1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 NOVEMBER 17, 2015 10 11 SALES AND USE TAX APPEAL HEARING 12 APPEAL OF 13 RONALD J. BLOMQUIST 14 NO. 467934, 565903 (FH) 15 AGAINST PROPOSED ASSESSMENT OF 16 SALES AND USE TAX 17 18 19 20 21 22 23 24 25 26 27 Reported by: Kathleen Skidgel 28 CSR No. 9039 1 1 P R E S E N T 2 For the Board Jerome E. Horton of Equalization: Chairman 3 4 Sen. George Runner (Ret.) Vice Chair 5 6 Fiona Ma, CPA Member 7 8 Diane L. Harkey Member 9 10 Yvette Stowers Appearing for Betty T. 11 Yee, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond 14 Chief Board Proceedings 15 Division 16 For Board of 17 Equalization Staff: Jeff Angeja Tax Counsel IV 18 Legal Department 19 For the Department: Erin Dendorfer 20 Tax Counsel Legal Department 21 Lawrence Mendel 22 Tax Counsel III Legal Department 23 Kevin Hanks 24 Chief, Headquarters Operations Division 25 For the Taxpayer: Alfred "Ted" Ruemke 26 Attorney 27 ---oOo--- 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 NOVEMBER 17, 2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next matter's Item C, 7 Sales and Use Tax Appeals Hearings; Item C1 Ronald 8 J. Blomquist. 9 Please come forward. 10 MR. HORTON: As the taxpayer settles in, I 11 would ask that Mr. Angeja please introduce the 12 issues in this case. 13 MR. ANGEJA: Good afternoon, Mr. Chairman 14 and Members. I'm Jeff Angeja on behalf of the 15 Appeals Division. 16 The appeal before you presents three 17 unresolved issues, which are whether taxpayer is 18 personally liable as a responsible person for the 19 unpaid liabilities of Blomquist Enterprises under 20 section 6829; second is whether the amounts due were 21 discharged in bankruptcy; third, whether taxpayer 22 has established reasonable cause for relieving 23 penalties for late payment of returns and late 24 prepayments. 25 And I'd like to add that we have a revised 26 recommendation. The Department's further review 27 indicates that the taxpayer's not liable for the 28 first quarter of '05 and for the last quarter of 3 1 two thousand -- fourth quarter of 2005. Those two 2 periods drop off, as well as the prepayment for the 3 second quarter of 2005. That's a reduction of tax 4 and penalties of one twenty -- approximately 5 $127,060. Interest would be reduced as well; I 6 haven't had the time to calculate that number. 7 MR. HORTON: Given the reduction, we will 8 now go to the taxpayer. 9 The taxpayer has ten minutes to make their 10 presentation. We'd ask that they'd commence with 11 their introduction. You certainly have the option 12 to respond to Appeals' most recent statement. 13 MR. RUEMKE: My response is, "That sounds 14 real good." Thank you. 15 MR. HORTON: You want to further clarify 16 "real good"? 17 MR. RUEMKE: Yes, I do. 18 MR. RUNNER: Good enough. 19 MR. RUEMKE: My name -- my name's Ted 20 Ruemke, and I represent Ronald J. Blomquist. 21 Mr. Blomquist is assessed significant taxes, 22 penalties and interest in his capacity as being a 23 responsible person of Blomquist Enterprises, Inc. 24 And Blomquist Enterprises, Inc. ceased 25 doing business in -- I think the -- the date being 26 used here was November 2005, when actually I think 27 there's evidence that it was in October 2005 that 28 they did cease doing business. 4 1 The business -- Blomquist Enterprises, Inc. 2 was owned and run by a married couple, Ronald J. 3 Blomquist and Linda Blomquist. For reasons unknown, 4 the Department only seriously considered 5 Mr. Blomquist as a responsible person. The only 6 reference I could find to Linda Blomquist was in the 7 June -- the June 17, 2011 Board hearing summary 8 which acknowledged that she was listed as the vice 9 president on the seller's permit but was not listed 10 as an officer with the Secretary of State in the 11 initial filings. 12 Additionally, the Department acknowledged 13 that there were some -- that they had spoken to 14 Mrs. Blomquist but that she, you know, when being 15 questioned, deferred to all the -- deferred to 16 Mr. Blomquist for all of the answers, which in my 17 household is a labor saving device. 