ORDERS:
ORDER
I. Statement of the Case
This matter results from an alleged violation by Miller L. Smith, d/b/a Wagon Wheel (Smith) and a
subsequent citation issued by the South Carolina Department of Revenue and Taxation (DOR) to
Smith. Jurisdiction over this contested case hearing is vested in the Administrative Law Judge
Division pursuant to S. C. Code Ann. §61-1-55 (Supp. 1994) with such hearing held under S. C.
Code Ann. §§1-23-600(B) and 1-23-310 (Supp. 1994).
II. Issues
1. Did Smith commit a violation of S. C. Code Ann. §61-5-110 (Supp. 1994) by having in his
possession on the licensed premises of the Wagon Wheel alcoholic beverages in containers
other than sealed containers of two ounces or less?
2. If it is established that Smith committed a violation of S. C. Code Ann. §61-5-110 is the
violation one involving the avoidance of taxes for which a revocation of his license for the sale
and consumption of alcoholic beverages via minibottles is warranted?
3. Is the further revocation of the beer and wine permit warranted?
III. Analysis
A. Possession of Unsealed and Refilled Mini-Bottle Containers
1. Positions of Parties:
DOR asserts SLED Agents entered the business known as "Wagon Wheel" and observed 119
unsealed mini-bottles on a shelf behind the bar with such bottles being "refilled" mini-bottles. DOR
asserts the presence of such bottles in an area behind the bar is evidence of possession. Further the
agents observed that the bottles were unsealed. Smith made no appearance in this case.
2. Findings of Fact:
I find, by a preponderance of the evidence, the following facts:
a. General
1. Smith holds a sale and consumption license for a business establishment known as
Wagon Wheel.
2. The Wagon Wheel is a licensed location in Blackville in Barnwell County, South
Carolina.
3. Law enforcement authorities in Blackville notified SLED concerning the Wagon
Wheel and asked SLED to investigate the location for possible violations of law
involving alcoholic beverages.
b. Possession of Unsealed Minibottles
4. On January 30, 1995, at approximately 2:30 a. m. SLED Agent Williams entered
the Wagon Wheel and observed an area behind the bar where 119 mini-bottles were
present.
5. Agent Williams examined the mini-bottles by physical inspection.
6. Each of the 119 bottles had broken seals and each bottle was either fully or partially
filled with alcoholic beverage.
7. The alcoholic beverage in the unsealed minibottles was placed in the unsealed
bottles by Smith.
8. Smith admitted to Agent Williams that Smith had poured the alcoholic beverage
into the minibottles from another container of alcoholic beverage.
9. Smith had knowledge of the presence of the refilled minibottles and exercised care,
control, and management over the minibottles.
10. Smith was in possession of minibottles that were unsealed and refilled.
3. Discussion
Pursuant to restrictions, S. C. Code Ann. §61-5-20(4) (Supp. 1994) authorizes a licensed
establishment to possess lawfully acquired alcoholic liquors where the alcoholic liquors are to be sold
in sealed containers of two ounces or less. Under the facts here, Smith was in possession of unsealed
minibottles and admitted to Agent Williams that Smith had refilled the minibottles by pouring
alcoholic beverage from another container into the minibottles.
4. Conclusions of Law
Based on the foregoing Findings of Fact and Discussion, I conclude the following as a matter of
law:
1. Knowledge that a substance is present and the ability to exercise care, control, and management
over the substance is evidence of possession. State v. Kimbrell, 294 S.C. 51, 362 S.E. 2d 630
(1987).
2. Possession by a licensed person upon a licensed premises of alcoholic beverages in unsealed
minibottles is unlawful. S. C. Code Ann. §61-5-110.
3. Smith was a licensed person in possession of alcoholic beverages in unsealed minibottles on the
licensed premises of the Wagon Wheel.
4. Smith violated S. C. Code Ann. §61-5-110.
B. Revocation Of Sale and Consumption License
1. Positions of Parties:
DOR asserts the refilling of minibottles constitutes an act of avoidance of taxes which requires the
permanent revocation of Smith's sale and consumption license. Smith made no appearance at the
hearing.
2. Findings of Fact:
I find, by a preponderance of the evidence, the following facts:
a. Avoidance of Taxes
1. Smith refilled 119 minibottles.
2. In addition to other alcoholic beverage taxes, a tax of twenty-five cents is imposed
upon each two ounce minibottle container.
3. The twenty-five cents tax avoided by the refilling of 119 minibottles is $29.75.
4. The refilling of minibottles avoids the payment of additional taxes that would be due
if the refilling had not taken place.
b. Penalty For Avoidance of Taxes
5. A violation involving the avoidance of taxes is subject to the penalties imposed by
S. C. Code Ann. §61-5-110(4).
6. Smith avoided the payment of taxes on minibottles.
7. Smith is liable for the penalties of S. C. Code Ann. §61-5-110(4).
3. Discussion
The imposition of a $1,000 penalty and permanent revocation is applicable here. Under S. C. Code
Ann. §61-5-130 (Supp. 1994) alcoholic liquors and beverages sold in sealed containers of two ounces
or less are taxed at the rate of twenty-five cents per container in addition to the case tax prescribed
in Article 5, Chapter 33, Title 12. A party who refills minibottles has committed an act that seeks to
avoid taxes since minibottles are taxed at a substantially higher rate than other containers of whiskey.
