Jesse W. McClellan, Esq., Principal, obtained another favorable decision on behalf of his client at the Board hearings held in Culver City on February 24, 2016. His second victory at the Board level hearings, which are held monthly, in the last three months.
The case involved an audit of a California based manufacturer of ink and related products used in the textile industry. The Board’s auditor disallowed numerous claimed exempt sales for resale for a variety of different reasons. Most of the disallowed transactions were resolved prior to the hearing, but the audit staff, and the Appeals Division, refused to accept several transactions on the basis that timely and valid resale certificates were not obtained, and that the items were ultimately consumed by the purchasers. Because the errors were projected over a three-year period, the resulting liability was substantial. Jesse was able to successfully argue that the evidence supported that the purchasers at issue represented that the items were purchased for the purpose of resale, and that our client relied on that representation in good faith. Thus, the tax was more properly placed with the purchasers. Although the audit staff and Board attorneys adamantly defended its position, the Board Members ruled in favor of our client in a 3-2 vote.
“I believe the Board Members made the right decision in this case. Even though our client may not have accepted perfect resale certificates for each transaction at issue, the evidence clearly demonstrated that there was reasonable reliance on the purchasers’ representation that the items were for resale. Because the purchasers caused tax not be charged, even if the items were ultimately used by the purchasers, equity, and the law, supports that the economic burden of the tax should be placed with the purchasers. While the audit staff generally seeks to hold the retailer responsible, the fair thing to do in cases like this is to hold the purchaser responsible.” Jesse McClellan, Esq.