18 The -- the summary then concludes, the 19 hearing summary, that the Department found that 20 there was no evidence, other than the seller's 21 permit application, indicating that Mrs. Blomquist 22 was a responsible person for BEI sales tax 23 compliance, and therefore the Department did not 24 issue a determination against her. 25 Now, the problem with that is, similar to 26 the other taxpayer that was here, is the Blomquists 27 are now divorcing. And the fact that if -- if the 28 Department had just done a little more research into 5 1 the public records available to the Department, they 2 would have discovered that Mrs. Blomquist was a 3 responsible person and, that if they had done a 4 little bit more research, she would be jointly 5 liable for this debt. 6 And the problem right now that 7 Mr. Blomquist is having is that they did have an 8 asset in the marriage, and that asset was sold, and 9 the proceeds of the sale were put in trust. 10 Mrs. Blomquist says, "That's mine. I don't 11 owe anybody. Didn't you see the June 11, two 12 thousand -- the June 17, 2011 summary?" 13 Mr. Blomquist says, "This is our debt. You 14 were there with me the whole time and all of the 15 proceeds need to go to the State to settle this 16 account with the State." 17 I have -- I provided to the Board many 18 public records that were available to the 19 Department, that if they had just looked they would 20 have seen, beginning with the -- October 2003 21 Statement of Information where she says she's 22 secretary and CFO. 23 In February 2005, she says she's vice 24 president, secretary and treasury in a Statement of 25 Information filed with the Secretary of State. 26 In the 1999 Statement of Domestic Stock 27 Corporation, she's listed as the director. 28 In the 2001 Surety Bond of Motor Vehicle 6 1 Verifier she signs as principal. 2 In the -- in lots of filings with the 3 Department of Consumer Affairs, Bureau of Automotive 4 Repair, she's listed herself -- and she signed all 5 of these documents by her -- she signed as 6 president, vice president, secretary/treasurer. 7 In the application for temporary branch 8 location, she signs as dealer. 9 In -- from May 27, 2005 through March 2006, 10 which is the period of time, partially, that we're 11 dealing with here, she signed the vehicle dealer 12 permits as licensee. And likewise -- I mean that 13 goes back to 2002 where she's signing as the 14 licensee for the business. 15 So I think if -- if -- if the Department 16 would have just looked, they would have found that 17 the chief financial officer, president, vice 18 president, secretary, treasurer, principal, dealer 19 is Linda Blomquist, I don't think that they would 20 have made that footnote that says that she is not 21 the responsible person, because she was just as 22 responsible as Mr. Blomquist. 23 And I'm not saying that Mr. Blomquist is an 24 innocent party. I am saying that they let -- they 25 let her go, and it's a -- it's a real problem for 26 him right now. 27 And because of -- because of the fact that 28 this is -- this is not his sole liability, which is 7 1 what the Department has put on him -- excuse me -- 2 he's asking for a equitable reduction in the amount 3 that is being assessed against him to reflect the 4 fact that the other responsible person is walking 5 away. 6 MR. HORTON: Thank you. I only hesitate 7 because that's an interesting argument. 8 MS. HARKEY: Interesting twist. 9 MR. HORTON: Thank you. 10 Members, let us go to the Department. The 11 Department has ten minutes to make their statement. 12 We would ask that they commence with their 13 introduction for the record. 14 I would also ask that they address the 15 concurrent liability position leading to 16 equitable estoppel, equitable relief. Okay. 17 Only if you wish. You can do what you want 18 to do. I just think there's a lot of wisdom in 19 doing that. 20 MS. HARKEY: If that helps. 