon a single motion of Mr. Horton, seconded by Ms. Steel and unanimously
carried, Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board made
the following orders:
Stephen M. Aldridge, 443881
2006, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Reana Anderson, 449809
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Rebecca S. Brannan, 443295
2007, $341.00
Action:
Sustain the action of the Franchise Tax Board.
Doris N. Cintron, 445341
2007, $347.50
Action:
Sustain the action of the Franchise Tax Board.
Betty Lou Erickson (Deceased), 436159
2007, $50.00
Action:
Sustain the action of the Franchise Tax Board.
Patricia J. Fanning, 458631
2007, $394.40
Action:
Sustain the action of the Franchise Tax Board.
Susie Jaeger, 445919
2006, $472.60
Action:
Sustain the action of the Franchise Tax Board.
Ok Hee Joe, 423625
2007, $347.50
Action:
Sustain the action of the Franchise Tax Board.
Inger Keith, 426788
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Guadalupe G. Magos, 426137
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
53
Tuesday, March 23, 2010
Rita L. Miles, 441577
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Carmen Z. Peralta, 442527
2007, $347.50
Action:
Sustain the action of the Franchise Tax Board.
Keochoi Phothiwat, 427285
2007, $347.50
Action:
Sustain the action of the Franchise Tax Board.
Jane W. Power, 473090
2006, $384.20
Action:
Sustain the action of the Franchise Tax Board.
Seyedeh Razavian, 448040
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Ronnie Vallet, 450602
2007, $332.50
Action:
Sustain the action of the Franchise Tax Board.
Ruenn Shyan Wang, 437614
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
Jo Anne Wilkinson, 473129
2007, $312.50
Action:
Sustain the action of the Franchise Tax Board.
Laura R. Williams, 424267
2007, $347.50
Action:
Sustain the action of the Franchise Tax Board.
A. Woods, 443186
2007, $1 or more
Action:
Sustain the action of the Franchise Tax Board.
54
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
SALES AND USE TAX MATTERS, REDETERMINATIONS, RELIEF OF PENALTIES
AND DENIALS OF CLAIMS FOR REFUND, CONSENT
The Board deferred consideration of the following matter: Federal Express
Corporation, 196286.
With respect to the Sales and Use Tax Matters, Redeterminations, Relief of
Penalties and Denials of Claims for Refund, Consent Agenda, upon a single motion of Ms. Steel,
seconded by Ms. Alby and unanimously carried, Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and
Ms. Mandel voting yes, Ms. Mandel not participating in accordance with Government Code
section 87105 in Fisher Scientific Co., LLC, 461618; the Board made the following orders:
A & A Ready Mixed Concrete, Inc., 488770 (EA)
7-1-05 to 6-30-08, $209,273.28
Action:
Approve the redetermination as recommended by staff.
International Business Machines Corp., 447655 (OH)
1-1-99 to 12-31-02, $229,618.72
Action:
Approve the redetermination as recommended by staff.
Alonso Munoz, 418695 (EH)
7-1-98 to 9-30-02, $149,649.92
Action:
Approve the redetermination as recommended by staff.
Brian J. Mills, 461965 (EA)
10-1-97 to 8-12-00, $1036,814.98
Action:
Approve the redetermination as recommended by staff.
Fisher Scientific Co., LLC, 461618 (OH)
10-1-02 to 9-30-05, $840,250.44
Action:
Approve the redetermination as recommended by staff. Ms. Mandel not
participating in accordance with Government Code section 87105.
De Lage Landen Operational Services, LLC, 479496 (OH)
4-1-01 to 12-31-05, $669,655.04
Action:
Approve the redetermination as recommended by staff.
Silicon Graphics Federal, Inc., 379232 (CH)
1-1-03 to 3-31-06, $164,875.86
Action:
Approve the redetermination as recommended by staff.
Haskel International, Inc., 491363 (AC)
10-1-03 to 12-31-06, $69,230.87
Action:
Approve the redetermination as recommended by staff.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
55
Tuesday, March 23, 2010
MSC-Medical Services Company, Inc., 466101 (OH)
10-1-97 to 3-31-06, $931,842.65
Action:
Approve the redetermination as recommended by staff.
Foot Locker Retail, Inc., 519428 (OH)
8-2-09 to 8-29-09, $127,093.32
Action:
Approve the relief of penalty as recommended by staff.
Save Mart Supermarkets, 519429 (KH)
3-30-09 to 6-28-09, $337,811.70
Action:
Approve the relief of penalty as recommended by staff.
LBS Financial Credit Union, 451329 (EA)
1-1-06 to 9-30-08, $174,624.09
Action:
Approve the denial of claim for refund as recommended by staff.
Business Objects Americas, 358658 (GH)
4-1-03 to 9-30-06, $123,863.00
Action:
Approve the denial of claim for refund as recommended by staff.
The Permanente Medical Group, Inc., 350183 (CH)
1-1-03 to 12-31-05, $75,725.92
Action:
Approve the denial of claim for refund as recommended by staff.
Federal Express Corporation, 196286 (OH)
1-1-97 to 12-31-00, $1,570,140.00
Action:
The Board took no action.
Merillat Corporation, 415509 (OH)
1-1-05 to 3-31-07, $109,158.77
Action:
Approve the denial of claim for refund as recommended by staff.
Proquire, LLC, 436405 (OH)
7-1-04 to 3-31-06, $114,109.11
Action:
Approve the denial of claim for refund as recommended by staff.
