South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
Ventures South Carolina, LLC, d/b/a SunCruz Casinos vs. SCDOR

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
Ventures South Carolina, LLC, d/b/a SunCruz Casinos

Respondents:
South Carolina Department of Revenue
 
DOCKET NUMBER:
05-ALJ-17-0418-CC

APPEARANCES:
For the Petitioner:
Zoe Sanders Nettles, Esquire
Dwight Drake, Esquire

For Respondent:
Harry Hancock, Esquire
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT OF THE CASE

This matter is before the Administrative Law Court (Court or ALC) pursuant to a request for a contested case hearing filed by Ventures South Carolina, LLC, d/b/a SunCruz Casinos (Petitioner) on October 17, 2005. Petitioner challenges the determination by the South Carolina Department of Revenue (Department), dated September 15, 2005, that Petitioner failed to comply with the reporting requirements of the Gambling Cruise Act (Act), S.C. Code Ann. § 3-11-100 et seq., (eff. June 1, 2005). Petitioner argues that the Department required more information to be provided on its official forms than is authorized or required by statute.

After several requests for continuances, upon notice given to both parties a hearing was held on May 8, 2006, at the offices of the Administrative Law Court in Columbia, South Carolina. Both parties appeared and evidence was introduced, including copies of Petitioner’s reports for the months of July and August 2005, as well as a copy of the Department’s instructions and official monthly report form.

After carefully weighing the evidence, reviewing the joint brief filed by both parties prior to the hearing, and listening to oral arguments, I find that the Petitioner must include in its monthly reports filed with the Department the amount wagered and the amount paid out as prize money for each table game and machine operated.

FINDINGS OF FACT

Having observed the exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

1. Notice of the date, time, place and subject matter of the hearing was timely given to all the parties.

2. Petitioner owns and operates the SunCruz VIII, a gambling vessel located in Little River, Horry County , South Carolina.[1] The SunCruz VIII engages in voyages that sail into the United States or international waters and makes no intervening stops prior to its return to Little River.2 It is not a passenger cruise liner.3

3. Petitioner is required to report to the Department each month the average daily percentage of winnings to losses for each gambling device used on the SunCruz VIII. This report must be delivered to the Department in a form and format determined by the Department on the 20th day of the month for the preceding month.

4. Petitioner timely provided the Department with reports for the months of July and August 2005.

5. Notwithstanding, on September 15, 2006, the Department sent a letter to Petitioner stating that Petitioner, by failing to fill out the official forms of the Department, had not provided all required information and data. The Department further stated that the information provided by Petitioner did not clearly state “the amount of winnings and losses as it only states percentages which are not identified for each machine.” The Department advised Petitioner in the letter that it was required to provide the totals of the amount wagered and paid out as prize money for each table game and machine operated. The Department also stated that if Petitioner did not provide the requested information within ten days of the date of the letter, a penalty would be imposed in the amount of $100.00 per gambling device for each day the report was late.

6.                  On September 15, 2005, Petitioner protested the Department’s determination by letter to the Department. In its letter, Petitioner stated that it had provided the Department the information required in S.C. Code Ann. § 3-11-400(C)(3)(b)(i) in its July 2005 report. Petitioner further requested an explanation by the Department of its position. On October 17, 2005, Petitioner requested a hearing before this Court.

CONCLUSIONS OF LAW

Based upon the above Findings of Fact, I conclude the following as a matter of law:

General

1. S.C. Code Ann. § 1-23-600(B)(Supp. 2005) grants jurisdiction to the Administrative Law Court to hear contested cases as defined in Section 1-23-310 involving certain departments of the executive branch of government.

2. S.C. Code Ann. § 12-60-30(1)(Supp. 2005) of the Revenue Procedures Act provides that the Administrative Law Court conduct contested case hearings with regard to disputes with the South Carolina Department of Revenue.

3. A Department determination is “the final determination within the department from which an individual can request a contested case hearing before the Administrative Law [Court].” S.C. Code Ann. § 12-60-30(10) (Supp. 2005).

4. A contested case hearing arising under the provisions of the South Carolina Revenue Procedures Act has the same meaning as it has in Section 1-23-310 of the South Carolina Administrative Procedures Act, and includes hearings conducted by the Administrative Law Court to review Department determinations. See S.C. Code Ann. § 12-60-30(4) (Supp. 2005).