21 MS. DENDORFER: Mr. Chairman and Members of 22 the Board, I'm Erin Dendorfer from the Board's Legal 23 Department, along with Lawrence Mendel and Kevin 24 Hanks representing staff. 25 We concur with the recommendation of the 26 Appeals Division; petitioner is liable under section 27 6829 for the liabilities of Blomquist Enterprises, 28 Inc., which was doing business as Bank Auto Resales. 8 1 Under section 6829 there are four elements 2 that the Department must establish for personal 3 liability to attach. 4 MR. HORTON: My apologies, but the 5 appellant has submitted that he is a responsible 6 person. He's not arguing that. 7 MS. DENDORFER: Okay. 8 Well, as for taxpayer's argument today that 9 another party should have been billed for 10 responsible person liability, the Department did 11 investigate the taxpayer's wife and concluded that 12 she was not a responsible person because she was not 13 in communication with the Board regarding sales and 14 use tax matters, which is an element that's required 15 for personal liability to attach under section 6829. 16 There's also evidence in the file that, on 17 the bankruptcy documentation, Ms. Blomquist was 18 terminated from the corporation in July of 2005. 19 And the liabilities at issue here today are only the 20 second quarter of 2005 and the third quarter of 21 2005, so she would not have been a responsible 22 person at the time that the liabilities became due. 23 Accordingly, we request that the 24 administrative protest and claim for refund be 25 denied. 26 MR. HORTON: On rebuttal, please. 27 MR. RUEMKE: In the section -- I did submit 28 some documents that show -- actually -- that Linda 9 1 Blomquist actually was not terminated. I have not 2 seen these bankruptcy documents. But she is still 3 writing checks, Bank Auto Resales checks through 4 August, certainly through August of 2005. And 5 there's several of those checks that have been 6 submitted. 7 I do not believe that she was -- in fact, I 8 think she participated -- in fact, there's a letter 9 in -- I also submitted a letter that she wrote to 10 the Bureau of Automotive Repair in December 11 of 11 2005 where she says, "Please be advised that 12 Blomquist Enterprises, Inc. has ceased business. 13 The new owners are BK Auto. I request a prorated 14 refund of my -- of my fee and they will pay the 15 balance of new fee costs. The transition occurred 16 October 20, 2005." 17 So she was -- and that's -- presumably, 18 that's also a public record. 19 (Pause.) 20 MS. MA: Yes. 21 MR. HORTON: Does that conclude your 22 testimony? 23 MR. RUEMKE: Yes, sir. 24 MR. HORTON: Thank you. 25 Discussion, Members? 26 Member Ma. 27 MS. MA: Yeah, so I'm confused because I do 28 see checks being signed in -- in August of 2005. 10 1 MS. DENDORFER: Right. 2 MS. MA: So -- 3 MS. DENDORFER: Yeah. I -- I was able to 4 review those checks also. 5 The -- one of the elements under section 6 6829 liability is that the party must be responsible 7 for the financial affairs of the corporation, 8 including sales and use tax matters. And they have 9 to have knowledge of the sales and use tax 10 liability, and we just didn't have that evidence in 11 this case. 12 She was involved in the corporation, yes. 13 But we didn't have evidence that showed she would be 14 personally liable for those liabilities. 15 And on the other hand, the taxpayer in this 16 case signed the sales and use tax returns, so there 17 was knowledge of the liability. 18 MS. MA: And did he sign all the checks 19 also, paying the sales and use tax? 20 MS. DENDORFER: Well, the reason we're here 21 today is because the sales tax was not paid. The 22 sales tax reimbursement was not turned over to the 23 State. 24 MS. MA: But how about past his- -- how 25 about past history? Because it looks like she signs 26 all the checks. 27 MR. HANKS: Ms. Ma, you're correct, it does 28 appear as though she had signatory authority to -- 11 1 to sign the checks. And we don't dispute that that 2 was the case in this matter. Given the copies of 3 the checks that we've looked at today, we agree that 4 she participated in some manner in the business. 