SALES AND USE TAX MATTERS, CREDITS, CANCELLATIONS AND REFUNDS,
CONSENT
With respect to the Sales and Use Tax Matters, Credits, Cancellations and
Refunds, Consent Agenda, upon a single motion of Ms. Steel, seconded by Ms. Yee and
unanimously carried, Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes,
Ms. Mandel not participating in accordance with Government Code section 87105 in Buena Vista
Home Video, 435365; the Board made the following orders:
56
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
Kenneth D. Durrett, 443768 (OH)
7-1-99 to 2-28-01, $324,180.56
Action:
Approve the credit and cancellation as recommended by staff.
Donna M. Stennis, 433474 (AS)
7-1-96 to 10-4-99, $453,377.26
Action:
Approve the credit and cancellation as recommended by staff.
Lynton D. Adams, 520058 (EA)
10-1-97 to 8-12-00, $167,848.58
Action:
Approve the credit and cancellation as recommended by staff.
Icon International, LLC, 432523 (AS)
1-2-02 to 12-31-06, $278,198.26
Action:
Approve the credit and cancellation as recommended by staff.
Hoop Retail Stores, LLC, 512296 (OH)
3-26-08 to 4-30-08, $1,349,592.48
Action:
Approve the credit and cancellation as recommended by staff.
Maisie Yolanda Ott, 461734 (JH)
5-1-05 to 9-30-07, $173,524.42
Action:
Approve the credit and cancellation as recommended by staff.
Buena Vista Home Video, 435365 (OH)
10-1-99 to 12-31-05, $1,916,597.60
Action:
Approve the refund as recommended by staff. Ms. Mandel not participating in
accordance with Government Code section 87105.
LBS Financial Credit Union, 451329 (EA)
1-1-06 to 9-30-08, $636,089.79
Action:
Approve the refund as recommended by staff.
The Permanente Medical Group, Inc., 350183 (CH)
1-1-03 to 12-31-05, $483,085.33
Action:
Approve the refund as recommended by staff.
The Regents of the University of California, 403162 (FH)
1-1-04 to 12-31-06, $1,529,785.56
Action:
Approve the refund as recommended by staff.
Merillat Corporation, 415509 (OH)
1-1-05 to 3-31-07, $154,251.99
Action:
Approve the refund as recommended by staff.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
57
Tuesday, March 23, 2010
Kokusai Semiconductor Equipment Corp., 491298 (GH)
1-1-09 to 3-31-09, $106,534.94
Action:
Approve the refund as recommended by staff.
GPS Consumer Direct, Inc., 400648 (OH)
1-1-04 to 6-30-04, $100,826.36
Action:
Approve the refund as recommended by staff.
Abraxis Bioscience, Inc., 437844 (OH)
1-1-05 to 12-31-06, $106,121.31
Action:
Approve the refund as recommended by staff.
Southern California Gas Company, 205208 (AA)
7-1-99 to 12-31-05, $112,288.10
Action:
Approve the refund as recommended by staff.
Kaiser Foundation Hospitals, 350184 (CH)
1-1-03 to 12-31-05, $1,713,015.62
Action:
Approve the refund as recommended by staff.
Solectron USA, Inc., 518869 (GH)
1-1-02 to 12-31-03, $266,592.71
Action:
Approve the refund as recommended by staff.
Kinecta Federal Credit Union, 491464 (AS)
4-1-06 to 3-31-09, $288,274.05
Action:
Approve the refund as recommended by staff.
Regal Cinemas, Inc., 479026 (OH)
7-1-05 to 6-30-08, $112,181.56
Action:
Approve the refund as recommended by staff.
Pacific Service Credit Union, 494550 (CH)
10-1-08 to 12-31-08, $145,544.00
Action:
Approve the refund as recommended by staff.
Applied Minds, Inc., 510504 (AC)
8-1-03 to 6-30-07, $279,404.94
Action:
Approve the refund as recommended by staff.
GPS Services, Inc., 400434 (BH)
2-1-04 to 6-30-04, $840,190.95
Action:
Approve the refund as recommended by staff.
58
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
Flynn, Sabatino and Day, Inc., 443998 (AS)
1-1-05 to 12-31-07, $144,088.47
Action:
Approve the refund as recommended by staff.
Veeco Process Equipment, Inc., 485606 (OH)
10-1-08 to 12-31-08, $266,200.00
Action:
Approve the refund as recommended by staff.
Drive Financial Services, LP, 462795 (OH)
1-1-06 to 12-31-06, $676,093.20
Action:
Approve the refund as recommended by staff.
Southside Financial Group, LLC, 481114 (OH)
10-1-07 to 3-31-09, $357,338.37
Action:
Approve the refund as recommended by staff.
SPECIAL TAXES MATTERS, REDETERMINATIONS, CONSENT
With respect to the Special Taxes Matters, Redeterminations, Consent Agenda,
upon a single motion of Ms. Steel, seconded by Mr. Horton and unanimously carried, Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, Ms. Mandel not participating in
accordance with Government Code section 7.9 in MBIA Insurance Corporation, 111737; and,
MBIA Insurance Corporation, 307815; the Board made the following orders:
Laidlaw Transit Services, Inc., 303428 (MT)
1-1-99 to 6-30-02, $333,246.92
Action:
Approve the redetermination as recommended by staff.
MBIA Insurance Corporation, 111737 (ET)
1-1-96 to 12-31-99, $826,754.00
Action:
Approve the redetermination as recommended by staff. Ms. Mandel not
participating in accordance with Government Code section 7.9.
