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 FEBRUARY 24, 2016 10 11 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Sen. George Runner (Ret.) Vice Chairman 6 7 Fiona Ma, CPA Member 8 9 Diane L. Harkey Member 10 11 Yvette Stowers Appearing for Betty T. 12 Yee, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief Board Proceedings 16 Division 17 For Board of 18 Equalization Staff: Deborah Cumins Business Taxes 19 Specialist III Legal Department 20 Chad Bacchus 21 Tax Counsel Legal Department 22 Jeff Angeja 23 Tax Counsel IV Legal Department 24 25 ---oOo--- 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 FEBRUARY 24, 2016 4 ---oOo--- 5 MR. HORTON: Members, let us reconvene the 6 meeting of the Board of Equalization. 7 We will take up the items for final 8 actions, resolve those issues for the taxpayer. 9 Ms. Richmond, what would be our first item? 10 MS. RICHMOND: Our first item would be Item 11 C2 Jantex Inks & Beyond, Inc. 12 ---oOo--- 13 ITEM C2 14 JANTEX INKS & BEYOND, INC. 15 NOS. 712415, 797612, 816214 (AP) 16 ---oOo--- 17 MR. HORTON: Discussion? 18 MS. HARKEY: I move to grant the 19 petition. 20 MR. HORTON: Member Harkey moves to grant 21 the petition. 22 MR. RUNNER: Second. 23 MR. HORTON: Second by Member Runner. 24 Objection? 25 Ms. Richmond, please call the roll. 26 MS. RICHMOND: Mr. Horton. 27 MR. HORTON: No. 28 MS. RICHMOND: Ms. Harkey. 3 1 MS. HARKEY: Aye. 2 MS. RICHMOND: Mr. Runner. 3 MR. RUNNER: Aye. 4 MS. RICHMOND: Ms. Ma. 5 MS. MA: Aye. 6 MS. RICHMOND: Ms. Stowers. 7 MS. STOWERS: No. 8 MS. RICHMOND: Motion carries. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 MR. HORTON: Next item? 2 MS. RICHMOND: Our next item is C4 Brian 3 Scott Gerstein. 4 ---oOo--- 5 ITEM C4 6 BRIAN SCOTT GERSTEIN 7 NO. 606328 (EA) 8 ---oOo--- 9 MS. HARKEY: I'd like to move -- make a 10 motion to allow the four transactions for the 11 hundred and $150, and to have the drop shipment be 12 handled separately, as taxable separate item. And 13 then sustain the rest of the staff recommendation 14 for the remaining amounts. 15 MR. RUNNER: Let me -- can we talk about 16 that for a minute? 17 MS. HARKEY: Sure. 18 MR. RUNNER: Because I have a question in 19 regards to the -- actually the NASCAR tax -- or 20 watch. 21 MS. RICHMOND: Do we need a second? 22 MR. HORTON: Why don't we just open up for 23 discussion, and then we'll take a motion. 24 MS. HARKEY: Are you going to second it? 25 Oh, you want to open it up for discussion? 26 MR. HORTON: The challenge with the second 27 is is that we have to speak to the motion. 28 MR. RUNNER: And that'll be -- and that'll 5 1 be what would be voted on. 2 MS. HARKEY: Oh, okay. 3 MR. HORTON: We'll get there. 4 MR. RUNNER: Let's have the broader 5 discussion and see if -- 6 MS. HARKEY: Okay. I'll withdraw. 7 MR. RUNNER: -- if there's a common motion 8 or something. 9 MS. HARKEY: Not second. 10 MR. HORTON: We'll get there. 11 Member Runner. 12 MR. RUNNER: You know, my -- my question's 13 in regards to -- I mean I think there's some valid 14 issues on those, too. But, to me, the NASCAR watch 15 was also an item to which there was clear 16 communication on the part of the taxpayer, tried to 17 clarify. 18 Now, did he -- did he indeed -- in that 19 correspondence was the phrase -- I'll find it here. 20 Where's my phrase? 21 You know, did it say "for resale," quotes, 22 as -- as the -- as the regulation says? Or did he 23 actually intend -- mean "resale" by the -- by the 24 nature of the -- of the -- of the conversations? 25 And I'm trying to find the reg. here real 26 quick, because I do have a question in regards to -- 27 to that. Yeah. Yeah, right. And the reg. says it 28 has to have the phrase "for resale." 6 1 And, again, I just think the nature of all 2 of his questions and whatnot indicated that that was 3 his intent. You know, I don't know what to do and, 4 again, I -- the idea that the XYZ letter, the guy 5 said, no, I was going to use it. But, again, I'm 6 not sure how else the guy answers the question, 7 because if he says I -- if I -- if I answer it 8 wrong, then I'm going to owe the tax. 9 So, I think he's not taking -- you know, 10 the XYZ letter, I don't know how useful that is 11 because it's kind of self-incriminating for him to 12 answer that. 13 So, I don't know. I still have -- I have a 14 question about that one, too. So I just wanted to 15 kind of throw that out before we actually started 16 the discussion, in the discussion. 17 MS. STOWERS: Chairman. 18 MR. HORTON: Member Stowers. 19 MS. STOWERS: Actually, I see it different 20 for that watch. 21 Wasn't that email after the fact, so that 22 he didn't take any type of resale certificate or 23 attempt to take a resale certificate at the time of 24 the sale so he can say he took it in good faith? 25 MR. RUNNER: Was it -- I don't know. Was 26 that after the -- I thought it was during the -- I 27 thought it was during the negotiation of the sale. 28 MS. CUMINS: I think you might be right. 7 1 MR. BACCHUS: The email correspondence 2 where he -- where taxpayer asked the customer if he 3 had a resale number was on March 20th -- or March 4 30th, 2011. He responded the same day. And then 5 the transaction -- 6 MR. RUNNER: Yeah, because he's saying, 7 "Please email me back the serial number and model 8 number so I can make a payment." 9 So -- right? I mean this is -- this was 10 all during the negotiation of the sale, it seemed to 11 me. 12 MR. BACCHUS: Right. The -- the 13 negotiation earlier. The email's correspondence 14 that we have starts on March 29th. So it was in 15 that same -- 16 MR. RUNNER: Right. 17 MR. BACCHUS: -- within a few days. 18 MS. STOWERS: Excuse me. It was during the 19 sale transaction? 20 MR. BACCHUS: According to the email 21 correspondence, they were negotiating price on March 22 29th. 23 MS. STOWERS: Do we have the invoice? 