5. S.C. Code Ann. § 12-60-510(a) of the Revenue Procedures Act requires that a taxpayer exhaust his prehearing remedy prior to seeking a contested case hearing. A taxpayer may exhaust his prehearing remedy by filing a written protest. See S.C. Code Ann. § 12-60-30(15)(a)(Supp. 2005).

6. A protest is defined as “a written appeal of a proposed assessment or a division decision made in accordance with this chapter.” S.C. Code Ann. § 12-60-30(24)(Supp. 2005). “Proposed assessment means the first written notice sent or given to the taxpayer stating that the division within the department has concluded that a tax is due….” S.C. Code Ann. § 12-60-30(23)(Supp. 2005).

7. “Tax” or “taxes” means taxes, licenses, permits, fees, or other amounts, including interest, regulatory and other penalties, and civil fines, imposed by Title 12 or subject to assessment or collection by the department. See S.C. Code Ann. § 12-60-30(27) (Supp. 2005). A “taxpayer” is a person who is liable for a tax. See S.C. Code Ann. § 12-60-30 (29) (Supp. 2005).

8. The Department may assess a gambling vessel a civil penalty up to one hundred dollars per day per gambling device for each day that the vessel fails to timely file with the Department the report required by the Gambling Cruise Act. See S.C. Code Ann. 3-11-400(C)(3)(b)(ii).

9. The letters between the Department and Petitioner, both dated September 15, 2005, constitute the proposed assessment or Department decision and the corresponding protest. Accordingly, Petitioner exhausted its prehearing remedy and, pursuant to the South Carolina Administrative Procedures Act and the South Carolina Revenue Procedures Act, this court has jurisdiction to hear this matter.4

10. The Gambling Cruise Act requires that all operators of gambling vessels engaged in voyages that depart from the territorial waters of the state, sail into United States or international waters, and return to the territorial waters of the State without an intervening stop must file with the Department monthly reports stating the average daily percentage of winnings to losses for each gambling device used on the gambling vessel. See S.C. Code Ann. § 3-11-400(C)(3)(b)(i). Specifically, Section 3-11-400(C)(3)(b)(i) states:

Each gambling vessel must report to the Department of Revenue, on a monthly basis, the average daily percentage of winnings to losses for each gambling device used on a gambling vessel. The report must be delivered to the Department of Revenue on the twentieth day of the month for the preceding month, in a form and format determined by the department. If no gambling devices are used, the gambling vessel must report to the department that no gambling devices were used. The department must perform an annual audit to verify the accuracy of the reports. (Emphasis added).

Positions

11. Petitioner asserts that Section 3-11-400(C)(3)(b)(i) only requires it to report the average daily percentage of winnings to losses for each gambling device used.

12. The Department asserts that the statute also requires a gambling vessel to provide the amount wagered and the amount paid out as prize money for each table game and machine operated. The Department further asserts that this information is necessary for the Department to carry out its duty to audit under the Act. See S.C. Code Ann. § 3-11-400(C)(3)(b)(i).

Statutory Construction of a Statute or Regulation

13. “The cardinal rule of statutory interpretation is to ascertain the intent of the legislature.” State v. Scott, 351 S.C. 584, 588, 571 S.E.2d 700, 702 (2002). A statute should be given a reasonable and practical construction consistent with the purpose and policy expressed in the statute. Davis v. NationsCredit Fin. Servs. Corp., 326 S.C. 83, 484 S.E.2d 471 (1997). Furthermore, all rules of statutory construction are subservient to the one that legislative intent must prevail if it can be reasonably discovered in the language used, and that language must be construed in the light of the intended purpose of the statute. McClanahan v. Richland County Council, 350 S.C. 433, 567 S.E.2d 240 (2002). The determination of legislative intent is a matter of law. Charleston County Parks & Recreation Comm’n. v. Somers, 319 S.C. 65, 459 S.E.2d 841 (1995).