MBIA Insurance Corporation, 307815 (ET)
1-1-00 to 12-31-02, $266,923.55
Action:
Approve the redetermination as recommended by staff. Ms. Mandel not
participating in accordance with Government Code section 7.9.
SPECIAL TAXES MATTERS, CREDITS, CANCELLATIONS AND REFUNDS,
CONSENT
With respect to the Special Taxes Matters, Credits, Cancellations and Refunds,
Consent Agenda, upon a single motion of Ms. Steel, seconded by Ms. Alby and unanimously
carried, Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, Ms. Mandel not
participating in accordance with Government Code section 7.9 in The Wine Group, LLC, the
Board made the following orders:
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
59
Tuesday, March 23, 2010
Laidlaw Transit Services, Inc., 332585 (MT)
7-1-02 to 6-30-05, $155,651.74
Action:
Approve the refund as recommended by staff.
IPC (USA), Inc., 379280, 432708 (MT)
5-1-06 to 7-31-06, $448,907.61
Action:
Approve the refund as recommended by staff.
The Wine Group, LLC, 493582 (ET)
3-1-09 to 7-31-09, $813,865.08
Action:
Approve the refund as recommended by staff. Ms. Mandel not participating in
accordance with Government Code section 7.9.
LEGAL APPEALS MATTERS, ADJUDICATORY
James M. Heim, 379939 (CH)
10-1-00 to 6-30-01, $0.00 Tax, $27,007.15 Interest, $38,949.88 Penalties
Considered by the Board: September 1, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Ms. Mandel, seconded by Ms. Alby and duly carried, Ms. Yee,
Mr. Horton, Ms. Alby and Ms. Mandel voting yes, Ms. Steel voting no, the Board ordered that
the petition be redetermined as recommended by the Appeals Division.
James Bass Smith, 353126 (UT)
December 4, 2003, $13,600.00 Tax
Considered by the Board: September 1, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and duly carried, Ms. Yee,
Mr. Horton, Ms. Alby and Ms. Mandel voting yes, Ms. Steel voting no, the Board ordered that
the petition be redetermined as recommended by the Appeals Division.
Ms. Mandel stated for the record that Mr. Chiang would not participate in the
matter of Surinder Singh, 506263; and left the Boardroom.
Surinder Singh, 506263 (ET)
May 27, 2009, $561.25 Approximate Value
Considered by the Board: December 15, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and duly carried, Ms. Yee,
Mr. Horton and Ms. Alby voting yes, Ms. Steel voting no, Ms. Mandel absent and not
participating, the Board determined that staff properly seized the tobacco products.
Ms. Mandel returned to the Boardroom.
60
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
CORPORATE FRANCHISE AND PERSONAL INCOME TAX MATTERS,
ADJUDICATORY
Michael D. Charles, 439490, 440947
2004, $4,235.00 Tax, $1,058.75 Late Filing Penalty, $1,058.75 Notice and Demand Penalty
2005, $5,043.00 Tax, $1,260.75 Late Filing Penalty, $1,260.75 Notice and Demand Penalty,
$122.00 Filing Enforcement Fee
Considered by the Board: October 6, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted a
decision sustaining the action of the Franchise Tax Board and imposed frivolous appeal penalties
in the amounts of $375.00 for 2004 and $375.00 for 2005 as recommended by staff.
Fernando Gutierrez, 449484
2006, $560.00 Claim for Refund
Considered by the Board: June 30, 2009
Contribution Disclosures pursuant to Government Code section 15626: No contribution
disclosure forms were filed. The Members noted that their records disclosed no contributions
from this taxpayer, his agent or participants.
Action:
Upon motion of Ms. Mandel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted a
decision modifying the action as conceded by the Franchise Tax Board by a refund in the amount
of $271.00, in accordance with staff’s revised recommendation.
David L. McKibbin and Sherri L. McKibbin, 340534
2002, $934.00 Assessment
Considered by the Board: September 22, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted a
decision sustaining the action of the Franchise Tax Board as recommended by staff.
Prudential Commercial Leasing, Inc., 468875
1999, $13,577.62 Assessment
2000, $5,617.82 Assessment
2001, $4,788.19 Assessment
Considered by the Board: September 22, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Ms. Alby, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted a
decision sustaining the action of the Franchise Tax Board.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
61
Tuesday, March 23, 2010
Andra R. Sachs, 446027
2000, $688,300.00 Tax
Considered by the Board: September 22, 2009
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted a
decision sustaining the action of the Franchise Tax Board.
SALES AND USE TAX MATTERS, DENIAL RELIEF OF PENALTIES,
ADJUDICATORY
Thermo Keytek, LLC, 494632 (OH)
7-1-06 to 12-31-07, $94,145.40
Considered by the Board: December 15, 2009
Contribution Disclosures pursuant to Government Code section 15626: No contribution
disclosure forms were filed. The Members noted that their records disclosed no contributions
from this taxpayer, his agent or participants.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board approved the
denial of relief of penalty as recommended by staff.
SALES AND USE TAX MATTERS, CREDITS, CANCELLATIONS AND REFUNDS,
ADJUDICATORY
Ultramar, Inc., 486928
7-1-99 to 12-31-06, $2,867,125.23
Considered by the Board: Presented for Separate Discussion
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Action:
Upon motion of Ms. Alby, seconded by Ms. Steel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board approved the
refund as recommended by staff.