24 MR. BACCHUS: I -- 25 MR. RUNNER: We should somewhere, because 26 the invoice needs to include -- I think we've -- I 27 mean there was actually phrasing on the invoice that 28 somebody talked about. So I assume we've got an 8 1 invoice somewhere on it. 2 MS. STOWERS: Okay. 3 And then my other item is on the -- the 4 drop shipment. You know, at first I was thinking 5 that, okay, this is a different transaction, it's 6 nonreocurring and it should be moved out and just 7 taxed separately. But their own testimony was that, 8 one, they did drop shipment on a regular basis 9 in-state and out-of-state, and they weren't going to 10 do anymore California drop shipment because now 11 they've seen that they're going to be responsible 12 for the tax. 13 And then when I go to the Audit Manual with 14 respect to nonoccurring events -- or nonrecurring 15 items, it doesn't fall into that category that -- it 16 was something that they sold on a regular basis, a 17 watch. And the amount was within the same amount 18 that they normally sell. So I don't see how we 19 could pull that out based on the Audit Manual. It 20 was rightfully included in the sample. 21 As far as the other items, there's just not 22 enough evidence for me to agree that it was not a 23 sale. The -- the letter that he did get from one 24 client was just not enough for me. 25 MS. HARKEY: Okay. So you don't like the 26 motion. 27 MS. STOWERS: Well, I was being polite. 28 MR. RUNNER: Any part of it -- any part of 9 1 it, I believe. 2 MS. STOWERS: No, I get it. 3 MS. HARKEY: Don't like any part of that 4 one. 5 MR. HORTON: Members, my concern with the 6 NASCAR watch is is that no resale certificate 7 exists. Unfortunately, the intent of the party, no 8 matter how it's consummated or conveyed, unless 9 their intent was is that -- if they -- I guess if 10 they specifically said that this modifies any -- any 11 previous documents or so forth, the mere discussion 12 of what you intend to do is -- is tantamount to the 13 discussion that takes place with the auditor and so 14 forth. 15 And the reverse wouldn't hold true. In 16 looking at taxation, one of the things I try to look 17 at is a double-edged sword, that if that was the 18 case when they had a valid resale, the card, and 19 someone said, well, we're going to use this, well, 20 that resale card would actually relieve them of the 21 liability regardless of what they intended or 22 regardless of what email they sent or so forth. And 23 so, I'd have some issues with that. 24 The reoccurring nature, we tried to get 25 there on the reoccurring nature, but the taxpayer 26 testified themselves. And, quite frankly, you know, 27 I wanted to interrupt, but I couldn't. And he said 28 it a couple of times that it's not reoccurring, it's 10 1 something that is consistent, and its business is 2 directly related to a sale that we do all the time. 3 And so, to pull that out as a nonrecurring, 4 I think, would be an inherent challenge. 5 The items, we certainly wanted to be able 6 to -- to, uh -- to sort of stratify this. And 7 however the small amount items -- the testimony was 8 is that they are reflective of the audit period and 9 what happens throughout the audit period. Pulling 10 those out, too, would be somewhat complicated from 11 my perspective. 12 But, anyway. 13 MS. HARKEY: I -- I would just like to 14 clarify on that. I think the items, the 100 to the 15 150, those four items, what occurred is that the 16 Department pulled out one document that showed a 17 $6,000 watch with a $500 insurance which we got 18 explained was really should have been $5,000. And 19 if you shipped anything that's worth $6,000 and 20 you've only insured it for 500, you're really in 21 trouble. 22 So I do believe that was an honest -- 23 honest mistake. So I think that these other 24 transactions for which there were no -- there were 25 no invoices because they were truly just for 26 shipment of, like he said, a watch. 27 He seemed very credible and believable to 28 me. I didn't feel like he was lying to us about 11 1 those items. Then he also had two -- two 2 documents -- or two responses on two of the items. 3 The other two items didn't have responses on them, 4 but he did show the receipts for those, for the, 5 uh -- the shipment. So I think he was very credible 6 on those, those four transactions. 7 As for the watch, yeah, I -- I empathize, 8 but I think we've had a lot of discussion on the 9 proper form for sales for -- the proper form for 10 resale. But I do think that that transaction -- I 11 did ask him, I did ask him specifically. So the 12 only transaction that was -- of these being 13 questioned that is nonrecurring is the drop ship. 14 And he -- he did confirm, yes. 15 So, maybe something else that I didn't on 16 clue in. But I did listen the questioning there. 17 So we could bifurcate this. I mean -- 18 MR. RUNNER: Just go ahead. I'm fine if 19 you want to restate the motion. 20 MS. HARKEY: Okay. I mean I could do any 21 or all. But I'd -- I'd move to allow the four 22 transactions for $100 to 150, and to account for the 23 drop shipment handled separately as an abhorrent 24 item or a nonrecurring item. And sustain the staff 25 recommendation for the remaining accounts. 26 MR. RUNNER: Second. 27 MR. HORTON: There's a motion as so stated, 28 second -- by Member Harkey, second by Member Runner. 12 1 Members, I would have to share, just to the 2 issue of credibility, not to question the taxpayer's 3 credibility. But the Department's equally credible, 4 and their review and analysis of that, that it was a 5 service in connection with the sale of tangible 6 personal property. And so -- and these are verbal 7 statements that we have the actual documents before 8 us, the analysis made by the Department, which 9 disputes that verbal statement despite their 10 appearance of credibility. 11 So I'd have to object to that. 12 Further discussion, Members? 13 Hearing none, Ms. Richmond, please call the 14 roll. 15 MS. RICHMOND: Mr. Horton. 16 MR. HORTON: No. 17 MS. RICHMOND: Ms. Harkey. 18 MS. HARKEY: Aye. 19 MS. RICHMOND: Mr. Runner. 20 MR. RUNNER: Aye. 21 MS. RICHMOND: Ms. Ma. 22 MS. MA: No. 23 MS. RICHMOND: Ms. Stowers. 24 MS. STOWERS: No. 25 MS. RICHMOND: Motion fails. 26 MR. HORTON: Subsequent motion, Members? 27 MS. HARKEY: I'd like to move to allow the 28 four transactions for 100 through 150 and sustain 13 1 the staff recommendation for the projection of the 2 remaining accounts. 3 MR. RUNNER: I'll second. 4 MR. HORTON: That's the same motion. 