The legislature’s intent should be ascertained primarily from the plain language of the statute. State v. Landis, 362 S.C. 97, 606 S.E.2d 503 (Ct. App. 2004). The language used should be given its plain and ordinary meaning without resort to subtle or forced construction to expand or limit the scope of the statute. Berkebile v. Outen, 311 S.C. 50, 426 S.E.2d 760 (1993).

However, the language must also be read in a sense which harmonizes with its subject matter and accords with its general purpose. Mun. Ass’n of South Carolina v. AT&T Communications of Southern States, Inc., 361 S.C. 576, 606 S.E.2d 468 (2004). “Once the legislature has made [a] choice, there is no room for the courts to impose a different judgment based upon their own notions of public policy.” South Carolina Farm Bureau Mut. Ins. Co. v. Mumford, 299 S.C. 14, 19, 382 S.E.2d 11, 14 (Ct. App. 1989). “The Court should not consider the particular clause being construed in isolation, but should read it in conjunction with the purpose of the whole statute and the policy of the law.” State v. Gordon, 356 S.C. 143, 152, 588 S.E.2d 105, 110 (2003). In construing a statute, the court looks to the language as a whole in light of its manifest purpose. Adams v. Texfi Industries, 320 S.C. 213, 464 S.E.2d 109 (1995).

In enacting the Gambling Cruise Act, the intent of the General Assembly was to delegate to counties and municipalities in South Carolina the authority to prohibit or regulate the operation of certain gambling vessels which depart from and return to the territorial waters of South Carolina without an intervening stop. See Act 104 of 2005, §1. As part of this regulatory authority, Section 3-11-400(C)(2) permits a county or municipality to “assess a surcharge of up to ten percent of each ticket sold per gambling cruise, and a surcharge of up to five percent of the gross proceeds of each gambling vessel.”5 For the purposes of Section 3-11-400(C), “gross proceeds” is defined as the “total amount wagered or otherwise paid, in cash or credit, by a passenger or user of a gambling device aboard a gambling vessel.”

Furthermore, as part of this regulatory scheme, the General Assembly charged the Department with certain reporting and auditing duties. Each gambling vessel must report its winnings to losses to the Department on a monthly basis. See Section 3-11-400(C)(3)(b)(i). The Department is then required to make this information available to the public and the governing body of the county or municipality from which the gambling vessel originates.6 See Section 3-11-400(C)(3)(b)(iii). The Department is also required to conduct an annual audit to verify the accuracy of the reports submitted to it by the gambling vessels. See Section 3-11-400(C)(3)(b)(i).

Although Section 3-11-400(C)(3)(b)(i) states that “the average daily percentage of winnings to losses for each gambling device used on a gambling vessel” is required to be reported to the Department, that section cannot be read in isolation. The General Assembly explicitly charged the Department with a duty to conduct an audit on an annual basis to verify the accuracy of the reports submitted by the gambling vessels. In order to carry out that statutorily mandated duty, the Department must be able to verify the percentages reported. If a gambling vessel does not provide the amount wagered and amount paid out, it will be difficult for the Department and the county or municipality to determine the surcharge to be assessed on the gross proceeds for tickets sold and on the profit from the amounts wagered. A mere listing of a percentage of winnings to losses does not provide an amount of profits to which the county or municipality can assess the gambling vessel a surcharge. To allow such an interpretation would lead to an unreasonable result. See Carolina Power & Light Co. v. Pageland, 321 S.C. 538, 543 471 S.E.2d 137, 140 (1996) (“Courts will reject a meaning when to accept it would lead to a result so plainly absurd that it could not possibly have been intended by the legislature or would defeat the plain legislative intent.”)

Sections 3-11-400(C)(2) and 3-11-400(C)(3)(b)(i) must be read together and be harmonized to give effect to both provisions in light of legislative intent and with reference to the objective to be accomplished by the Gambling Cruise Act. To the extent there is a conflict between Sections 3-11-400(C)(2) and 3-11-400(C)(3)(b)(i), if reasonably possible they must be construed to allow both to stand and to give effect to each. Chris J. Yahnis Coastal, Inc. v. Stroh Brewery Co., 295 S.C. 243, 368 S.E.2d 64 (1988). Also, our courts have repeatedly held that there is a presumption that the Legislature intended to accomplish something with a statute when it passed it rather than engage in a futile exercise. Berkebile v. Outen, 311 S.C. 50, 53-54, 426 S.E.2d 760, 762 (1993). To allow the interpretation espoused by Petitioner would create a presumption that the Legislature engaged in a futile exercise.