TAX PROGRAM NONAPPEARANCE MATTERS NOT SUBJECT TO CONTRIBUTION
DISCLOSURE STATUTE
PROPERTY TAX MATTERS
Audits
Southern California Gas Company, (149)
2005, $17,300,000.00 Escaped Assessment, $7,266,000.00 In-lieu Interest
2006, $10,700,000.00 Escaped Assessment, $3,531,000.00 In-lieu Interest
2007, $11,300,000.00 Escaped Assessment, $2,712,000.00 In-lieu Interest
2008, $15,200,000.00 Escaped Assessment, $2,280,000.00 In-lieu Interest
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby and Ms. Steel voting yes, Ms. Mandel not participating in
accordance with Government Code section 7.9, the Board adopted the audit escaped assessments,
plus in-lieu interest, as recommended by staff.
62
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
ABS-CBN Telecom North America, Inc., (7581)
2006, $133,000.00 Escaped Assessment
2007, $158,000.00 Escaped Assessment
2008, $164,000.00 Escaped Assessment
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby and Ms. Steel voting yes, Ms. Mandel not participating in
accordance with Government Code section 7.9, the Board adopted the audit escaped assessments
as recommended by staff.
Telmex USA, LLC, (7866)
2006, $12,600,000.00 Escaped Assessment, $1,260,000.00 Penalties, $4,158,000.00 In-lieu
Interest
2007, $19,600,000.00 Escaped Assessment, $1,960,000.00 Penalties, $4,704,000.00 In-lieu
Interest
2008, $100,000.00 Escaped Assessment, $10,000.00 Penalties, $15,000.00 In-lieu Interest
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby and Ms. Steel voting yes, Ms. Mandel not participating in
accordance with Government Code section 7.9, the Board adopted the audit escaped assessments,
plus penalties and in-lieu interest, as recommended by staff.
OFFERS-IN-COMPROMISE RECOMMENDATIONS
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board approved the
Offers in Compromise of Jeff Parsons and Robin Parsons; J.R. Brewski’s, Inc.; Thomas Dodson
and Linda Dodson; Richard Walton and Matrix Communications, LLC; Cupid’s Garden Bridal
Boutique, Inc.; Blair Wilkes and Lynnette Wilkes; and, John Herrera; as recommended by staff.
LOCAL TAX REALLOCATION MATTERS
City of Union City, 469296
10-1-96 to 9-30-09, $1,607,500.00 Estimated Amount in Dispute
Considered by the Board: August 31, 2009
Action:
Upon motion of Ms. Alby, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition for rehearing be denied.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
63
Tuesday, March 23, 2010
FINAL ACTION ON CORPORATE FRANCHISE AND PERSONAL INCOME TAXES
HEARINGS HELD MARCH 23, 2010
Granite Rock Company, 420038
Bruce W. Woolpert and Rose Ann Woolpert, 420171
Bruce G. Woolpert and Mary E. Woolpert, 420181
Stephen G. Woolpert and Elizabeth M. Woolpert, 420221
Arthur Woolpert, 420187
Marianne Woolpert, 420219
Joseph Woolpert, 420222
Melissa E. Woolpert, 420223
Final Action: Upon motion of Ms. Steel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board reversed the
action of the Franchise Tax Board. 1
Walter B. Elcock and Laura K. Elcock, 474172
Final Action: Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board sustained the
action of the Franchise Tax Board.
CORPORATE FRANCHISE AND PERSONAL INCOME TAXES HEARING
Kenneth Pillay, 487771
2003, $9,260.26 Tax, $2,315.24 Late Penalty, 6,793.25 Notice and Demand Penalty
For Appellant:
No Appearance
For Franchise Tax Board:
Suzanne Small, Tax Counsel
Karen Smith, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether appellant has shown that respondent’s proposed assessment is barred by
the statute of limitations.
Whether appellant has shown error in respondent’s determination of his
underlying tax for 2003.
Whether appellant has shown the late filing penalty and the notice and demand
penalty imposed by respondent should be abated.
Whether a frivolous appeal penalty should be imposed
Respondent’s Exhibit: Letter from Kenneth Hall, CPA to FTB (Exhibit 3.5)
Action:
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board sustained the
action of the Franchise Tax Board.
1
Additional discussion on this matter took place later in the day.
64
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Tuesday, March 23, 2010
FINAL ACTION ON CORPORATE FRANCHISE AND PERSONAL INCOME TAXES
HEARINGS HELD MARCH 23, 2010
Clovus M. Sykes, 492696, 492702
Amy Kelly, Counsel, Legal Appeals Division, Legal Department, stated for the
record that the Franchise Tax Board reduced the tax for 2001 and 2004 and conceded the demand
penalty.
Final Action: Upon motion of Ms. Yee, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board modified the
action of the Franchise Tax Board as conceded and imposed a $375.00 frivolous appeal penalty
for each tax year on appeal.
Granite Rock Company, 420038
Bruce W. Woolpert and Rose Ann Woolpert, 420171
Bruce G. Woolpert and Mary E. Woolpert, 420181
Stephen G. Woolpert and Elizabeth M. Woolpert, 420221
Arthur Woolpert, 420187
Marianne Woolpert, 420219
Joseph Woolpert, 420222
Melissa E. Woolpert, 420223
The Board discussed the appropriateness of a Formal Opinion on this matter but
no further action was taken.
The Board adjourned at 5:00 p.m.
