Wednesday, April 16, 2014

BOE taxation crimes

From page A7 | November 30, 2012 | 7 Comments


I have owned several businesses within Placerville for several years with success. In February, I was contacted at home on a Friday evening by the California Bureau of Equalization (BOE) wanting to conduct a sales tax audit for one of my businesses. I agreed to the audit. The auditor asked me how much time would I need to prepare; my response was two or three weeks. If you have never been through an audit this is not asking for much. He then said next Thursday would be fine. I nearly choked on my tounge.

I agreed knowing the rest of the week I would not be able to focus on my businesses and would have to scramble to fullfill their needs. I contacted my CPA (Smith Maloney) and requested their help as they have always been there for us when needed. They offered an office and anything else the auditor would need to conduct his audit. The auditor said it would only take two days to complete. He (Thomas Thai) showed up to our CPA Thursday as agreed and started in. When he finished the first day he approached our CPA and reported his findings. She nearly fainted. She had tried to explain to him that he was taxing items that were exempt from California sales tax per Regulation 1671.1. She also told him that we had probably overpaid the state for the past three years in question. In reference I paid on average $90,000 per year to the state BOE.

On the second day he showed up to our business to complete his audit. I showed up around 1:30 p.m. and he was still at lunch. When he arrived he didn’t say much and continued his audit. We had to show him how we rang up discounted products and then he retreated to the back of the store to compile his data. At 3 p.m. he asked me to come back so he could explain his audit findings. With very little explaination he told me we owed $1,000 for unpaid taxes. I asked how he came up with this. Our register was collecting 7.52 percent when the actual tax was 7.5 percent for 2009. The register tax was set by the previous owner and we never checked to see if it was correct. My bad! Even though the BOE recieved their 7.5 percent they wanted the rest as well. Why? I have no idea. Then he mentioned our books looked excellent, (this is where it gets strange) he proceeded to turn the page and looked me in the eye and said you owe $13,000 … All I could do was mutter something like ah … umm … urgh … faaaa. I recovered from my shock and asked, for what? He said unpaid sales tax. I said this could put me out of business. He smiled at me and grunted something.

When I returned home I e-mailed retired Senator George Runner for a more logical explination. Runner is incharge of the BOE 2nd District. I had told him what had just taken place and that his auditor really never explained his findings and that he was very rude to my staff while there. Runner said that he would look into it and gave me his aid (Jim Kuhl) to use for information. I thought great, finally someone at the state level that is doing work for the people. I called Mr. Kuhl and explained our issue. He asked me how we processed our coupon sales and I explained the method. He told me that is the correct method and we should not have to pay taxes on those coupons. He also said if we recieved rebates or purchase discounts, that they to are not subject to California sales tax and we would not have to pay them as well. I thought things were rolling now and we were going to be fine. I have never disputed the fact that we may owe some sales tax but never this outragous amount. I e-mailed the Auditor and copied his supervisor (Jim Miller) with regard to my e-mail to Runner and call to Mr. Kuhl. The e-mail I recieved from the auditor sent me into shock, it said that I now owe $16,110. He increased the amount without any supporting documentaion. It was starting to get ugly!

I e-mailed them to clarify their findings with no success. I asked for more time to go over the three years of reciepts and coupons to locate items that should not be taxable and they agreed. This took several weeks as we had to work our businesses as well. After many sleepless nights, upset stomach, headaches, blurred vision and cursing, I continued to contact them for something in writting and to answer a few yes or no questions. They would not comply to my requests. Skip forward five months to July, and yes we are still fighting this bogus audit. We had a meeting with a state official, Mr. David Hofer, and his assistant Tina something. We brought all of our supporting documentation showing that we did not owe taxes for Purchase discounts, Coupons, and Rebates as they are not subject to California sales tax per their regulation 1671.1  (they write the regulations so they are interpreted in their favor). They asked me what percentage of the coupon rebate should be excluded, and I replied, maybe 30 percent. We discussed the purchase discount information and got little insight from either of them as they already had their minds made up.

We left our files with them and they said we should hear from them within a week. We also furnished them by fax more information to help support our findings. Four weeks later I had to contact Mr. Hofer by e-mail as he would never be in the office when I called, to see if he had sent our information back and what the final determination would be. Now into August I recieve a letter from the BOE and when I opened it, shock once again overwhelmed me. The amount was now $18,322. My usually professional letters to everyone involved were know Flamethrowers. I even had to e-mail the United States Attorney General, Eric Holder, to fill him in on the way California BOE treats their small business owner. We pay for their salaries, cell phones, iPads, gas, meals, etc. and get nothing in return. I have since sent in my appeal and have not heard a word from anyone at the BOE. This is the most corrupt form of Government I have ever been witness to.