5 MS. HARKEY: No, it's not. No, it's not. 6 It just -- 7 MR. RUNNER: What'd you take out? 8 MS. HARKEY: It does not -- I did not take 9 out the drop ship. 10 MR. RUNNER: Yeah. 11 Ms. HARKEY: And that's a big item. 12 MR. HORTON: Let me hear it again, 13 Member. 14 MS. HARKEY: Okay. There were four 15 transactions for 100 -- three at 100 and one at 150 16 that had shipping labels, no -- no receipts or no 17 invoices, as I understand it. And they were 18 verified and explained to me in full detail by -- by 19 the -- the appellant. 20 And the Department didn't really -- I'm not 21 distrusting what the Department said, but the 22 Department basically said there were no invoices, so 23 we're just assuming that they were at a certain 24 level. And the problem with that assumption is you 25 don't -- you don't insure something of a large value 26 for a hundred bucks. 27 So I think he was very right and accurate 28 in saying that the minimum is a hundred dollars, he 14 1 just -- you know, he had to pay for a hundred 2 dollars. It didn't cost him anything, and he did 3 it. 4 So I want to move to allow those four 5 transactions for 100 and -- 100, 100, 100, and then 6 one for 150, and then sustain the staff 7 recommendation for the projection of the remaining 8 accounts. 9 MR. HORTON: I still would object. The 10 logic, it seems to me, a little counterintuitive in 11 that if the -- if it was insurance, I would agree 12 that you just don't insure something for a hundred 13 bucks; therefore, the conclusion made by the 14 Department that it was service in connection with 15 the sale of tangible personal property, I think is a 16 reasonable conclusion on their part. 17 But there's a motion, second. 18 Ms. Richmond, please call the roll. 19 MS. RICHMOND: Mr. Horton. 20 MR. HORTON: No. 21 MS. RICHMOND: Ms. Harkey. 22 MS. HARKEY: Aye. 23 MS. RICHMOND: Mr. Runner. 24 MR. RUNNER: Aye. 25 MS. RICHMOND: Ms. Ma. 26 MS. MA: No. 27 MS. RICHMOND: Ms. Stowers. 28 MS. STOWERS: No. 15 1 MS. RICHMOND: Motion fails. 2 MR. RUNNER: Somebody else better make a 3 motion. 4 MS. HARKEY: I give up. 5 MS. STOWERS: Move to adopt staff 6 recommendation to deny the petition. 7 MR. RUNNER: Somebody else's turn. 8 MS. HARKEY: Object. 9 MR. HORTON: Member Stowers moves staff 10 recommendation, second by Member Ma. 11 MS. MA: Yes. 12 MR. HORTON: Objection noted. 13 Ms. Richmond, please call the roll. 14 MS. RICHMOND: Mr. Horton. 15 MR. HORTON: Aye. 16 MS. RICHMOND: Ms. Harkey. 17 MS. HARKEY: No. 18 MS. RICHMOND: Mr. Runner. 19 MR. RUNNER: No. 20 MS. RICHMOND: Ms. Ma. 21 MS. MA: Aye. 22 MS. RICHMOND: Ms. Stowers. 23 MS. STOWERS: Aye. 24 MS. RICHMOND: Motion carries. 25 ---oOo--- 26 27 28 16 1 MS. RICHMOND: Our next matter is C5 PCS 2 Wireless, Inc. 3 ---oOo--- 4 ITEM C5 5 PCS WIRELESS, INC 6 NO. 572015 (EA) 7 ---oOo--- 8 MS. HARKEY: I'll move that the petition be 9 denied and the -- and it be referred if -- that it 10 be referred to Offers in Compromise. 11 MR. RUNNER: Second. 12 MR. HORTON: There's a motion to deny the 13 petition and find the petitioner negligent, second 14 by Member Runner. 15 Without objection, Members, such will be 16 the roll -- order. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 17 1 MS. RICHMOND: Our next item is C7 Allied 2 Modular Buildings Systems, Inc. 3 ---oOo--- 4 ITEM C7 5 ALLIED MODULAR BUILDINGS SYSTEMS, INC. 6 NO. 506774 (EA) 7 ---oOo--- 8 MS. HARKEY: Ms. Ma. 9 MR. HORTON: Members, just -- if I may, I 10 just want to make sure -- I just want to see if I 11 can get the Appeals Department to clear up. 12 There were -- there were a number of 13 hypotheticals that were posed. And my review of the 14 situation is that those hypotheticals simply didn't 15 fit the situation in place. Although they did exist 16 in the audit period, some of those hypotheticals 17 where you have a nominal transaction, walls and so 18 forth. But the Department excluded all of those. 19 They didn't pick up the tax on that. The only thing 20 that they picked up are when you had those major 21 buildings with major, major drill-downs and 22 installation taking place and so forth. 23 But I don't want to -- I'd like to have the 24 Department speak to that, as to what the -- which is 25 always the inherent challenge when we get into 26 discussing hypotheticals. Generally I think the 27 hypotheticals are good because they serve to educate 28 us in a "what if" situation. But we also have to be 18 1 able to get back to "what is" in the reality of 2 where we are in these transactions. 3 So, Appeals, can you please speak to the 4 transactions that are being disallowed? 5 MR. ANGEJA: And the way you phrased it, we 6 would agree with. The Department specifically went 7 back to pull out the transactions that were the 8 types of units that can be moved easily, that were 9 the small ones, the ones that didn't have a roof on 10 it. The ones that remain are, for lack of a better 11 term, the big ones. Their own pictures show some of 12 these that are two stories. They're full-sized 13 rooms. 14 MR. RUNNER: No, those -- but hang on. 15 That was clear that was not part of the -- that 16 the -- that was not part of what they were appealing 17 though, those particular ones. The ones that we're 18 dealing with were not the ones that are two 19 stories. 20 MR. ANGEJA: I'm just explaining what's 21 left -- 22 MR. RUNNER: Okay. 23 MR. ANGEJA: -- in the measure -- 24 MR. RUNNER: Okay. 25 MR. ANGEJA: -- is the big -- what got 26 taken out were the ones that would qualify as 27 modular furniture or that were consistent with that 28 annotation that said if it's just walls of this type 19 1 of nature, that we -- it's the exception to calling 2 it a construction contract. 3 Those got taken out. All that remains are 4 the ones that are the heavy items that can't be 5 moved as a unit, that are affixed to the realty, 6 that do have a roof. 7 MR. RUNNER: Right. Your comment was 8 "two-story," that's why I wanted to clarify. 9 MR. ANGEJA: I'm trying to speak to the 10 nature of how big what's left is, and the small 11 stuff that -- 12 MR. RUNNER: There was not a two -- there 13 was not a two-story item that was -- that they were 14 appealing, was there? 