The foregoing minutes are adopted by the Board on May 26, 2010.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
65
Wednesday, March 24, 2010
The Board met at its offices at 450 N Street, Sacramento, at 10:59 a.m., with
Ms. Yee, Chairwoman, Mr. Horton, Vice Chair, Ms. Alby and Ms. Steel present, Ms. Mandel
present on behalf of Mr. Chiang in accordance with Government Code section 7.9.
SALES AND USE TAX APPEALS HEARINGS
Macromedia, Inc., 461946 (BH)
7-1-03 to 12-31-05, $225,461.14 Tax
For Petitioner:
Sonja Johnson, Representative
Purva Samant, Representative
Tran Nguyen, Representative
For Sales and Use Tax Department:
Scott Lambert, Hearing
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether adjustments are warranted to the disallowed claimed nontaxable and
netted sales.
Whether adjustments are warranted to the audited amount of recorded, but not
reported, taxable sales.
Whether adjustments are warranted to the understated amount of ex-tax
purchases subject to use tax.
Action:
Upon motion of Ms. Mandel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
Douglas Brent Dunbar, Zaid Rahmani, and Irina Rasuli, 295401 (CH)
10-1-96 to 9-30-99, $3,595.55 Successor Liability
Smoker's Paradise, LLC, 295398, 378099, (GH)
10-1-96 to 12-31-03, $5,768.63 Successor Liability, $3,750.00 Claim for Refund
Douglas Brent Dunbar and Zaid Rahmani, 304043, 378109 (CH)
10-1-96 to 1-31-04, $8,866.15 Successor Liability, $350.00 Claim for Refund
Cheaper Cigarette, Douglas Brent Dunbar, Mansoor Rahmani, Tariq Rasuli and Zaid
Rahmani, 296295 (JH)
10-1-96 to 3-31-04, $11,764.87 Successor Liability
Cigarettes “R” Cheaper, Zaid Rahmani, Tariq Mohammed Rasuli and Monsoor Rahmani,
296294 (JH)
10-1-96 to 3-31-04, $9,556.22 Successor Liability, $500.00 Claim for Refund
Cigarette Center, LLC, 295400, 378108 (CH)
10-1-96 to 9-30-99, $5,721.30 Successor Liability, $3,000.00 Claim for Refund
For Petitioners/Claimants:
Douglas Dunbar, Taxpayer
For Sales and Use Tax Department:
Cary Huxsoll, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issue:
Whether taxpayer is liable as a successor for the unpaid liabilities of Cigarettes
Cheaper (SR JHF 99-793094).
Additional issue in petitions of 296295 and 296294:
Whether taxpayer should be relieved of the late-payment penalties imposed
against the predecessor that were passed through to taxpayer as part of the successor liability.
66
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Wednesday, March 24, 2010
Upon motion of Mr. Horton, seconded by Ms. Steel and unanimously carried,
Action:
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
matters be submitted for decision.
The Board recessed at 12:49 p.m. and reconvened at 1:36 p.m. with Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
TestOut Corporation, 400769, 400658 (OH)
1-1-03 to 12-31-05, $45,482.23 Tax, $105,602.00 Claim for Refund
For Petitioner/Claimant:
Steve Young, Attorney
For Sales and Use Tax Department:
Bradley Heller, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issue:
Whether petitioner was required to collect and report use tax to the Board
because it held a Certificate of Registration–Use Tax.
Action:
Upon motion of Ms. Mandel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
James Fishman, 355538 (CH)
1-1-96 to 12-31-98, $8,248.64 Tax, $934.50 Finality Penalty
For Petitioner:
James Fishman, Taxpayer
For Sales and Use Tax Department:
Cary Huxsoll, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether petitioner is personally liable as a responsible person pursuant to
Revenue and Taxation Code section 6829 for a portion of the unpaid liabilities of Unmanned
Solutions, Inc. (USI), seller’s permit SR CH 26-736854, for the period January 1, 1996, through
December 31, 1998.
Whether petitioner has established that USI should be granted relief from the
finality penalty that has been passed through to petitioner as a responsible person.
Whether the NOD was timely issued to petitioner.
Action:
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
Sukrita Sanahi, 436874 (EA)
5-1-04 to 12-31-06, $10,698.91 Tax, $1,098.34 negligence Penalty
For Petitioner:
Sukrita Sanahi, Taxpayer
Sham Sunder, Witness
For Sales and Use Tax Department:
Scott Lambert, Hearing Representative
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether further adjustments are warranted to the audited understatement of
reported sales.
Whether petitioner was negligent.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
67
Wednesday, March 24, 2010
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Action:
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
Winntech Digital Systems, Inc., 353092, 416075, 416073 (OH)
1-1-96 to 6-30-04, $00.00 Tax, $24,032.34 Penalty
7-1-04 to 12-31-06, $00.00 Tax, $2,415.40 Penalty
1-1-07 to 3-31-07, $00.00 Tax, $59.80 Penalty
For Petitioner:
Joseph D. Prelogar, Representative
For Sales and Use Tax Department:
Scott Lambert, Hearing Representative
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether relief of the failure-to-file penalties is warranted.
Whether relief from the finality penalties are warranted.
Action:
Upon motion of Mr. Horton, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
matters be submitted for decision.
Ms. Yee directed staff to confer with the petitioner regarding the remaining
interest in dispute.