5 But, unfortunately, we didn't have the information 6 that indicated that she was knowledgeable about the 7 sales and use tax liability. 8 The communication that the Department had 9 had with the petitioner was actually with 10 Mr. Blomquist. When an installment payment 11 agreement was -- was discussed, it was Mr. Blomquist 12 that -- that we dealt with. He signed the sales and 13 use tax returns as well. So we just didn't see that 14 Mrs. Blomquist had the knowledge of the amounts that 15 are in question today. 16 One last matter. It appears, too, there 17 would be a statute of limitations issue for us. 18 There's a three-year statute period that applies. 19 And so the statute actually ran for issuing another 20 determination against another party in January of 21 2009. 22 MR. HORTON: Members, just -- 23 MR. RUEMKE: May I comment on that? 24 MR. HORTON: Member Ma? 25 MS. MA: I -- I don't know. I mean I have 26 a little bit of an issue when husband and wife are 27 doing business together, the wife clearly signs 28 checks and documents, and then you're saying because 12 1 the husband signed the actual tax return, he's the 2 only one that's liable. 3 MS. DENDORFER: I -- I don't believe that's 4 what we're saying here. We're just saying that 5 under section 6829 there's a requirement that the 6 party has to be aware of the sales and use tax 7 matters and be involved with the Board regarding the 8 sales and use tax matters specifically. And we just 9 didn't have that evidence for the taxpayer's wife in 10 this case. 11 MS. MA: So maybe I can ask the 12 representative, what did the husband and wife do? 13 Do you know them? 14 MR. RUEMKE: The husband actually is my 15 brother. 16 MS. MA: Okay. So you know them pretty 17 well. 18 MR. RUEMKE: Yes, I do know them very 19 well. 20 MS. MA: Okay. So, how did they operate 21 their business? 22 MR. RUEMKE: They actually -- it was pretty 23 much -- I work -- I also work with my wife and it 24 was pretty much the same way. 25 My -- my brother basically worked for his 26 wife. I mean my brother was the expert in selling 27 the cars. She was -- she ran the office, is what 28 she did. He ran the sales force. And that's how 13 1 they operated the business. 2 She was well aware of everything going on 3 financially because she was primarily in charge of 4 the finances of the company. The fact that she did 5 not want to deal with the liability -- I mean, I 6 don't know who initiated the call that they referred 7 to in that June 2011 footnote, but it wouldn't 8 surprise me if she was calling them up to find out 9 how much they owed and to -- because she was -- had 10 limited funds available. 11 But it was her that was -- that was 12 deciding which creditor to pay, and -- and it wasn't 13 Mr. Blomquist. 14 MS. MA: Did they have a bookkeeper? 15 MR. RUEMKE: No, they did not at that time. 16 Because of the -- financially, the business was 17 failing in 2005. Otherwise -- because in all the 18 prior years they operated, the sales and use tax was 19 paid. But it was 2005 that things kind of fell 20 apart. 21 And on the statute of limitations issue -- 22 I just want to add this real quick -- that may be 23 one of the problems with why the Department did not 24 pursue Mrs. Blomquist, is because they didn't even 25 file anything against Mr. Blomquist until October 26 2008, I believe, like three months before the 27 statute was going to run. 28 MS. MA: I'm aware of the statute issue. 14 1 But I'm just trying to get to the bottom of this 2 because, you know, when people operate a business, I 3 kind of like to know who is doing what in the 4 business. 5 So, your brother -- 6 MR. RUEMKE: -- was in charge of sales. 7 MS. MA: Okay. 8 MR. RUEMKE: He had a sales force. 9 MS. MA: Would he have filed the sales tax 10 return knowing how much sales they made and how to 11 fill out the sales tax return? 