15 MS. HARKEY: No. 16 MR. ANGEJA: I know the testimony was that 17 they didn't have it. I'm just explaining to you -- 18 MR. RUNNER: Okay. I just want to 19 clarify. 20 MR. ANGEJA: He's got it in exhibit, so I 21 was trying to use that as an illustration. We don't 22 have the small stuff that could be otherwise 23 modular. 24 MR. HORTON: Okay. Members, we can agree 25 to disagree. 26 In the event that the -- that the Board 27 concludes that this is not a construction contract, 28 therefore not a -- they are not the consumer but the 20 1 retailer, and therefore a retail sale to a U.S. 2 Government, my concern is is that there are hundreds 3 of contractors out there that are treating it 4 properly. And in such case, this exact same 5 transaction when another contractor's already paid 6 the tax as the consumer would alter those 7 transactions. 8 So, in the event that that's the 9 interpretation of the Board, what would be the 10 impact on -- to other contractors? 11 MR. ANGEJA: Before I reach that question, 12 it would delete the U.S. Government sales for this 13 taxpayer. And as they agreed, it would increase the 14 measure of the remaining sales, which are the sales 15 for resale -- sales to non U.S. Government 16 customers. 17 For anybody else who reported on cost and 18 they don't have the U.S. Government sales, if it's 19 treated as tangible personal property, the measure 20 would be the full retail price instead of their 21 cost. 22 And so to the other similarly situated 23 taxpayers, non U.S. Government construction 24 contracts, it would increase their exposure 25 potentially. 26 MR. RUNNER: Mm-hmm. And they acknowledge 27 that. 28 MR. ANGEJA: These taxpayers did, 21 1 obviously. 2 MR. RUNNER: Hmm? 3 MR. ANGEJA: Today's taxpayers did, but Mr. 4 Horton's question was to the other similarly 5 situated contractors out there. 6 MS. HARKEY: I'm not so sure that their 7 representative wanted to agree with that. So I 8 just -- I'll just throw that out there. 9 MS. STOWERS: Excuse me. When you say it 10 would increase, these taxpayer's exposure? 11 MR. ANGEJA: Their net would come down. 12 The -- the -- the audit item for the U.S. Government 13 sales -- 14 MS. STOWERS: Uh-huh. Would go away. 15 MR. ANGEJA: -- would go away. 16 MS. STOWERS: Okay. 17 MR. ANGEJA: The remaining measure, which 18 is -- 19 MS. STOWERS: 274,419. 20 MR. ANGEJA: That's cost. That would 21 get -- basically we would be taxing the markup. 22 MS. STOWERS: Okay. 23 MR. ANGEJA: So that would increase. Their 24 net liability, I believe, still goes down. 25 Mr. Horton's question is for anybody else 26 who has sales of a non U.S. Government construction 27 contract nature who reported on cost, technically 28 today's decision would mean that those would have to 22 1 be taxed on the markup as well and they're currently 2 not. 3 MS. STOWERS: Got it. 4 MS. MA: Well -- I'm sorry. 5 MS. STOWERS: Sorry. Just real briefly. I 6 think there was a brief discussion about Regulation 7 1583 and modular system furniture. Do we define 8 furniture? Or is it just, you know, look up the 9 (inaudible) dictionary and, to me, furniture would 10 be a desk, a chair, modular furniture that we see 11 often in offices like ours. Does that just apply 12 the normal definition? 13 MR. ANGEJA: I'm reading real quickly. 14 Hold on. 15 MS. STOWERS: Okay. 16 MR. ANGEJA: If I'm reading this right, the 17 definition in the regulation is desks, credenzas, 18 lateral files, book cases, work tables -- I don't 19 know what a convergent is -- corner unit, storage 20 towers, chairs. Basically what -- the common 21 perception of what furniture is is what 1583 is 22 referring to. 23 MS. STOWERS: Okay. So this, in my view, 24 there's no way we can get the structures that they 25 were assembling to be under the definition of 26 modular systems furniture. 27 MR. ANGEJA: Yes. 28 MR. HORTON: Based on the records, I mean 23 1 these are 200- to 2000-square-foot units. It's 2 not -- you know, it's not a desk where someone goes 3 and sits for a minute or two, you know. 4 In -- I can't remember the annotation that 5 deals with this more or less. But the building 6 within the building, 598, something like that. 7 MR. ANGEJA: 190.0598? 8 MR. HORTON: Yeah. Can you share that with 9 us so that we have as much of the information as 10 possible in making our decision? 11 MR. ANGEJA: I won't take the time to 12 re-read it, but I did read that while the case was 13 going on. And they actually put in dimensions and 14 describe -- 200 square feet, some were more than 15 that. It was 20 or 40 feet long. 16 So your -- your understanding of that 17 annotation is correct. Building within a building, 18 but it's a very large building that you couldn't 19 move as a unit by itself. 20 MR. HORTON: Okay. 21 All right. Further discussion, Members? 22 MS. MA: Yeah. 23 MR. HORTON: Member Ma. 24 MS. MA: So I think, you know, this is 25 obviously probably one of the tougher cases because 26 it's just it's -- it's the new -- it's a new type of 27 construction or furniture or whatever they want to 28 call it that people are using. 24 1 I mean I think we need to talk about, you 2 know, you put a roof on it, then it's not moveable. 3 But you don't put a roof on it, it is moveable. 4 Because I think that's what the taxpayers wanted. 5 They wanted some clarification in terms of moving 6 on, like what -- how are they supposed to treat it? 7 So, you know, I'd just like to hear how the 8 Board wants to treat all of these because there's 9 other players in the market that are going to be 10 impacted either way. So what does that mean? Does 11 that mean our auditors are now going to go back, 12 depending on how we vote today, to go back to all of 13 these similar type of companies and audit and open 14 it up. I'm just -- I want to have a conversation 15 about this, you know. 16 MR. HORTON: Yeah. I think -- and we've 17 been pretty creative over the -- you know, here 18 lately in being able to protect the Board from 19 exposing itself to situations where our decisions 20 that may be inconsistent with the law is not 21 precedential and doesn't apply. And my personal 22 opinion is is that I -- I -- I don't think we're 23 successful at the end of the day if we're ever 24 challenged on that, but we've certainly been able to 25 get there. 