Thus, the Court finds and concludes that it is reasonable for the Department to require gambling vessels to provide in the monthly reports the amount wagered and the amount paid out as prize money for each table game and machine operated in order for the Department to comply with its statutory duty to review the reports, make the information available on a quarterly basis, and conduct its annual audits.

ORDER

Accordingly, based upon the findings of facts and conclusions of law,

IT IS HEREBY ORDERED that Petitioner must include in its monthly reports filed with the Department the amount wagered and the amount paid out as prize money for each table game and machine operated; and

IT IS FURTHER ORDERED that within fifteen (15) days of the date of this order Petitioner must provide a report to the Department which contains the information requested by the Department on its official form for each month the Sun Cruz VIII has operated as a gambling vessel.

AND IT IS SO ORDERED.

__________________________________

July 27, 2006 Marvin F. Kittrell

Columbia, South Carolina Chief Administrative Law Judge



[1] Pursuant to S.C. Code Ann. § 3-11-100(1), a gambling vessel is defined as “a boat, ship, casino boat, watercraft, or barge kept, operated, or maintained for the purpose of gambling, with one or more gaming establishments abroad, that carries or operates gambling devices for the use of its passengers or otherwise provides facilities for the purpose of gambling, whether within or without the jurisdiction of this State, and whether it is anchored, berthed, lying to, or navigating, and the sailing, voyaging, or cruising, or any segment of the sailing, voyaging, or cruising begins and ends within this State.” Furthermore, “gambling” or “gambling device” is defined as “any game of chance and includes, but is not limited to, slot machines, punchboards, video poker or blackjack machines, keeno, roulette, craps, or any other gaming table type gambling or poker , blackjack or any other card gambling game.”

2 An intervening stop occurs “when a vessel departs the territorial waters of this State and sails into United States or international waters, and between the time the vessel departs the territorial waters of this State and the time it returns to the territorial waters of this State, the vessel docks at a port of call in another state, possession of the United States, or foreign country.” S.C. Code Ann. § 3-11-100(3).

3 A passenger cruise liner is “a vessel that: (a) has a draft that is equal to or larger than the controlled depth of the intercoastal waterway as determined by the United States Army Corps of Engineers; (b) provides separate passenger cabins, including bathroom or head facilities, in a size reasonably suitable to accommodate living and sleeping space in a ratio of at least one cabin for every four passengers; (c) contains kitchen or galley facilities and dining facilities reasonably suitable to offer and accommodate all of the vessel’s passengers at seated meals in no more than two sittings for each of the meals at breakfast, lunch, and dinner times; (d) offers other support facilities and services including, but not limited to, exercise facilities, gift shops, medical services, and musical programs; (e) is principally engaged in entertaining and transporting passengers on destination cruises; and (f) is certified or authorized by the United States Coast Guard or equivalent foreign authority to carry passengers for hire upon the open ocean without navigational limitations.” S.C. Code Ann. § 3-11-100(5).

4 The Court has not considered a remand of this matter since it is apparent from a review of the entire file and oral arguments that such would be futile. The parties previously attempted to resolve their dispute but are at an impasse. The law does not require the imposition of a futile act. Ward v. State, 343 S.C. 14, 538 S.E.2d 245 (2000). Furthermore, the Department consented to Petitioner’s request for an expedited hearing in this matter.

5 Section 3-11-400(C)(2) of the Gambling Cruise Act states that if a county or municipality does not adopt an ordinance prohibiting a gambling vessel from operating, the county or municipality may add a surcharge of up to ten percent of each ticket sold per gambling cruise and a surcharge of up to five percent of the gross proceeds of each gambling vessel. Pursuant to Section 3-11-40(C)(3)(a), the surcharges must be paid to the county or municipality from which the gambling vessel originates its cruise. “Surcharge” is defined as “an additional tax, charge, or cost.” Blacks Law Dictionary, 7th Ed., 1999, p. 1455.

6 The Department must also provide quarterly reports to the Governor, the President Pro Tempore of the Senate, and the Speaker of the House of Representatives.


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