12 MR. RUEMKE: Yes. 13 MS. MA: Okay. 14 MR. RUEMKE: He did -- he did know how to 15 do that. And -- and Linda knew how to do it, too. 16 And what would normally happen is Linda would 17 prepare it and Ron would sign it. 18 MS. MA: Okay. 19 MR. RUEMKE: Just because she -- well, I 20 don't need to say that. 21 MS. MA: Okay. 22 MR. RUEMKE: But that -- you know, that's 23 good instincts. 24 MR. HORTON: Okay. 25 MS. STOWERS: Chairman? 26 MR. HORTON: Members, let me go to Appeals, 27 to the point in question here relative to the 28 request of the taxpayer's request for relief and 15 1 that they are concurrently liable and maybe some 2 adjustment or estoppel. 3 MR. ANGEJA: I'm aware of no authority that 4 allows any kind of equitable reduction based on the 5 allegedly responsible person that we didn't get but 6 should have. 7 Further, adding someone else to the 8 liability, if there were a second party that should 9 be added, doesn't decrease the amount that's at 10 issue. It might make a difference for purposes of 11 collection. But in terms of the legal liability, 12 more than one person can be liable. But so far 13 as -- so long as all four elements are met as to any 14 one individual, that individual is responsible for 15 that amount regardless of who else might also be 16 responsible. 17 MR. HORTON: Okay. Life would have been a 18 lot easier if the Department had responded. 19 But -- further question. 20 Mr. Runner? 21 MR. RUNNER: Yeah, what -- what, um -- so 22 the -- during the -- during this audit, or during 23 this period of time, the tax -- the -- it was filed 24 by the -- by Mr. Blomquist. No checks were written 25 during this period of time, which is why there's a 26 liability, correct? 27 How about prior this time? What was their 28 relationship to the BOE and who wrote checks to the 16 1 BOE prior to this? 2 MS. DENDORFER: I don't have that 3 information. 4 MR. MENDEL: We know that the prior returns 5 were all signed by Mr. Blomquist. 6 MR. RUNNER: How about the checks? 7 MR. MENDEL: I don't know. 8 MR. HANKS: I'm -- I'm -- 9 MS. DENDORFER: Mr. -- sorry. 10 Mr. Blomquist entered into an installment 11 payment agreement for the first quarter of 2005 for 12 those liabilities and he made payments under that. 13 MR. RUNNER: Did he write the checks? 14 MS. DENDORFER: I'm not sure. I don't -- 15 MR. RUNNER: That's kind of a critical 16 issue for me right now, trying to figure out who 17 actually wrote checks. 18 MS. STOWERS: Chairman? 19 MR. RUNNER: Because, again, we've had -- 20 we've had -- in history, we've -- I mean we clearly 21 have people who've signed returns but they weren't 22 held accountable. You know, they were responsible. 23 We've had people who'd write checks, they weren't -- 24 they weren't held responsible. 25 It was this broader view in regards to who 26 actually had control. 27 MR. HANKS: Right. 28 MR. RUNNER: And -- and, again, I think, 17 1 you know, the taxpayer representative went through 2 this long list of the roles that Mrs. Blomquist had 3 in the corporation, but none of those necessarily 4 indicate then responsible party. 5 MR. HANKS: Right. 6 MR. RUNNER: It's going to come down -- so 7 I'm interested to kind of figure out prior to this 8 time was she writing checks to the -- to the BOE? 9 MR. MENDEL: I don't have the check 10 answers, but our ACMS notes just consistently 11 indicate that the only one we communicated with was 12 Mr. Blomquist. And when his wife was on the line, 13 she would just defer all questions to him. So that 14 led us to believe that she was not directly involved 15 in sales and use tax matters. 16 MR. HANKS: We do also note that 17 Mr. Blomquist's electronic signature as present, 18 appeared on the bankruptcy court documents. And he 19 was also identified within those documents as the 20 hundred percent sole shareholder of the corporation. 21 So that was also informative to us as to who the 22 responsible party might be. 23 MR. RUNNER: There's only one corporation 24 that we're dealing with and he's listed as a hundred 25 percent? 26 MR. HANKS: Yes. 27 MR. RUNNER: Can you explain how that 28 would -- could take place? 