26 But, you know, in this case the evidence is 27 such that these are not small units. These are 28 large units in and of themselves. Once they're 25 1 assembled, you can't -- can't get 'em out of the 2 building without disassembling them. And then it's 3 going to cause irrevocable harm to the -- you know, 4 to the building, which is one of the conditions of 5 determining whether or not this is realty in this 6 construction contract. 7 The contract itself with the -- with the 8 parties involved that the -- if my understanding is 9 correct, is that they themselves, prior to 10 adjudication, entered into a construction contract 11 by the nature of their contract. You got materials, 12 you got installation, you got (inaudible), all of 13 those are charges that they're charging in the 14 contract. 15 So the contract itself becomes a 16 construction contract based on their action 17 subsequent to the hearing. And then the evidence 18 provided in the video demonstrates how it's done, 19 and that in and of itself demonstrates that -- so 20 it's affixed to the realty. And the inherent nature 21 of the product itself is not similar to that of 22 modular furniture and more in lines with 190-0598. 23 And I think -- I think this is one of those 24 areas that either the Customer Service Department -- 25 I mean Committee or Business -- 26 MS. HARKEY: I think Business Taxes needs 27 to look -- 28 MR. HORTON: -- Tax Committee can kind of 26 1 take it up so that they can have a discussion as to 2 where the interested parties are in this. But I 3 think what we'll find is just diverse. Those who 4 don't do business with the -- with the government 5 would want it to be -- would want to be consumers, 6 historically. Those who do do business with the 7 government would want to be retailers because it's 8 not a decision based on facts or based on law, it's 9 the decision based on how much tax you want to pay. 10 And so, unfortunately -- and I think that 11 might be, that might be helpful, I just don't know 12 how to get there within the existing law. 13 MS. MA: So -- so is it small? Is it big? 14 I mean is it -- you can get it out? You can't get 15 it out? 16 MR. HORTON: Well -- 17 MS. MA: I think we need to clarify this. 18 Either it's all or nothing or we're setting 19 parameters, because I do think there are other, you 20 know, players in this industry and they're going to 21 be confused, too. 22 MR. HORTON: Well, I don't think the other 23 players in the industry are confused. I think there 24 are a lot of 'em that -- that -- that understand 25 this and they report it properly. It's just if 26 they're subject to an audit is when the opinions 27 begin to shift. 28 And so, I mean there are -- the Regulation 27 1 1521 is extensive. I think we've held a number of 2 interested parties -- I mean informational 3 discussions on Regulation 1521. The contractors get 4 it. The contractors really like it. They like to 5 be treated as the consumer because it reduces their 6 tax liability. So generally their intent is to 7 shift it to the other -- other way. 8 And we've dealt with this over the last 50 9 years, and the whole notion on -- on the issue with 10 the -- with the cabinets, which was just a major 11 issue for the Board of Equalization. They came up 12 with this rule, this 90-percent rule, primarily to 13 favor the contractors to be treated as -- as the 14 contractor instead of the retailer, you know, vice 15 versa, depending on the situation. 16 The -- the determination is, as it relates 17 to size, is just an indication that it takes more 18 than pushing it in, sitting it down, and then making 19 sure it doesn't move in order to make it happen. So 20 it's just an indication that kind of goes into the 21 professional judgment. Then the affixation, how 22 it's actually affixed, whether it has a -- I mean if 23 it has a roof on it or not, there's an annotation 24 that deals with this notion of the roof, which is an 25 isolated annotation to a specific issue. 26 But the way it's affixed, then is the next 27 determination whether it's going to be damaging to 28 realty. And at the end of the day, you have this 28 1 thing that they refer to as a site test. You know, 2 you walk in and you look at it and say, "Oh, that's 3 part of the building." And if someone was to 4 purchase it, they'd say, "Well, you know, that 5 doesn't include the -- all the fixtures and all the 6 tangible personal property." But when they buy it, 7 they're going to buy it as it is, with this 2,000 -- 8 or 200- to 2,000-square-foot property in it. It 9 adds value to the -- to the realty by virtue that 10 it's there from a selling perspective. Whereas, a 11 chair in a building adds no value to the building 12 whatsoever. 13 Modular furniture, unless there's an 14 agreement that you're going to leave that modular 15 furniture, adds no real value to the building and it 16 may -- or the sale of the building. May add value 17 in the escrow by virtue that you transfer it or you 18 give it, maybe it's a consideration. 19 All those var- -- I mean, you know, 20 professional judgment is all -- they take all of 21 that in consideration. But for the most part, the 22 industry's pretty astute. The government's astute, 23 too. I mean the government, they don't want -- they 24 don't want to pay the tax. So they will usually 25 issue a blanket certificate saying that they're not 26 subject to tax to try to get out of it, but -- 27 MR. RUNNER: Couple -- couple comments. 28 MR. HORTON: Mr. Runner. 29 1 MR. RUNNER: Yeah, a couple comments. 2 First of all, I don't know if anybody ever 3 said that there was damage to the realty when this 4 was -- these were taken out. I don't think that was 5 ever talked about. I think, in fact, I think quite 6 the opposite was said, that these are moveable, that 7 you put 'em up and you can move 'em around. 8 So I don't think any -- there was any 9 testimony at all that I heard. 