1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 OCTOBER 24, 2017 10 11 SALES AND USE TAX APPEAL HEARING 12 APPEAL OF 13 CHARLES R. MARSHALL 14 NO. 875259 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 of Equalization: Fiona Ma, CPA 3 Chairwoman 4 Diane L. Harkey Vice Chair 5 Jerome E. Horton 6 Member 7 Sen. George Runner (Ret.) Member 8 Yvette Stowers 9 Appearing for Betty T. Yee, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Chief Board Proceedings 13 Division 14 For Appeals Bureau: Jeff Angeja Tax Counsel IV 15 Legal Department 16 For Department of Tax 17 and Fee Administration: Bradley Heller Tax Counsel IV 18 Legal Department 19 Kevin Hanks Chief 20 Business Tax and Fee Department 21 Stephen Smith 22 Tax Counsel IV Legal Department 23 For Petitioner: Charles R. Marshall 24 Taxpayer 25 26 ---oOo--- 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 OCTOBER 24, 2017 4 ---oOo--- 5 MS. HARKEY: Ms. Richmond, the next case. 6 MS. RICHMOND: Our next item is item C, 7 Sales and Use Tax appeals hearings. Item C1 Charles 8 R. Marshall. 9 Please come forward. 10 MS. HARKEY: Okay. Mr. Angeja, will you 11 please introduce the items on this appeal. 12 MR. ANGEJA: Good morning, Madam Chair and 13 Members. I'm Jeff Angeja on behalf of the Appeals 14 Division. 15 The appeal before you involves one 16 unresolved issue, which is whether claimant is a 17 qualified itinerant vendor pursuant to Revenue and 18 Taxation Code section 6018.3. 19 MS. HARKEY: Thank you. 20 Sir, welcome to the Board of Equalization. 21 You will have ten minutes to make your case. The 22 Department will get ten minutes, and then you'll 23 have another five minutes on rebuttal. 24 So will you please introduce yourself for 25 the record and then you may begin. 26 MR. MARSHALL: Thank you. 27 Good morning. My name is Charles R. 28 Marshall. I'm a Korean war veteran and served my 3 1 country with honor. 2 During the claim period April 1, 2002 3 through April 1, 2010, as a itinerant veteran vendor 4 and a sole proprietor, I made sales and filed my tax 5 returns to the BOE on time without penalty, as 6 required. I was a retailer and I held a valid 7 seller's permit. 8 Reference the Board hearing summary, the 9 blue sheet. BTFD has denied my claim due to the 10 following unresolved issues: 11 Number one, page 2, line 4, BTFD states the 12 type of property was not typical for an itinerant 13 vendor. BTFD states the dollar volume of sales 14 exceeded the allowable statutory amount. My 15 response, BTFD made an invalid statement. Reference 16 Assembly Bill AB 919; there is no list of approved 17 type of property to be sold. Secondly, there is no 18 limit on dollar sales. 19 Second item, page 2, line 26, BTFD states 20 section 6018.3 states qualified itinerant vendors 21 are considered consumers of tangible personal 22 property owned and sold by the person, except 23 tangible personal property sold for more than $100 24 My response, with copies of Exhibit B, in your 25 possession, special notice highlighted in red, RTC 26 section 6018.3 becomes operative April 1, 2010, the 27 date claim period ends. 28 Third item, page 3, line 3, BTFD states 4 1 claimant claimed deductions for sales tax 2 reimbursement included in reported total sales on 3 returns filed during claim period. My response, 4 with copies of Exhibit A, page 2, in your 5 possession, highlighted in red, represents cost of 6 tax-paid purchases resold prior to use. My claim 7 was zero. There is no line item for reimbursement. 8 Your response, please. 9 MS. HARKEY: Are you -- are you -- is that 10 the end of it? 11 MR. MARSHALL: Your turn. 12 MS. HARKEY: Okay, thank you. No. It is 13 the Department's turn now. 14 Please introduce yourself for the record if 15 you would. 16 MR. HELLER: Good morning, Chairwoman 17 Harkey, Members of the Board. I'm Bradley Heller 18 from the California Department of Tax and Fee 19 Administration's Legal Division. To my right are 20 Stephen Smith from the Department's Legal Division 21 and Kevin Hanks from the Department's Business Tax 22 and Fee Division. 23 The Department agrees with the Appeals 24 Bureau's conclusions and recommendations as set 25 forth in claimant's Decision and Recommendation, and 26 the Department respectfully requests that the Board 27 vote to deny the claim for refund. 