I got my SRA Fire Tax/Fee last week. Guess who is in charge of collecting your hard-earned money? That is correct, the BOE. Oh yea, they are not elected to these jobs they are given to them with instructions to write regulations and enforce them at their descretion. I have had to sell my business in order to pay them off and I will never open any kind of business in this state again. Way to support small business growth; tax them into closing just to collect a paycheck.

Hangtown Discount Cigarettes Inc.

Letters to the Editor


Discussion | 7 comments

  • IzOctober 11, 2012 - 8:29 am

    So...because this guy charged was ripping the public off by charging .02% extra on every single sale & and thought he could pocket the State's money from the kickbacks he was getting from cigarrette companies...then it's the State that's the criminal? Hmmmm...let's count the victims this business owner was cheating: 1)Every paying customer that ever entered his doors 2)Fire Departments 3)Police Departments 4)Hospitals 5)Schools 6)Emergency Response Service 7)Highway Patrol 8)and the Elderly But the State is the criminal? Well...if Sen. Runner didn't back you up & he's a staunch Republican...then odds are...YOU ACTUALLY DO OWE THE MONEY!!! The money he collected was not his, but he's choosing to feel as though he should get to keep it.

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  • East EndOctober 11, 2012 - 8:33 pm

    I like the fact that he says he paid the BOE $90,000 a year. PAID!! errr.. you COLLECTED sales tax from customers and REMITTED what you collected. Oops, I forgot it was the prior owners fault that you over collected sales tax and keep such excellent books that the additional money in the bank was an honest mistake.

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  • cookie65November 30, 2012 - 3:42 am

    The greatest power the government has is the power to tax. In a state where so few are carrying so many the cost to the few gets pretty steep. The people on the recieving end of socialism don't think it is socialism.

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  • Adam SinclairNovember 30, 2012 - 8:17 am

    As usual, cookie cannot comprehend the facts staring him in the face. Sales taxes are not paid by "the few", they are paid by each customer. I am glad the government audits businesses to make sure that the money goes to the state rather than the cigarette man's pocket.

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  • Ed RibocecDecember 01, 2012 - 6:57 am

    A guy that sells an addictive poison wants sympathy?

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  • cookie65December 02, 2012 - 4:44 am

    Adam, let me help you out with a simple fact that you have obviously never learned. There are two catagories of people, those who are contributors "to" the tax system and those who are consumers "from" the tax system. In California 37% are contributors and 63% are consumers. For example, public sector emoployees are tax consumers not tax producers. Regardless of what kind of tax or how it is paid. What ever money they pay in taxes was provided by someones elses earnings.

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  • If I were BraverJanuary 17, 2013 - 7:55 pm

    Ours is going horribly. First there are the calls. The auditor has "failed" 50% of our resale certificates. Resale certs are filled out by the customer and sent in, so essentially half of the companies we do business with in CA do not have the skill to fill one of these out. Having been in business since the early 70's the resale forms have changed, but ancient evils such as a description of goods being purchased not being to the auditor's liking are suddenly creating a taxable customer. What's worse is the scope. The auditor has tens of thousands of samples chosen, so as we clear one, if she forgets to clear the others, it's on us to follow up. Then there's the pure evil, in the reconciliation of what is owed vs what is paid, she's citing timing differences created by credit memos as non-compliance. If it appears an underpayment has been made, she wants payment and penalties. If an overpayment was made, we don't even get credit for the amount paid. Purchase orders that have "Sales Tax: No" and not being accepted. I've been through many state tax audits before, but nothing remotely like this. After escalation proved fruitless I told them I wanted an estimate of how much to get them out of here. They came back with $2.2 Million. When I asked how on Earth they had arrived at such a ridiculous figure, the auditor backed away from it and said her boss made her take all sample selections that hadn't been cleared on her sheet (that I never get to see) and extrapolate it across the population. So we trudged on. I've lost two staff over this and a third is ready to go if she has to work with this group anymore. It falls to me. Sending up Resale certs and sending out ABC letters. As more came into place, they got antsy and now are trying to cap the time. I got an e-mail today saying they want all responses by tomorrow. Seriously?!? It's not that we didn't follow the law, it's just I can't shovel the proof that I'm not guilty at these horrible people fast enough. I want to build things and make things better, not keep digging up old documents and constantly correcting their calculation mistakes. I'm scared as to what I'll do. They've been harrassing our staff for over a year. I can't make them go away. I feel I owe about $10-15K. I'd pay $200K for them to leave and will immediately begin throwing those efforts into a state of the art document retention system and any customer that doesn't nail it to the 9's can shop elsewhere or pay tax. But $'s just not sensible. To prorate each item I haven't proven myself not guilty of in a way that crazy lady will accept... I've gotten so tired and sick as of late. Lord, help me, these devils tear at my soul, begging me to commit sin. To any entrepreneur that's considering their start-up location. Don't do it here if you have tangible property to sell. You will regret it. Start your business somewhere else. See all the manufacturing fleeing CA? This is why. You can't fight this. It will destroy you. Engineer it here and ship it somewhere else to be produced.

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