Edward A. Foster, 424872 (CH)
7-1-04 to 6-30-05, $00.00 Tax, $1,936.20 Penalty
For Petitioner:
Edward A. Foster, Taxpayer
For Sales and Use Tax Department:
Andrew Kwee, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether relief is warranted from the late-payment and finality penalties
originally assessed against the corporation.
Whether relief of interest is warranted.
Action:
Upon motion of Mr. Horton, seconded by Ms. Mandel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
The Board recessed at 4:08 p.m. and reconvened at 4:15 p.m. with Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
FINAL ACTION ON SALES AND USE TAX APPEALS HEARINGS HELD MARCH 24,
2010
Winntech Digital Systems, Inc., 353092, 416075, 416073 (OH)
Scott Lambert, Hearing Representative, Sales and Use Tax Department, stated
for the record that staff explained the interest computation to the petitioner and will continue the
discussion the following day and will make any changes if necessary.
Final Action:
The Board deferred consideration of the matter to later in the day.
68
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Wednesday, March 24, 2010
Macromedia, Inc., 461946 (BH)
Final Action: Ms. Steel moved to find that the sales to CSU Long Beach are exempt, and that
the petition otherwise be redetermined as recommended by the Appeals Division. The motion was
seconded by Ms. Alby. Ms. Steel withdrew her motion.
Upon motion of Ms. Steel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision, granting the petitioner 30 days to file supporting documents,
the Department 30 days to respond, and the Appeals Division 30 days thereafter to review the
parties’ submissions and provide its recommendation to the Board.
Douglas Brent Dunbar, Zaid Rahmani, and Irina Rasuli, 295401 (CH)
Smoker's Paradise, LLC, 295398, 378099, (GH)
Douglas Brent Dunbar and Zaid Rahmani, 304043, 378109 (CH)
Cheaper Cigarette, Douglas Brent Dunbar, Mansoor Rahmani, Tariq Rasuli and Zaid
Rahmani, 296295 (JH)
Cigarettes “R” Cheaper, Zaid Rahmani, Tariq Mohammed Rasuli and Monsoor Rahmani,
296294 (JH)
Cigarette Center, LLC, 295400, 378108 (CH)
David H. Levine, Tax Counsel, Appeals Division, Legal Department, reported
staff’s revised recommendation to grant taxpayer’s claim for refund in Case ID 296294 in the
amount of $500.00.
Final Action: Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that no
further adjustments be made in the administrative protests and that the claims for refund be
denied, except that the Board ordered the claim for refund in Case ID 296294 be granted in the
amount of $500, in accordance with the revised recommendation of the Appeals Division.
TestOut Corporation, 400769, 400658 (OH)
Final Action: Upon motion of Ms. Alby, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be redetermined as recommended by the Appeals Division.
James Fishman, 355538 (CH)
Final Action: Upon motion of Ms. Alby, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby and Ms. Steel voting yes, Ms. Mandel abstaining, the Board
ordered that the petition be redetermined as recommended by the Appeals Division.
Sukrita Sanahi, 436874 (EA)
Final Action: Ms. Steel moved to apply an error rate of 125 percent for 2004, and that the
petition otherwise be redetermined as recommended by the Appeals Division, and to direct staff
to inform the petitioner of the Offer in Compromise Program. The motion was seconded by
Ms. Alby but failed to carry, Ms. Alby and Ms. Steel voting yes, Ms. Yee, Mr. Horton and
Ms. Mandel voting no.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
69
Wednesday, March 24, 2010
Upon motion of Ms. Yee, seconded by Mr. Horton and duly carried, Ms. Yee,
Mr. Horton, Ms. Alby and Ms. Mandel voting yes, Ms. Steel voting no, the Board ordered that
the petition be redetermined as recommended by the Appeals Division and directed staff to
inform the petitioner of the Offer in Compromise Program.
Winntech Digital Systems, Inc., 353092, 416075, 416073 (OH)
Final Action: Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
determination be redetermined without further adjustments, that the finalities penalties be deleted,
and that the administrative protests otherwise be adjusted as recommended by the Appeals
Division, and directed staff to discuss payment options with the taxpayer.
Edward A. Foster, 424872 (CH)
Final Action: Upon motion of Ms. Mandel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that no
adjustments be made in the administrative protest as recommended by the Appeals Division, and
directed staff to discuss payment options with the taxpayer.
The Board adjourned at 4:38 p.m.
The foregoing minutes are adopted by the Board on May 26, 2010.
70
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Thursday, March 25, 2010
The Board met at its offices at 450 N Street, Sacramento, at 9:30 a.m., with
Ms. Yee, Chairwoman, Mr. Horton, Vice Chair, Ms. Alby and Ms. Steel present, Ms. Mandel
present on behalf of Mr. Chiang in accordance with Government Code section 7.9.
SALES AND USE TAX APPEALS HEARINGS
Kenneth Richard McLeod, 435025, 504922 (KH)
1-1-95 to 6-30-00, $121,048.88 Tax, $00.00 Penalty, $16,465.81 Claim for Refund
For Petitioner/Claimant:
Kenneth Richard McLeod, Taxpayer
Kenneth Roy McLeod, Representative
For Sales and Use Tax Department:
Cary Huxsoll, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issue:
Whether taxpayer is liable for the unpaid tax-related liabilities of the predecessor,
Kenneth Roy McLeod.
Action:
Upon motion of Ms. Mandel, seconded by Ms. Alby and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
matters be submitted for decision.