18 1 MR. RUEMKE: Yes. 2 MR. RUNNER: Apparently, but you don't want 3 to. 4 MR. RUEMKE: I believe what happened was 5 when they were going to file the bankruptcy, Linda 6 told him she didn't want to be a part of it and then 7 transferred all of her interest into -- to Ron, so 8 that Ron could be the sole shareholder and deal with 9 the bankruptcy by himself. 10 MR. RUNNER: Okay. Okay, thank you. 11 MR. HORTON: Member Stowers. 12 MS. STOWERS: Okay. To the Department. 13 Mr. Runner asked did the former spouse also sign 14 checks, I mean for the prior tax due. And you're 15 indicating that you don't know, you don't have that 16 record in front of you right now. 17 MS. DENDORFER: I -- I do have some returns 18 for prior periods that were signed by bookkeepers. 19 But I don't -- 20 MS. STOWERS: -- have checks. 21 MS. DENDORFER: -- I don't know if there -- 22 MS. STOWERS: Actually my question is 23 this -- I'm just looking at the statute -- does it 24 matter if we're looking at these particular periods? 25 Is it these periods that you would need to see that 26 she had financial responsibility for the sales and 27 use tax, when the sales and use tax became due? 28 MS. DENDORFER: Yeah. We would need -- 19 1 MR. HANKS: Yes. Yes. 2 MS. STOWERS: Yes? 3 MR. HANKS: That's accurate. 4 MS. STOWERS: That's accurate? 5 MR. HANKS: That's accurate, yes. We'd be 6 looking at -- 7 MS. STOWERS: So for what we have here, we 8 know that she did not -- well, no one signed -- she 9 did not sign the checks because it's a 10 non remittance tax return. But we do know that 11 Mr. Blomquist communicated with the Board of 12 Equalization regarding an unpaid tax liability and 13 signed the tax returns. 14 MS. DENDORFER: Yes. 15 MS. STOWERS: Okay. And they have conceded 16 that he is a responsible party. 17 MS. DENDORFER: That's my understanding. 18 MS. STOWERS: Okay. Thank you. 19 MR. HORTON: Member Harkey? 20 MS. HARKEY: I -- without some 21 clarification, I'm struggling here because I think 22 we're beyond statute of limitations, as was 23 indicated. So this conversation about where she was 24 or wasn't probably doesn't help. I think it's nice 25 to add clarity, but it's not going to bring us to 26 the result that the taxpayer would like to see. 27 So, I'm trying to figure out -- I mean I 28 have reviewed this file, looked at it at length. 20 1 I -- I see that the taxpayer in question is now 2 working for someone else; is that true? 3 MR. RUEMKE: That is correct. 4 MS. HARKEY: Okay. He doesn't have his own 5 business. 6 The final year he paid himself for the 7 entire year is, what I'm seeing is like $92,000. 8 That's not really high flying if you've got a house 9 and a family. 10 I don't think he -- I'd like to try to give 11 some kind of a break here because I hate to pursue 12 him into perpetuity. He doesn't appear to be living 13 high right now. He appears to be making his bills 14 and trying to deal with this. 15 So I -- I guess to the Appeals, is there 16 any kind of break, so to speak, that we could allow 17 here, interest, penalties, anything at all that 18 might -- because I think we do have a responsible 19 party. We have the only one we can have at this 20 point, regardless of what happened in the past. 21 He's admitted that he did not remit the 22 taxes, but he did go BK during that time. He did 23 not just wipe out money for himself. It looks like 24 he probably paid his employees, did what he had to 25 do to keep himself out of jail, and in essence did 26 not remit the tax. And nobody really got it. It 27 didn't go anywhere. It just kind of went to 28 shutting down the business and getting rid of it. 21 1 So is there any kind of allowance? Or 2 other than offers in compromise or something? 3 MR. ANGEJA: That's what I was -- that's 4 what I was going to suggest. Because under the law, 5 there's not. Even the innocent spouse statutes 6 require that the party that's claiming have -- well, 7 basically be innocent, obviously if it's inherent. 8 But did not know or have reason to know the tax 9 liability. You basically can't have a person liable 10 under -- 11 MS. HARKEY: Right. 