Holds ‘Open Office’ in Van Nuys : State Tax Official Listens to Sad Tales

With all the eye-rolling, head-shaking, shrugging and groaning, it could have been an audition for the lead in a musical comedy about Job.

But the reality was more mundane: Local business people had come to the Van Nuys Chamber of Commerce for a chance to pour out their woes to one of the state’s top tax officials.

Conway Collis, a member of the state Board of Equalization, was holding one in a series of “open office” days for people frustrated by their dealings with the state. Collis, who is up for reelection next year to his $73,000-a-year job on the five-member board, will hold a similar session today at the Litton Employees Federal Credit Union at 21340 Burbank Blvd.

Collis says the Board of Equalization, which administers state business-tax programs, is an important but obscure government agency. It was not obscure to the 41 people who showed up Tuesday. They knew what it is and what it does--especially to them.

Question of Intent

Some of their problems raised the question of how closely errant taxpayers should be held to the letter of the law when the evidence shows they followed its spirit. The board rules on taxpayers’ appeals of administrative decisions on business and income taxes. Collis said it finds in favor of taxpayers about 10% of the time. Most of Collis’ encounters on Tuesday involved sales taxes and small businessmen.

If anyone seemed to typify them, it was Marvin Kerner of Sherman Oaks, a free-lance sound editor for films. Speaking of the Van Nuys tax office, he said, “My feeling is that this office is only interested in collecting taxes and they’re going to twist and shape it so that you owe taxes.”

Even after a day of such comments, Collis insisted that state tax collectors “are people, just like you and me, trying to do their best. But it’s a bureaucracy, like other bureaucracies.”

Collis sat down Tuesday with the North Hollywood operator of a food vending-machine business who complained bitterly about having to collect the 6.5% sales tax even though catering vans selling the same type of items are exempt. Kerner complained that state auditors didn’t understand his business. Another man argued that the board was trying to snare him on a technicality.

Sympathy Shown

Dressed in a serious navy suit, Collis nodded sympathetically and gave realistic appraisals of what he could do for these visitors. For the most part he listened, but sometimes he took documents and said he would present the person’s view to the board.

Kerner, who works out of his home for studios needing work on sound tracks, was only one of several people who had to pause midway during the meeting to apologize for letting his anger bubble to the surface. “I’m not good at these things,” he said. “I tend to lose my temper.”

Kerner said the tax workers in the board’s Hollywood office understood his business better than the ones in Van Nuys. He was, he said, being taxed for a kind of work that the Hollywood office leaves alone.

He explained: Sometimes, after shooting a scene, directors want to replace certain sounds without replacing the whole track. People like Kerner keep libraries of sound effects and know how to replace one sound with another.

“The man,” he said, meaning the tax man, “looks at me and says, ‘That’s fabrication,’ and I say, ‘The bulk of the work is labor and that’s not taxable,’ but you have this word ‘fabrication’ and when you don’t agree with me you break out this Holy Grail of fabrication and you’ve got me.”

Promise of Review

He stopped to catch his breath but never really seemed to calm down completely before leaving with Collis’ promise to have a state tax man talk to him further.

“There has been a lot of confusion in the area of sound editing,” Collis acknowledged. The question is when does a sound editor provide merely labor, which is generally not taxed, and when does he provide a physical product, which is taxed.

Another angry taxpayer was Marvin Keogh, who blurted lines such as “This is ridiculous,” and “I can’t believe this,” and, “I’ve never seen anything like it.”

“It” was a tax bill for $8,000.

Keogh’s business makes stretchers for airliners, used for sick and injured passengers. He makes them for airlines all around the world. That’s where his trouble lies.

Apparent Oversight

When a California business sells something to an out-of-state customer, it is supposed to complete a certificate promising that the goods will not be used in California. That exempts the sale from the sales tax.

In eight years of selling stretchers around the world, Keogh had never heard of the so-called Certificate D, he said. A year ago a state auditor told him he owed back taxes on hundreds of sales. “Air Tunis does not fly to California,” he said, his voice rising. Rattling off the names of other obscure airlines, he said, “They don’t come here, and I have invoices. I have purchase orders that say, ‘For Export Only.’ ”

“On the merits you’re right,” Collis said. “According to the spirit of the law, you’re right. But not the letter of the law.”

He told Keogh to send him any purchase orders indicating the items were only for export and said he would present Keogh’s case to the board.

Candy Bar Case

One of the last visitors for the day was soft-spoken Joe Sklar, who showed up with two candy bars in identical-looking wrappers, one in each hand.

“You see these two candy bars?” Sklar said. “Well, they look the same. But, if you bought one from me, you’d pay sales tax, and if you bought the other from a catering van, you wouldn’t.”

Sklar said his North Hollywood business operates about 1,000 vending machines for candy and soft drinks. The law requires vending-machine operators to collect the sales tax. It exempts cold food from catering vans.

“If I have to pay tax, I think everybody should pay tax,” Sklar said.

Collis agreed. “The sales tax law is a morass of special-interest exemptions,” he told the weary-looking Sklar. “Candy is a problem.”