The Board recessed at 10:31 a.m. and reconvened at 10:41 a.m. with Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
Rebecca Ann Scherz, 416659 (CH)
Eric Brian Scherz, 401795 (CH)
4-1-03 to 4-15-04, $00.00 Tax, $9,902.42 Penalty
For Petitioner:
Eric B. Scherz, Taxpayer
For Sales and Use Tax Department:
Andrew Kwee, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issues:
Whether taxpayer is personally liable as a responsible person under Revenue and
Taxation Code section 6829 for the unpaid liabilities of Ask Us First! LLC (SR CH 97-713214).
Whether relief of the late-payment penalties originally assessed against AUF is
warranted.
Action:
Upon motion of Ms. Alby, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
matters be submitted for decision.
PETITION FOR RELEASE OF SEIZED PROPERTY
DFC Gas & Wine, LLC, 513008 (ET)
August 13, 2009, $595.001 Approximate Value
For Petitioner:
Harpreet Dhaliwal, Taxpayer
For Property and Special Taxes Department
Stephen Smith, Tax Counsel
Contribution Disclosures pursuant to Government Code section 15626: None were disclosed.
Issue:
Whether the cigarettes should be forfeited because they are described by
Business and Professions Code section 22974.3, subdivision (b).
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
71
Thursday, March 25, 2010
Upon motion of Ms. Mandel, seconded by Ms. Alby and unanimously carried,
Action:
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be submitted for decision.
CHIEF COUNSEL MATTERS
RULEMAKING
Section 100 Changes
Sales and Use Tax Regulation 1525.7, Rural Investment Tax Exemption
Bradley Heller, Tax Counsel, Tax and Fee Program Division, Legal Department,
made introductory remarks regarding staff's request for authorization to complete Rule 100
changes to repeal Regulation 1525.7 based on the repeal of Revenue and Taxation Code section
6378.1 by its own terms effective January 1, 2006. (Exhibit 3.6.)
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board authorized the
repeal of Regulation 1525.7 as recommended by staff.
Exhibits to these minutes are incorporated by reference.
Sales and Use Tax Regulation 1584, Membership Fees
Bradley Heller, Tax Counsel, Tax and Fee Program Division, Legal Department,
made introductory remarks regarding staff's request for authorization to complete Rule 100
changes to delete obsolete reference to the operative date of January 1, 1996. (Exhibit 3.7.)
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board authorized the
amendment as recommended by staff.
Sales and Use Tax Regulation 1602.5, Reporting Methods for Grocers
Bradley Heller, Tax Counsel, Tax and Fee Program Division, Legal Department,
made introductory remarks regarding staff's request for authorization to complete Rule 100
changes to update the tax rates used in the example included in the regulation. (Exhibit 3.8.)
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board authorized the
amendment of examples in the regulation as recommended by staff.
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2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
Thursday, March 25, 2010
Sales and Use Tax Regulation 1700, Reimbursement for Sales Tax
Bradley Heller, Tax Counsel, Tax and Fee Program Division, Legal Department,
made introductory remarks regarding staff's request for authorization to complete Rule 100
changes to update the tax rates used in the examples included in the regulation. (Exhibit 3.9.)
Action:
Upon motion of Ms. Steel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board authorized the
amendment of examples in the regulation as recommended by staff.
OTHER CHIEF COUNSEL MATTERS
Request for Resolution Concerning Coverage for BOE Volunteers
Sharon Brady Silva, Tax Counsel, Lisa Fien, Chief, Human Resources Division,
presented staff’s request for Board adoption of a resolution regarding workers’ compensation
coverage for volunteers performing services to the agency in order to ensure compliance with the
requirements of Labor Code section 3363.5. (Exhibit 3.10.)
Action:
Upon motion of Mr. Horton, seconded by Ms. Steel and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board adopted the
resolution as recommended by staff.
ADMINISTRATIVE SESSION
ADMINISTRATIVE MATTERS, CONSENT
With respect to the Administrative Matters, Consent Agenda, upon a single
motion of Ms. Steel, seconded by Ms. Alby and unanimously carried, Ms. Yee, Mr. Horton,
Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board made the following orders:
Action:
Adopt the following resolutions extending its best wishes on their respective
retirements and its appreciation for their service to the State Board of Equalization and the State
of California. (Exhibit 3.11.)
Sandra Kay Ellerson, Tax Technician III, Out-of-State Sacramento Office, Sales
and Use Tax Department
Harold J. Scott, Business Tax Compliance Supervisor, Return Analysis Unit,
Sales and Use Tax Department
Elena A. Shroyer, Tax Technician III, Out-of-State Sacramento Office, Sales and
Use Tax Department
Luis Torres, Business Taxes Specialist I, Can Nuys Office
Edward Toussaint, Business Taxes Representative, Culver City Office
Estelita B. Velasquez, Tax Technician III, San Diego Office
Brenda Ward, Associate Personnel Analyst, Human Resources Division
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
73
Thursday, March 25, 2010
Adopt a resolution to Honorable Rick Auerbach, Los Angeles County Assessor,
Action:
extending its best wishes on his retirement and its appreciation for his service to the citizens of
Los Angeles County. (Exhibit 3.12.)
Action:
Approve the Board Meeting Minutes of November 17-19, 2009, December 1516, 2009, January 26-27, 2010, and, February 23-24, 2010.
Action:
Approve 2010 Timber Advisory Committee appointments. (Exhibit 3.13.)
Approve revisions to Audit Manual Chapter 4, General Audit Procedures.
Action:
(Exhibit 3.14.)