28 January 1, 2016 was the statutory deadline 5 1 for a qualified veteran to file a timely claim for 2 qualified repayment of sales tax the qualified 3 veteran paid to the Board on sales made during the 4 period April 1, 2002 to March 31, 2010 in accordance 5 with Revenue and Taxation Code section 6018.2. 6 On May 18, 2015, claimant filed a claim for 7 refund for an unstated amount he paid in connection 8 with the returns he filed for 2002 through 2010 9 based upon the grounds that the provisions of 10 Business and Professions Code section 16102 11 exempting veterans from local license fees and taxes 12 applied to his sales taxes. 13 The claimant -- the claim for refund was 14 reviewed as a timely claim for qualified repayment 15 of sales taxes claimant remitted for the second 16 quarter of 2002 through the first quarter of 2010 17 under Revenue and Taxation Code section 6018.2 18 because the California Attorney General previously 19 advised the Board in Opinion Number 09-402 dated 20 July 19, 2010 that Business and Professions Code 21 section 16102 does not establish a general exemption 22 from taxes and has no effect upon state or local 23 sales and use taxes. And the claim for refund was 24 not timely filed for taxes claimant remitted with 25 his 2002 through 2010 returns under the generally 26 applicable statute of limitations in Revenue and 27 Taxation Code section 6902. 28 However, the claim was eventually denied 6 1 because Revenue and Taxation Code section 6018.2, 2 subdivision (c)(1)(B) only authorizes the repayment 3 of sales taxes that a claimant paid and for which no 4 sales tax reimbursement was collected from 5 customers. 6 Claimant's filing and payment history 7 showed that he reported collecting sales tax 8 reimbursement from his customers on all his reported 9 taxable sales during the period April 1, 2002 10 through March 31, 2010, and claimant confirmed in 11 writing that his business practice was to collect 12 sales tax from his customers. I believe he 13 indicated the same this morning. 14 Therefore, there was no sales taxes that 15 claimant paid on sales made during the period April 16 1, 2002 through March 31, 2010 that were eligible 17 for qualified repayment under section 6018.2. 18 In addition, section 6018.2 only applies to 19 a claimant who met all the requirements to be a 20 qualified itinerant vendor under Revenue and 21 Taxation Code section 6018.3, the qualified 22 itinerant vendor provisions do not apply to tangible 23 personal property sold for more than $100, and 24 claimant previously acknowledged that the dollar 25 amount of his sales exceeded the $100 limitation. 26 Therefore, claimant did not make sales during the 27 April 1, 2002 to March 31, 2010 period that were 28 eligible for qualified repayment under section 7 1 6018.2 based upon the $100 limitation in section 2 6018.3. 3 Furthermore, the Legislature only 4 appropriated $50,000 from the General Fund to pay 5 all qualified repayments to qualified veterans. The 6 Board previously paid 46 -- or, excuse me, $6,555 in 7 qualified repayments to qualified veterans, which 8 left $43,445 in appropriated funds available to pay 9 other claims. And our understanding is the 10 Controller was previously required to return the 11 unused balance to the General Fund by statute. 12 Therefore, the Legislature did not appropriate 13 sufficient funds to pay claimant a refund of the 14 entire $180,804 in sales taxes he paid on sales made 15 during the period April 1, 2002 to March 31, 2010 16 under Revenue and Taxation Code section 6018.2. And 17 there may no longer be any appropriated funds 18 available to pay claimant a refund under section 19 6018.2. 20 As a result, the Department respectfully 21 requests that the Board deny claimant's claim for 22 refund. 23 MS. HARKEY: Okay. Members, any questions? 24 MR. RUNNER: He gets to respond. 25 MS. HARKEY: Oh, I'm sorry. You get to -- 26 you have five minutes to respond, sir. 27 MR. MARSHALL: Well, I'm not sure I heard 28 everything that the gentleman said. Seems to me 8 1 like there was something in there that my 2 application wasn't in on time or whatever, which is 3 ludicrous. 