10 MR. HORTON: But I think my point is, that 11 doesn't really matter. They have prefabricated 12 houses that you can -- 13 MR. RUNNER: I know, I just -- 14 MR. HORTON: -- pull the whole house and 15 you can actually take the whole house down and move 16 it anywhere you want. 17 MR. RUNNER: Well, again, I only say that 18 because your point, at least I heard, was moving 19 them created -- one of the reasons for justification 20 was it created damage to the real estate. 21 MR. HORTON: The question was relative -- 22 MS. HARKEY: I think that's in real 23 estate. 24 MR. HORTON: -- to regulation. 25 MR. RUNNER: The other issue -- the other 26 issue -- the other issue, it seems to me, is that 27 the fact that it has value because you sell it, I 28 mean -- within a building, that's fine, but you're 30 1 not selling it -- you're not getting value because 2 it's part of the real estate. You're getting value 3 because it's part of the -- it's there at the real 4 estate site, just like you can sell a building with 5 furniture in it or not. You can buy a house with 6 furniture or not. It doesn't make -- doesn't make 7 the real estate any more valuable. You're just 8 buying it because it's furnished. 9 And so the fact that gives it value at its 10 time of sale, you know, doesn't make it -- adds 11 value, doesn't make it any more of a permanent 12 issue. 13 The issue that I thought was interesting 14 was the annotation. And that is, clearly, in the 15 past -- I don't know when -- there was clarifying 16 annotation dealing with this issue of modular walls. 17 Because in the beginning this issue was applied to 18 modular walls, that these were construction 19 contracts. But yet there was a change and an 20 annotation then made to exclude these modular walls. 21 So my thought is, hey look, if we could -- 22 I just struggle with this idea that says you can 23 have a modular wall and you can use it for then an 24 area that you're -- that you're -- you know, again, 25 you know, fencing off or, you know, fencing off. 26 And, like I said, I've been in plenty of hangars 27 that should do exactly this, for a tool shed or for 28 a tool crib, and then you want to go ahead and put a 31 1 roof on it that, again, isn't weatherproof, it's 2 just in order to keep the sound down and all of 3 those issues, all of a sudden it becomes a 4 construction contract simply because it has -- all 5 the elements are exactly the same. It just has a 6 roof on it and -- and it's inside of a building. 7 I think, to me, I don't have any problem 8 trying to figure out how to extend the annotation to 9 include that very narrow kind of application. 10 And I think that's -- that's kind of where 11 I would -- where I come from on -- on this issue. 12 You know, I think it's interesting we talk 13 about, you know, chairs and, you know, what's 14 furniture? But the fact is we actually have -- you 15 can go to a furniture store -- or furniture 16 catalogue and you can find out, you can find whole 17 pieces of modular furniture that include doors, 18 windows, that are 15 feet tall, that are -- you 19 know, and they -- and they -- and they -- sometimes 20 they attach to the floor, sometimes they're put in 21 by pressure from ceiling to floor in order so they 22 don't move so they meet earthquake requirements. 23 So it's more than just, you know, chairs 24 and desks. It can be whole kinds of modular kind of 25 walls that end up being there. And to me, this is 26 more like a modular wall that happens to maybe have 27 a roof on it for different purposes. 28 And that's why I'm fine to -- at this 32 1 point -- 2 Have we had a motion yet? 3 MR. HORTON: Yeah, let me -- but let me -- 4 let me be clear. I -- I -- I truly appreciate your 5 opinion, Mr. Runner, but I wasn't stating my 6 opinion. I was stating the law. So -- but, you 7 know, relative to my opinion, I mean, I'd love to 8 see this -- 9 MR. RUNNER: Again -- again -- 10 MR. HORTON: May I? May I? 11 MR. RUNNER: Mr. Chair, I appreciate that 12 but -- 13 MR. HORTON: May I? May I? 14 MR. RUNNER: -- the reality -- hang on just 15 a minute -- 16 MR. HORTON: The Department. 17 MR. RUNNER: -- because you just -- you 18 just -- again, I think I have a right to deal with 19 something here. Because you basically said, "I have 20 an opinion" -- 21 MR. HORTON: Mr. Runner, I sat and listened 22 to you for quite a while. 23 MR. RUNNER: -- and you are quoting the 24 law. What I'm saying is we have a chance -- 25 MR. HORTON: Okay. I'm going to do it -- 26 MR. RUNNER: -- to adjust -- 27 MR. HORTON: -- I'm going to do it again. 28 MR. RUNNER: -- the annotation, which 33 1 becomes law. 2 MR. HORTON: Well -- 3 MR. RUNNER: Or it becomes -- it becomes -- 4 changes the law or adjusts -- 5 MS. HARKEY: Can I -- can I interject here? 6 MR. HORTON: Madam Harkey, one second. 7 I agree that we can change the annotation. 8 We probably can change the regulation, and I think 9 it's appropriate, if that's your desire, for the 10 Board to take that matter up and -- and decide as to 11 whether or not and how that affects. And I believe 12 it's appropriate that we take that up in the 13 Business Tax Committee. 14 Unfortunately, that's not -- we don't -- 15 that's not the issue before us. And the Department 16 took all of those items into consideration and they 17 excluded 'em. They didn't pick those items up. 18 They excluded 'em. The only items before us is the 19 ones that are more akin to the construction 20 contract. But anyway. 21 MR. RUNNER: Can we ask, for a process, is 22 there a way for us to actually hold this pending 23 a -- a process within the Business Taxes Committee? 24 MR. HORTON: Sure. 25 MR. RUNNER: And that way we can actually 26 try to see if we could try to identify what the 27 unique issues of this are through a -- through a, 28 you know, through a proper regulatory process? 34 1 MS. HARKEY: Okay. I just -- I just would 2 like to opine that I think that's going to take 3 quite a while. I'm not sure what these taxpayers 4 are looking for right now. This is not going to be 5 a quick decision. 6 We have, currently, the regulation that we 7 would be looking at is Regulation 1521(c)(3), which 8 specifically states, "attached to real property." 