Approve revisions to Audit Manual Chapter 10, Occasional Sales - Sales of a
Action:
Business. (Exhibit 3.15.)
Members made complementary remarks regarding their experiences with
Honorable Rick Auerbach, Los Angeles County Assessor, thanked him for his diligent work for
the State of California, and wished him well in his retirement.
ADOPTION OF BOARD COMMITTEE REPORTS AND APPROVAL OF COMMITTEE ACTIONS
Legislative Committee
Action:
The Board deferred consideration of the Legislative Committee report to the
April meeting.
OTHER ADMINISTRATIVE MATTERS
Executive Director’s Report
Ramon Hirsig, Executive Director, provided an update on the Board’s 2010-2015
Strategic Plan.
Ms. Yee directed staff to consult with each Board Member’s office regarding
external stakeholders.
Mr. Hirsig introduced Anita Gore, Deputy Director, External Affairs Department,
and Anna Brannen, Chief Information Officer, Technology Services Division, who provided
updates on video streaming Culver City Board Meetings and the conferencing technologies pilot
project. (Exhibit 3.16.)
Mr. Hirsig introduced David Gau, Deputy Director, Property and Special Taxes
Department, who provided an update on the proposal to reorganize the Special Taxes Divisions
along functional lines. (Exhibit 3.17.)
Sales and Use Tax Deputy Director’s Report
Randie L. Henry, Deputy Director, Sales and Use Tax Department, provided an
update on the unapplied remittances project in response to Members’ request for the number of
unapplied remittances refunded without credit interest. (Exhibit 3.18.)
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2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
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Ms. Steel directed staff to provide her office with a copy of the notification letter
that will be sent to taxpayers with unapplied remittances.
The Board directed staff to provide procedures for returning these payments
made in error, with the Legal Department’s review, for the Board’s consideration at the April
2010 Board Meeting.
Administration Deputy Director’s Report
Christine Demes, Acting Chief, Administrative Support Division, Administration
Department, made introductory remarks regarding staff’s request for approval of the contract over
$1 million, Microsoft licenses, which would upgrade prior versions of Office to Office 2007.
(Exhibit 3.19.)
Ms. Mandel stated for the record that she would not participate in this matter and
left the Boardroom.
Action:
Upon motion of Ms. Yee, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby and Ms. Steel voting yes, Ms. Mandel absent and not
participating, the Board approved the Microsoft licenses contract as recommended by staff.
Ms. Mandel returned to the Boardroom.
Christine Demes, Acting Chief, Administrative Support Division, Administration
Department, provided an update on the Headquarters Remediation Project and made introductory
remarks regarding the 2009 State Agency Recognition Award (SARA), the Governor’s Bronze
Award to the Acquisitions Branch for increasing its participation in the State’s Small Business
and Disabled Veteran Business Enterprise programs.
Members made complementary remarks regarding staff of the Acquisitions
Branch and expressed their appreciation for staff’s excellent work.
The Board recessed at 12:36 p.m. and reconvened at 12:43 p.m. with Ms. Yee,
Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
FINAL ACTION ON SALES AND USE TAX APPEALS HEARINGS HELD MARCH 25,
2010
Kenneth Richard McLeod, 435025, 504922 (KH)
Final Action: Upon motion of Mr. Horton, seconded by Ms. Mandel and duly carried, Ms. Yee,
Mr. Horton and Ms. Mandel voting yes, Ms. Alby and Ms. Steel voting no, the Board ordered that
no further adjustments be made in the administrative protest and that the claim for refund be
denied as recommended by the Appeals Division, and directed staff to inform the petitioner of the
Offer in Compromise Program.
2010 MINUTES OF THE STATE BOARD OF EQUALIZATION
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Thursday, March 25, 2010
Rebecca Ann Scherz, 416659 (CH)
Eric Brian Scherz, 401795 (CH)
Final Action: Upon motion of Ms. Mandel, seconded by Mr. Horton and unanimously carried,
Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel voting yes, the Board ordered that the
petition be redetermined without adjustment and no adjustments be made in the administrative
protest as recommended by the Appeals Division.
FINAL ACTION ON PETITION FOR RELEASE OF SEIZED PROPERTY HELD
MARCH 25, 2010
DFC Gas & Wine, LLC, 513008 (ET)
Final Action: Upon motion of Ms. Alby, seconded by Ms. Mandel and duly carried, Ms. Yee,
Mr. Horton, Ms. Alby and Ms. Mandel voting yes, Ms. Steel voting no, the Board determined that
staff properly seized the tobacco products.
ANNOUNCEMENT OF CLOSED SESSION
The Board recessed at 12:57 p.m. and reconvened immediately in closed session
with Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
CLOSED SESSION
The Board met to discuss pending litigation (Gov. Code § 11126(e)), settlements
(Rev. & Tax. Code §§ 6901, 7093.5, 30459.1 and 50156.11) and personnel matters (Gov. Code §
11126(a)).
The Board recessed at 1:41 p.m. and reconvened immediately in open session
with Ms. Yee, Mr. Horton, Ms. Alby, Ms. Steel and Ms. Mandel present.
The Board adjourned at 1:42 p.m.
The foregoing minutes are adopted by the Board on May 26, 2010.
Note: The following matters were removed from the calendar prior to the meeting: portions of the
Administration Deputy Director’s Report (purchase of some SharePoint licenses; activated swing
space moves; Headquarters annex; and, 2009/10 and 2010/11 budget update, furlough plan and
layoffs).
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