4 For clarification purposes, from Webster's 5 dictionary, a couple of critical words here, key 6 words, are defined as retailers to sell at retail, a 7 consumer is one who uses goods or services for his 8 own needs. And regardless, everything on your own 9 form, without a seller's permit you cannot make 10 sales. 11 Back in the -- in the unsolved issues, it 12 says that making a sale without a permit is guilty 13 of misdemeanor. So I have challenged these 14 address -- these unresolved -- and proven my 15 position of the unresolved issues by BTFD. And I 16 repeat, their issues is there's no authorized 17 commodity list, there is no dollar sales limit, and 18 6018.3 became operative April 1, 2001, the same day 19 the claim period ended. 20 But if you want to put a blind eye or a 21 deaf ear to that particular item, there are 22 exceptions to that law. And the provisions of RTC 23 6018.3 do not apply to sales of single items sold 24 for more than $100. Therefore, a qualifying 25 veteran, which is me, continued to be regarded as a 26 retailer with the respect of their sales for single 27 items over $100. 28 I can't see any -- tell me where I'm wrong. 9 1 I qualify. 2 MS. HARKEY: Okay. Okay. You had five 3 minutes on rebuttal. Is that the end of your 4 rebuttal? 5 MR. MARSHALL: I'm sorry? 6 MS. HARKEY: You had five minutes on 7 rebuttal. Do you want to say anything more? 8 Because we will probably have questions from the 9 dais. 10 MR. MARSHALL: At this point, I thank the 11 BOE system for allowing me to appeal my case before 12 the Board Members, and respectfully request your 13 approval of my claim for a refund. 14 MS. HARKEY: Okay. Thank you very much. 15 Members, do we have any questions? 16 Member Runner. 17 MR. RUNNER: Just to clarify, you did 18 collect sales tax? 19 MR. MARSHALL: The law says -- yes, I did. 20 MR. RUNNER: Okay. 21 MR. MARSHALL: Whether it was in lump sum 22 or whether it was add-on, the customer does pay 23 sales tax. 24 MR. RUNNER: Okay. 25 MR. MARSHALL: For an example, you see an 26 ad, come in and buy the store out and we pay the 27 sales tax. 28 MR. RUNNER: Right. 10 1 MR. MARSHALL: They're not kidding anybody. 2 You're paying it. They just discounted their 3 merchandise. You still paid the sales tax, whether 4 it's lump sum or add-on doesn't make any 5 difference. 6 MR. RUNNER: All right. So in that 7 process, again, if -- going down this path and 8 following your argument in regards to the refund, 9 what would your -- what would you believe your 10 obligation and what would the process be for you to 11 refund those monies to those who paid the sales tax? 12 MR. MARSHALL: Would you repeat that, 13 please? 14 MR. RUNNER: Well, you would have collected 15 sales tax. You would have paid sales tax. And now 16 you're asking for a refund. So the question is then 17 what would your intention be to then go ahead and 18 reimburse those individuals who then paid you that 19 sales tax? 20 MR. MARSHALL: What would my intentions be? 21 MR. RUNNER: Right, right. Do you have a 22 list of people? Do you have the -- 23 MR. MARSHALL: Well, today, the only list 24 of customers I would -- no, I don't have a list of 25 customers. That's 15 years ago. 26 MR. RUNNER: Okay, okay. 27 Okay. Thank you. 28 MR. MARSHALL: But -- but the law says that 11 1 to re -- to refund sales tax that the veteran paid. 2 I paid that to the state -- this is not my law. I 3 paid in. 4 MR. RUNNER: Thank you. 5 MS. HARKEY: Okay. Thank you. 6 Members, any other questions? 7 I would just like a clarification from the 8 Department. The -- the 16102, can you elaborate on 9 that? You said does not apply to sales and use tax 10 items. That seems to be one of the cruxes of the 11 case here. 12 MR. HELLER: As to like specific items or 13 items sold over a certain amount? 14 MS. HARKEY: Well, reiterate kind of that 15 that -- 16 MR. HELLER: Okay. Well, I'll just 17 reiterate the two main points or they're covered and 18 please stop me if I'm going on too much. 19 This is Bradley Heller from the Department. 20 First off, section 6018.2 only provides for 21 a repayment of sales taxes paid for which no sales 22 tax reimbursement was collected from customers. And 23 that's in section 6018.2 subdivision (c)(1)(B). 