See S. C. Code Ann. §12-33-410 (Supp. 1994); Carman v. South Carolina Alcoholic Beverage
Control Comm'n,___ S. C. ___, 433 S.E. 2d 885 (Ct. App. 1993), rev'd on other grounds, ___ S.
C. ___, 451 S.E. 2d 566 (1994).
Once a violation is established, the determination of the penalty is at issue. Under the facts here,
Smith committed an act that constitutes the avoidance of taxes. The penalty for such a violation is
a $1,000 fine and the permanent revocation of the license. DOR seeks such a penalty. The violation
here involves the very serious offense of attempting to defeat a tax. In addition, Smith made no
appearance at the hearing to attempt to justify his actions. Thus, I find a $1,000 fine and a permanent
revocation of the sale and consumption license is warranted.
4. Conclusions of Law
1. Minibottles are taxed at a substantially higher rate than other containers of alcoholic beverage.
S. C. Code Ann. §12-33-410.
2. The act of refilling minibottles avoids the tax imposed upon minibottles. Carman v. South
Carolina Alcoholic Beverage Control Comm'n, ___ S. C. ___, 433 S.E. 2d 885 (Ct. App.
1993), rev'd on other grounds, ___ S. C. ___, 451 S.E. 2d 566 (1994) .
3. The act of refilling minibottles is a violation of S. C. Code Ann. §61-5-110(4).
4. Other than the authority to decide contested cases granted to an Administrative Law Judge,
DOR has the exclusive authority in suspending or revoking a license issued under Article 1 of
Chapter 5 of Title 61. S. C. Code Ann. §§61-5-40 (Supp.1994); 61-1-55; 1-23-600(B); 1-23-310.
5. DOR may impose a monetary penalty as an alternative to revocation of a license. S. C. Code
Ann. §61-1-80 (Supp. 1994).
6. DOR has discretionary authority involving a violation of S. C. Code Ann. §61-5-110(4). S. C.
Code Ann. §61-1-80.
7. The discretionary authority of DOR to impose a monetary penalty as an alternative to
revocation is granted to an ALJ by virtue of such authority having been granted to hearing
officers. S. C. Code Ann. §§61-1-55 and 61-1-30 (Supp. 1993) (repealed 1994).
8. Smith is liable for a fine of $1,000 and a permanent revocation of his license as issued under
Article 1, Chapter 5. S. C. Code Ann. §61-5-110(4).
C. Revocation Of Beer and Wine Permit
1. Positions of Parties:
DOR asserts a revocation of Smith's beer and wine permit is warranted also. Smith did not present
a view on this issue and made no appearance at the hearing.
2. Findings of Fact:
I find, by a preponderance of the evidence, the following facts:
1. Smith is the holder of a beer and wine permit for the Wagon Wheel.
2. Smith was in possession of 119 minibottles with broken seals with each bottle either fully or
partially filled with alcoholic beverage.
3. The alcoholic beverage in the unsealed minibottles was placed in the unsealed bottles by
Smith.
4. Smith admitted to Agent Williams that Smith had poured the alcoholic beverage into the
minibottles from a larger container of alcoholic beverage.
5. Smith held the minibottles to sell to customers at the Wagon Wheel.
6. Smith had knowledge of the presence of the refilled minibottles and exercised care, control,
and management over the minibottles.
7. Smith was knowingly in possession of unsealed minibottles to be used for sale to customers.
3. Discussion
Under the facts in this matter, Smith knowingly refilled empty minibottles and maintained possession
of alcoholic liquor in unsealed minibottle containers. Under 23 S. C. Code Regs. 7-13(1976), Smith
was required to destroy the empty bottles and was not allowed to refill them. Instead of destroying
the bottles Smith refilled them and held them for sale to customers. Such activity warrants revocation
of the beer and wine permit under S. C. Code Ann. §61-9-410(6) (Supp. 1994).
Under S. C. Code Ann. §61-13-510 (Supp. 1994), a violation of a Chapter 9 provision or a regulation
grants discretion to both DOR and the ALJ to impose a monetary penalty in lieu of revocation. The
violation here involves the very serious offense of attempting to defeat a tax. Further, Smith made
no appearance at the hearing to attempt to justify his actions. Thus revocation of the beer and wine
permit is warranted.
4. Conclusions of Law
Based on the foregoing Findings of Fact and Discussion, I conclude the following as a matter of law:
1. The holder of a license authorizing the sale and consumption of alcoholic beverages in sealed
containers of two (2) ounces or less must destroy all empty or partially empty containers. 23
S. C. Code Regs. 7-13.
2. The refilling of previously used but now empty or partially empty minibottles is a violation of
23 S. C. Code Regs. 7-13.
3. It is unlawful to possess unsealed and refilled minibottle containers held for sale to customers.
S. C. Code Ann. § 61-5-20.
4. Smith committed a violation against his beer and wine permit since Smith knowingly possessed
and offered for sale alcoholic liquor of a type prohibited on the licensed premises of the Wagon
Wheel. S. C. Code Ann. §61-9-410(6).
5. Smith's beer and wine permit is to be revoked. S. C. Code Ann. §61-9-410(6).
IV. ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, the following ORDER is issued:
1. DOR shall permanently revoke Smith's sale and consumption license for the licensed premises
of the Wagon Wheel and impose a $1,000 fine.
2. DOR shall also revoke Smith's beer and wine permit for the Wagon Wheel.
IT IS SO ORDERED.
____________________________
RAY N. STEVENS
Administrative Law Judge
This 17th day of August, 1995 |