12 MR. ANGEJA: -- 6829 qualify for innocent 13 relief, innocent spouse relief. 14 MS. HARKEY: Right. 15 MR. ANGEJA: OIC or settlement, I do know 16 under family law this liability, even though we 17 should be deciding it under sales and use tax law, 18 it's still -- I don't know when the separation was, 19 so I don't have that question. I don't mean to 20 cross-examine anybody. But depending on when the 21 parties separated, it could still be a community 22 property asset for the business, community property 23 debt, even for the 6829 liability, so you could 24 still have a joint and several liability for family 25 law purposes. But that doesn't help us resolve the 26 tax question that's in front of us. 27 MS. HARKEY: Right. I just -- I'm -- I'm 28 questioning whether there's even the ability to pay 22 1 at this point, my review. 2 So I'd kind of like to -- this has been 3 going on 2005. It seems like a long nightmare. 4 Okay. Thank you. 5 MR. HORTON: Member Ma. 6 MS. MA: So I'm having the same struggles. 7 You know, I see signatures from Linda on the DMV 8 vehicle dealer licenses issued May 27, 2005. I see 9 her signature on documents that say she is the vice 10 president, secretary/treasurer. Another one she 11 signed as the owner. Another one she signed as vice 12 president, secretary/treasurer. 13 I mean I'm having a little problem putting 14 all the debt onto just Mr. Blomquist. In my 15 opinion, based on the documents and what we 16 understand and her actually signing and giving 17 herself these titles, she was actively involved in 18 this business. And I'm just having a little problem 19 assigning a hundred percent just to him just because 20 the bankruptcy or they got a divorce and, you 21 know. 22 MR. ANGEJA: I understand the question. 23 The problem is that 6829, one of the elements is 24 element three, the person has to be responsible for 25 sales and use tax compliance. Just being the 26 officer or just writing checks to vendors or making 27 payroll isn't enough to sustain liability against 28 someone. That would be a failure of element three. 23 1 And that element has to be satisfied when the tax is 2 due. 3 So for the third quarter, with her being 4 terminated on October 20th of '05, tax isn't due 5 'til the 31st. But what I'm not seeing, and we 6 haven't seen evidence yet, is her responsibility for 7 sales and use tax compliance. She might have been 8 involved financially and otherwise, but that -- 9 unless we have evidence that it's sales and use tax 10 compliance, we wouldn't be holding her liable of her 11 appeal in front of us today. And that's why the 12 Department didn't go after them -- after her. 13 MS. HARKEY: And it's beyond the statute of 14 limitations. 15 MR. HORTON: What's the, um -- does the 16 Board have authority to recommend relief to the -- 17 if he were to file with the -- I don't know what the 18 name of that board is. 19 MR. ANGEJA: Victim's compensation? 20 MR. HORTON: Yes. 21 MR. ANGEJA: I looked into that. There 22 isn't really a tort that's committed or a breach of 23 contract -- 24 MR. HORTON: Yeah. 25 MR. ANGEJA: -- that's committed by the 26 State. 27 MR. HORTON: Stretching it. Okay. 28 MR. RUNNER: Let me just ask, again, in a 24 1 civil capacity, I mean it seems to me what I've 2 heard was there's -- there's an account of money out 3 there. 4 MR. RUEMKE: Yes. 5 MR. RUNNER: And so there's this account of 6 money to which -- to which your -- your client, or 7 your brother at that point, feels like, gee, some of 8 that money needs to go toward settling up this 9 debt. 10 MR. RUEMKE: Correct. 11 MR. RUNNER: And, um -- and your -- and 12 your portion, you shouldn't just get your portion of 13 that and walk away from this debt; is that -- 14 MR. RUEMKE: Correct. 15 MR. RUNNER: Okay. 16 MR. RUEMKE: That is precisely correct. 