9 Also says, "prefabricated buildings that are not 10 moveable as a unit are always considered 11 construction contracts, whether they are attached or 12 not to the real property," which I think is a 13 problem for what we're trying to do here. 14 I was -- I very much want to give these 15 guys a break. I'm -- but I'm -- I'm just afraid 16 that we're going to get this issue really confused. 17 But, Fiona, or Ms. Ma did bring up good 18 points that the Department of Defense Regulation 19 1583 says it's not a permanent structure. The 20 interior wall panels, 190.1785, and the -- to 21 modular systems. 22 So I think we've got a lot of conflicts 23 here between what the Feds willing to do, what the 24 FTB does, and what the BOE does. And so I do think 25 we need to review it. 26 But -- so I just -- I will be happy to take 27 this as a business tax issue; I'm more than happy to 28 do that. But I think we're going to have a lot of 35 1 back and forth on it, and I think we need to 2 probably have a decision this evening for this 3 taxpayer and let them, as they said, to just kind of 4 get on. 5 There is a negligence penalty here that I 6 don't think is appropriate; I'll just say that. And 7 if anybody wants to try to abate for anything else, 8 I would -- I would entertain that. 9 MS. STOWERS: Okay. I'm sorry, I didn't 10 mean to cut you off, Ms. Harkey. 11 MR. HORTON: Member Stowers. 12 MS. STOWERS: Are -- are we done with 13 discussion? 14 MR. HORTON: Member Runner. 15 MR. RUNNER: I would, again, I think that, 16 again, I don't have any issue with the fact that we 17 would try to create and understand a -- the 18 regulatory process to clarify this issue. 19 The taxpayer's already paid $66,000 of his 20 liability. He's only got $33,000 left, so he's 21 already paid the vast majority of it. 22 In reality, if we go ahead and -- I assume 23 what we would be doing is continuing this hearing. 24 If the taxpayer then all of a sudden said, no, I 25 want it decided, he could let us know and we could 26 go ahead and decide it in the next month, or two, if 27 he was not -- if he was not open to a longer 28 process, which indeed it would be. I mean, clearly 36 1 you're talking about, you know -- 2 MS. HARKEY: You're talking about a real 3 long process. 4 MR. RUNNER: But, again, it seems to me 5 I -- it still -- it would be in the -- it would be 6 in the taxpayer's hands, because if he chose not to 7 do that, he could just say, hey, no, I'd rather have 8 it on your next agenda, you guys just decide it. 9 So, it seemed to me he still is in control 10 at that point, so -- 11 MR. HORTON: Well, I mean for me I'm clear. 12 I mean I get the regulation. I also get the law. 13 And, quite frankly, I think you have to change the 14 law in order to change the regulation. The 15 regulation is simply an interpretation of the law. 16 What we end up with at the end of the day 17 is clarifying law, not necessarily clarifying -- 18 MR. RUNNER: What law do you believe we'd 19 have to change? 20 MR. HORTON: Legislation. 21 MR. RUNNER: What -- what -- what's the 22 legislation say? 23 MR. HORTON: But -- 24 MR. RUNNER: See, I don't think so. I 25 think it's all regulatory. 26 MR. HORTON: Okay. 27 MR. RUNNER: That we have within the realm 28 of being able to do it, just like -- just like the 37 1 annotation does now. 2 Just for the heck of it, I'll go ahead and 3 move to grant for the taxpayer. 4 MR. HORTON: Okay. 5 MR. RUNNER: Go from there. 6 MR. HORTON: Mr. Runner moves to grant in 7 favor of the taxpayer, presuming a second? Member 8 Harkey? 9 MS. HARKEY: Don't look at me. 10 MR. HORTON: Oh. 11 MR. ANGEJA: That would need to be a 12 re-audit if you're finding that it's TPP. 13 MR. RUNNER: Because the rest of the 14 deal would -- what's the process? 15 MR. ANGEJA: The markup higher on the -- 16 MR. RUNNER: I don't think it's going to 17 happen. But, sure, that's fine. 18 MR. HORTON: Let me make -- 19 MS. HARKEY: Do we have a second? 20 MR. HORTON: Are you okay with the 21 re-audit? 22 MR. RUNNER: Well, I think it has to be 23 because the clarity with the re-audit is because 24 he's hav- -- we're having to redefine what it was 25 that it his other sales were as being tangible 26 personal property, of which he said he was okay 27 with. 28 MR. ANGEJA: And there's a markup. 38 1 MR. HORTON: I know -- I know the answer. 2 I just don't see the wisdom in it. 3 There's a -- there's a motion. Second? 4 Dies for the lack of a second. 5 Subsequent motion? 6 MS. STOWERS: I move to cancel the 7 negligence penalty, otherwise deny the petition. 8 MR. HORTON: Member Stowers moves to cancel 9 the negligence penalty, otherwise adopt staff 10 recommendation, redetermine liability -- 11 MS. HARKEY: I second that. 12 MR. HORTON: -- according to the 13 Department's second re-audit. Second by Member -- 14 MS. HARKEY: Harkey. 15 MR. HORTON: -- Harkey. 16 Without objection, Members, such will be 17 the order. 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 39 1 MR. HORTON: Ms. Richmond. 2 MS. RICHMOND: Our next matter is C9a and 3 C9b Phillip Andres Anacker, Maura Stanley 4 Harrington, and Jake Anthony Whiteley. 5 ---oOo--- 6 ITEM C9a 7 PHILLIP ANDRES ANACKER, MAURA STANLEY HARRINGTON, 8 and JAKE ANTHONY WHITELEY 9 NO. 611321 (JH) 10 ITEM C9b 11 PHILLIP ANDRES ANACKER, MAURA STANLEY HARRINGTON, 12 AND JAKE ANTHONY WHITELEY 13 NO. 611322 (JH) 14 ---oOo--- 15 MS. HARKEY: I move to grant the 16 petition. 17 MR. RUNNER: I'll second. 18 MR. HORTON: Member Harkey moves to grant 19 the petition, Member Runner seconds the grant. 20 MR. RUNNER: Let me -- just in 21 discussion. 22 MR. HORTON: Discussion, Member Runner. 23 MR. RUNNER: Yeah. The reason why I'm okay 24 with that is because, at least I am familiar with 25 what it is that we -- that we give to some of those 26 chain-type, in terms of what we assume on the sales. 27 His numbers are much closer to that number 28 that we give to some of those managed audits, or 40 1 whatever we want to call 'em, and so his numbers are 2 closer to that than what the Department's were. And 3 so that's why I'm comfortable dealing with his 4 numbers. 5 MS. HARKEY: Yes, they were. 6 Thank you for clarifying that. 7 MR. HORTON: This is another one of those 8 ballpark things. 9 MS. HARKEY: That's the flying goat. 10 Flying goats. 