24 MS. HARKEY: Okay. 25 MR. HELLER: And then it also requires that 26 the -- that -- excuse me. It also requires that a 27 claimant for a qualified repayment be a qualified 28 itinerant vendor under section 6018.3. And section 12 1 16 -- excuse me, 6018.3 subdivision (a) provides 2 that those provisions apply and treat a qualified 3 itinerant vendor as a consumer, except as to sales 4 of alcoholic beverages or tangible personal property 5 sold for more than $100. 6 So those provisions don't apply to a person 7 who's purchasing, or I should say just selling 8 tangible personal property for amounts over $100. 9 That person cannot be a qualified itinerant vendor 10 and treated as a consumer under that section for 11 those sales. 12 MS. HARKEY: Okay. As I understand, it was 13 meant for smaller items that, you know, were 14 promoting the veterans and, you know, to help raise 15 money for the causes. 16 MR. HELLER: My understanding is that it 17 was intended for small item sales. And also my 18 understanding of section 6018.2 was more aimed at 19 the -- at a veteran who was making sales for which 20 they didn't collect any sales tax reimbursement and 21 for which the state then came along and assessed 22 them additional tax in which they actually had paid 23 or were paid through enforcement proceedings or 24 something, and that allowed them -- 25 MS. HARKEY: I seem to recall a very 26 similar thing. There was a real problem because the 27 veterans that were selling these were not -- were 28 not collecting tax on the items that they sold at 13 1 various fairs and outreach programs. And so the 2 state said, "Well, you didn't collect it but you 3 still owe it because you're selling items." And 4 that was the intent. 5 As I understood you to say, was you did 6 collect the tax and that's why Member Runner or Vice 7 Chair Runner was saying if you got this tax back, 8 how are you going to refund it to those who paid 9 you? So I think that's really the crux of the case. 10 Okay. 11 MR. MARSHALL: Does it -- does it say in 12 this law that I -- 13 MS. HARKEY: Yeah, it's section 60 -- 14 MR. MARSHALL: It's a refund back to the 15 veteran. It's not the veteran refunding back to the 16 customer. That's not in there. 17 MS. HARKEY: Okay. It's section 6018.02 is 18 the -- is the law. And that's -- that's if you -- 19 it was meant for -- and I was in the Legislature -- 20 it was meant for those -- those sellers of veterans 21 items, those qualified veterans that did not collect 22 sales tax, and then were later held liable for it. 23 Because the law is if you sell something, you're 24 responsible to remit the tax, regardless of whether 25 you collected it or not. So that was the intent of 26 this. 27 So, I think that's the story. 28 MR. MARSHALL: Well, which takes 14 1 precedence, the intent or what the law says? 2 MS. HARKEY: Well, that's what the law 3 says. That's what the law says. If you didn't 4 collect it, that's what the law says, section 601 -- 5 6 -- 6018.02, I would refer you to that. 6 MR. MARSHALL: Well, I did collect tax. 7 MS. HARKEY: Okay. So then -- 8 MR. MARSHALL: I applied. 9 MS. HARKEY: I know. There you go. 10 MR. MARSHALL: I didn't commit a 11 misdemeanor. 12 MS. HARKEY: Okay. No, you're fine. 13 You're fine. 14 Okay. Do you have anymore questions? 15 All right, Members. 16 MR. HORTON: Move to sustain the FTB, deny 17 the appeal. 18 MS. STOWERS: This is BOE. 19 MS. HARKEY: There's a motion. 20 MS. STOWERS: CDTF. 21 MR. HORTON: Oh. CDTF. 22 MS. HARKEY: CDTF. Okay. There's a 23 motion. 24 Is there a second? 25 MS. STOWERS: Second. 26 MS. HARKEY: There's a second. Motion by 27 Member Horton. Second by Ms. Stowers. 28 And any objection? 15 1 No. 2 Such will be the order. 3 I'm sorry, sir. Thank you. 4 MR. MARSHALL: Well, what's the outcome? I 5 can't hear ya. 6 MS. HARKEY: The outcome is you lost. 7 MR. MARSHALL: Oh. 8 MS. HARKEY: Okay. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 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 October 24, 2017 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 16 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: March 2, 2018 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 17