17 MR. RUNNER: So let me ask you -- see, the 18 other issue I -- I'm not -- I'm just wondering if 19 there's additional civil responsibilities that you 20 guys can go down, a path to go down. 21 MR. RUEMKE: Well, and obviously they 22 haven't had their divorce hearing on property and he 23 is claiming -- 24 MR. RUNNER: They haven't yet? 25 MR. RUEMKE: No. They have not. 26 MR. RUNNER: Oh, well. 27 MR. RUEMKE: He is claiming this is a 28 community debt. She's claiming no, it's not; didn't 25 1 you see the June -- 2 MR. RUNNER: Okay. 3 MR. RUEMKE: -- 2011 thing that says this 4 is all you? 5 MR. RUNNER: So is part of your concern the 6 fact that if we then decide that she is not, which 7 is hard for -- again, I'm just saying, then that 8 backs up her story for when she goes into a civil 9 litigation? 10 MR. RUEMKE: Well -- 11 MR. HORTON: No. 12 MR. RUNNER: Let him finish. 13 Go ahead. 14 MR. RUEMKE: Because the statute has run on 15 her -- 16 MR. RUNNER: Right. 17 MR. RUEMKE: -- you know, I think that the 18 position can be taken in the divorce action that no, 19 that doesn't matter. That, because they couldn't 20 come after you anyway. 21 MR. RUNNER: Okay. 22 MR. RUEMKE: So, I mean the -- the 23 uncertainty is what the divorce judge is going to 24 do. 25 MR. RUNNER: Mm-hmm. 26 MR. RUEMKE: And Ron wants to use that 27 money to go into offer in compromise. And she wants 28 to use that money to, you know, buy another house or 26 1 whatever. 2 MR. RUNNER: Okay. 3 MR. RUEMKE: You know, to use it as she 4 sees fit. 5 MR. HORTON: Member Harkey. 6 MS. HARKEY: Well, as I've stated, from our 7 perspective, she's out of this. We can't -- 8 statute's run, 6829's over. Regardless of whether 9 she should have been or should not have been, it's 10 over, and that's what the record shows. 11 So I'm just kind of trying to find some 12 other avenue. I mean, people do things getting a 13 divorce that they probably shouldn't do, and they 14 sign things that they shouldn't. And maybe your 15 brother shouldn't have let her out of the 16 corporation or shouldn't have whatever, but it's 17 done. 18 And I think that the Department 19 legitimately pursued the path that they had and they 20 followed all of our criteria. The problem is now I 21 just don't -- I'm not so sure that there's an 22 ability to pay it anyway. 23 So, thank you. 24 MR. RUNNER: There is the ability. They 25 got money in the bank. 26 MR. HORTON: How much -- how much monies 27 are being held? 28 MR. RUEMKE: I believe it is $80,000. 27 1 MR. HORTON: To the Department, these -- 2 this -- we're speaking of sales tax, right? 3 MS. DENDORFER: Yes. 4 MR. HORTON: Okay. These are taxes that 5 were collected from California taxpayers and not 6 remitted to the Board? 7 MR. MENDEL: That's correct. 8 MR. HANKS: Correct. 9 MR. HORTON: Do you know what he used the 10 taxes for? 11 MR. RUEMKE: I -- to pay other vendors and 12 creditors. The business was -- the business was not 13 being operated in a fiscal -- fiscally responsible 14 manner obviously. 15 MR. HORTON: Did he pay himself as well? 16 MR. RUEMKE: Well, he put a lot of his own 17 money into the business. A lot of his own money, a 18 lot of their money, because it was Linda's money, 19 too. 20 They -- they -- they bankrupted themselves 21 in trying to make this business go. And so when it 22 was over, really all they had was that one asset 23 which they claimed, the homestead asset. And so 24 they didn't make anything. 25 MR. HORTON: Further discussion, Members? 26 Hearing none, is there a motion? 27 Member Ma moves to take the matter under 28 submission. Second by Member Harkey. 28 1 Without objection, Members, such will be 2 the order. 3 Thank you very much for appearing before us 4 today. The Board will take your matter under 5 consideration later on this evening and send you a 6 written report of our decision. 7 MR. RUEMKE: Thank you very much. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Kathleen Skidgel, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on November 17, 2015 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 29 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: July 21, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 30