11 MR. HORTON: Yeah. I mean, I wouldn't 12 grant in its entirety, but probably reduce the ratio 13 down to 12.5, which is -- gives some consideration 14 to -- 15 MS. MA: What 12.5? 16 MR. STOWERS: As opposed to the -- 17 MR. RUNNER: As opposed to the -- 18 MS. HARKEY: To the 11 -- 19 MR. RUNNER: -- 11 five that he has. 20 MS. HARKEY: Right. 21 MR. HORTON: Yeah, 12.5. 22 MS. STOWERS: What did the Department come 23 up with? Twenty percent? 24 MR. HORTON: Help me out here, Appeals. 25 MS. CUMINS: The Department came up with a 26 23 and a 21. 27 MS. HARKEY: Yeah, they did; 23, 21. 28 MR. HORTON: I mean, for a variety of 41 1 reasons that I could state if the night wasn't so 2 late, but -- 3 MS. HARKEY: It is. 4 MR. HORTON: All right. There's a motion 5 and a second on the floor to deny the petition -- I 6 mean to grant the petition, by Member Harkey, Member 7 Runner. 8 Ms. Richmond, please call the roll. 9 MS. RICHMOND: Mr. Horton. 10 MR. HORTON: No. 11 MS. RICHMOND: Ms. Harkey. 12 MS. HARKEY: Aye. 13 MS. RICHMOND: Mr. Runner. 14 MR. RUNNER: Aye. 15 MS. RICHMOND: Ms. Ma. 16 MS. MA: Aye. 17 MS. RICHMOND: Ms. Stowers. 18 MS. STOWERS: No. 19 MS. RICHMOND: Motion carries. 20 ---oOo--- 21 22 23 24 25 26 27 28 42 1 MS. RICHMOND: Our next matter is C10 2 Robert Ramos. 3 ---oOo--- 4 ITEM C10 5 ROBERT RAMOS 6 NO. 612720 (EA) 7 ---oOo--- 8 MR. RUNNER: Boy, this one's a tough one. 9 MS. HARKEY: Oh, this is real hard for me. 10 I don't know about anybody else, but once -- once 11 Mr. Ramos started to speak, he seemed to be able to 12 explain his case very clearly, and I thought he was 13 very acceptable. 14 I would -- the nontaxable from the 15 Department was 41 44. The nontaxable that they were 16 originally requesting, the appellant was originally 17 requesting was quite a bit larger, but then it came 18 down to 46 94. And I would like to move to accept 19 the -- the non -- accept the nontaxable to 46 94 20 from -- reduce the nontaxable from 46 94. 21 MR. RUNNER: To what? 22 MS. HARKEY: To -- to 46 94, from 41 44. 23 MR. RUNNER: Okay. 24 MS. HARKEY: And accept the rest of the 25 audit, I guess. 26 MR. RUNNER: I'll second. 27 MR. HORTON: Raise the nontaxable? 28 MS. HARKEY: Nontaxable, yeah. Nontaxable. 43 1 That's right. Right? 2 MR. HORTON: Just for clarification, Member 3 Harkey moves to raise the nontaxable up to 46 4 point -- 5 MS. HARKEY: 94. 6 MR. HORTON: -- 94. Second by Member 7 Runner. 8 Objection. 9 Ms. Richmond -- 10 Discussion, Members? 11 Member Stowers. 12 MS. STOWERS: Give me a second, please. 13 Again, what did the Department come up 14 with? 15 MS. HARKEY: 41 44 of nontaxable. 16 MS. STOWERS: And you're saying 46? 17 MS. HARKEY: Right. 18 MS. STOWERS: Difference of five percent. 19 MR. HORTON: Appeals, do you want to bring 20 some clarity to these numbers as to what we're -- 21 MS. STOWERS: Would that make them want 22 more? 23 MS. CUMINS: Taxpayer had originally 24 thought 51.57, and I think he -- he made a comment 25 that he was going to split the baby. So he wanted 26 to go between what his number said and what the 27 Department came up with. 28 The Department was looking at cash register 44 1 tapes for the period mid-February 'til the end of 2 June. Taxpayer provided -- extended the period to 3 six months using sales journals for the first six 4 weeks of the year. 5 So, Department's was based on cash register 6 tapes; taxpayer's was based on sales journals. 7 Is that what you're -- 8 MS. HARKEY: For one month. 9 MR. HORTON: Yeah. The Department 10 indicated that the numbers in the sales journal were 11 inconsistent and unreliable. 12 MS. CUMINS: Correct. 13 MR. HORTON: And therefore -- 14 MS. HARKEY: Only one month. It's only one 15 month. The rest of it, they got. 16 MR. HORTON: Okay. 17 MS. HARKEY: I don't know. I'm just 18 thinking, you know, he's going out of business in 19 one location and -- 20 MR. HORTON: All right. There's a motion 21 and a second to adjust the nontaxable and somewhere 22 in the middle. Second by Member Runner. 23 Ms. Richmond, call the roll. 24 MS. RICHMOND: Mr. Horton. 25 MR. HORTON: Aye. 26 MS. RICHMOND: Ms. Harkey. 27 MS. HARKEY: Aye. 28 MS. RICHMOND: Mr. Runner. 45 1 MR. RUNNER: Aye. 2 MS. RICHMOND: Ms. Ma. 3 MS. MA: No. 4 MS. RICHMOND: Ms. Stowers. 5 MS. STOWERS: Aye. 6 MS. RICHMOND: Motion carries. 7 MR. HORTON: Wait a minute here. 8 MS. HARKEY: That was -- that was a protest 9 vote. 10 That's okay. It's just fun up here. 11 MR. HORTON: All right. 12 MR. RUNNER: You never want to assume on 13 anybody. 14 MR. HORTON: Okay. That's right. 15 MS. HARKEY: It was a protest vote. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 46 1 MR. HORTON: Ms. Richmond. 2 MS. RICHMOND: Our next matter is D1 3 Kerolos H. Guirguis. 4 ---oOo--- 5 ITEM D1 6 KEROLOS H. GUIRGUIS 7 NO. 873783 (STF) 8 ---oOo--- 9 MR. RUNNER: The Department threw out a 10 number, didn't they? 11 MS. HARKEY: Which one is that now? 12 MS. MA: Cigars. 13 MS. HARKEY: Oh, cigars. Okay. 14 MR. RUNNER: Oh, no. I'm sorry. I've got 15 Hoiles. We already did that one. 16 MS. HARKEY: We did -- we did Hoiles. 17 MR. RUNNER: I'm sorry. We did that one. 18 MS. HARKEY: We did Hoiles. 19 MR. RUNNER: I'm sorry. 20 MS. HARKEY: So just move the petition be 21 denied; is that the proper way to handle this? 22 MR. HORTON: Member Harkey moves to deny 23 the petition. Second by -- 24 MS. STOWERS: Second. 25 MR. HORTON: -- Member Stowers. 26 Without objection, Members -- 27 MS. HARKEY: I wasn't going to make all 28 these motions. 47 1 MR. HORTON: -- such will be the order. 2 MR. RUNNER: And we'll continue to work on 3 the language of those notices and whatnot. 4 MS. HARKEY: I can't wait for everybody. 5 MS. MA: We depend on you to make the 6 motions. We wait for you. 7 MS. HARKEY: I don't want to make these -- 8 I know you do. You get me in the ditch. I'd like 9 to know I have some company up here when I throw 10 something out. 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 48 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 February 24, 2016 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 48 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: March 7, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 49