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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Edward Rothchild, d/b/a Nicki's Novelties and Gifts

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Edward Rothchild, d/b/a Nicki's Novelties and Gifts
 
DOCKET NUMBER:
95-ALJ-17-0079-CC

APPEARANCES:
Nicholas P. Sipe, Esquire
Attorney for the Petitioner

H. Louis Sirkin, Esquire
John D. Delgado, Esquire
Attorneys for the Respondent
 

ORDERS:

ORDER

STATEMENT OF THE CASE

This matter comes before me pursuant to S.C. Code Ann. § 1-23-320 (Supp. 1994) on a citation issued by the Department of Revenue and Taxation ("Department") against Nicki's Novelties and Gifts ("Nicki's"). The Department alleges that Nicki's violated S.C. Code Ann. § 12-21-2804(B) (Supp. 1994) by advertising the playing of video game machines. The Department seeks a fine of $500.00 for the alleged violation.

Nicki's denies the alleged violation and contests the citation of the Department. In addition to arguing that the advertisements at issue promote the sale of gifts and novelties, and not the playing of video game machines, Nicki's argues that S.C. Code Ann. § 12-21-2804(B) (Supp. 1994) is unconstitutional in that it violates the First and Fourteenth Amendments to the Constitution of the United States and Article I, § 2 of the South Carolina constitution.

After timely notice to all parties, a contested case hearing was held at the Administrative Law Judge Division in Columbia, South Carolina, on July 25, 1995. At the hearing, the parties stipulated that there were no factual issues in dispute. As a result, the only matter to be decided is whether the figures painted on the window of the location serve as advertising for video game machines, which is prohibited by S.C. Code Ann. § 12-21-2804(B) (Supp. 1994). Based on the following, I have determined that the figures painted on the windows of the location do not constitute advertising for the playing of video game machines. Therefore, the citation is dismissed and no penalty will be assessed against Nicki's.

EVIDENCE

Without objection, the Department placed into evidence the following exhibits:

Exhibit 1A: A picture of the outside of Nicki's illustrating all the signs alleged to be in violation of S.C. Code Ann. § 12-21-2804(B) (Supp. 1994).
Exhibit 1B: Four pictures of Nicki's, two of which are close up shots of the alleged violative advertisements, and two of which are shots of the interior of the business illustrating the merchandise Nicki's offers for sale.
Exhibit 2 : Tax returns and other financial documents pertaining to Nicki's. This exhibit consisted of nineteen total pages.

On July 25, 1995, subsequent to conducting the hearing, I visited Nicki's in order to view the location and to determine the type and volume of products and services offered for sale or use within the establishment.



FINDINGS OF FACT

By a preponderance of the evidence, I make the following findings of fact:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time, place, and nature of the hearing was timely given to all parties.

3. Edward Rothschild owns and operates a sole proprietorship known as Nicki's Novelties and Gifts located at 3311 E. Broad River Road, Columbia, South Carolina.

4. Painted on the front window of Nicki's are facsimiles of an ace of spades, a king of clubs, a queen of hearts, a jack of spades, and a ten of diamonds. Situated around the facsimiles of the playing cards are the following words: "MAXWELLS PLAYING CARDS...SOLD HERE...HOYLE, BICYCLE, CASINO AND OTHERS...."

5. Also, painted on the front window of Nicki's are facsimiles of a watermelon, an orange, a lime, a cherry, a bell, and a row of sevens. Situated underneath these symbols, apparently in reference to the facsimiles of the playing cards located on the adjacent window, are the following words: "SOLD HERE FOR HOME ENTERTAINMENT ONLY."

6. The symbols cited in paragraphs four and five are clearly visible from the public thoroughfare that runs directly in front of Nicki's.

7. The symbols referenced in paragraphs four and five are the same as are displayed in the windows of various video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1994).

8. There are five video game machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1994) inside Nicki's which display the symbols cited in paragraphs four and five.

9. In addition to housing video game machines, Nicki's rents and sells movies and offers for sale numerous novelties and gifts, including playing cards and toy slot machines (coin banks).

10. The video game machines located at Nicki's make up only a small portion of a large variety of inventory offered for sale and/or use to the public by the establishment.

11. Nicki's produces revenue from the playing of video game machines, the sale and rental of movies, and the sale of novelties and gifts.

12. Based on Nicki's State Sales Tax Return for the period ending in January of 1995 (submitted as part of Petitioner's Exhibit 2), its gross proceeds totalled $50,070.80 of which $3,875.53 was derived from the five video game machines. Sales Tax Returns from February to June of 1995 (also submitted as part of Petitioner's Exhibit 2) generally reflect the same ratio between gross revenues and video game machine revenues that was produced in January of 1995.

13. While the playing of video game machines produces significant revenues for Nicki's, the vast majority of its total revenues are derived from the rental and sale of movies and the sale of novelties and gifts.

14. Only a small portion of Nicki's total income is derived from the sale of playing cards and toy slot machines.





CONCLUSIONS OF LAW

1. This matter is properly before the Administrative Law Judge Division pursuant to the provisions of Chapter 23, Title 1 and S.C. Code Ann. § 12-4-30(D) (Supp. 1994).

2. The Video Game Machines Act, which regulates video poker machine activity in South Carolina, was enacted in 1993 and became effective on July 1, 1993. This Act is codified at S.C. Code Ann. § 12-21-2770, et seq. (Supp. 1994).

3. S.C. Code Ann. §12-21-2804(B) (Supp. 1994) provides:

No person who maintains a place or premises for the operation of machines licensed under Section 12-21-2720(A)(3) may advertise in any manner for the playing of the machines nor may a person offer or allow to be offered any special inducement to a person for the playing of machines permitted under Section 12-21-2720(A)(3).

4. The Video Game Machines Act does not define the term "advertise." The meaning of the term may be derived from the common meaning as found in the dictionary. "Advertise" means (1) "to make something known;" (2) "to announce publicly especially by a printed notice or a broadcast;" (3) "to call public attention to especially by emphasizing so as to arouse a desire to buy or patronize." Merriam Webster's Collegiate Dictionary 18 (10th ed. 1993).

5. The playing card facsimiles cited by the Department as an advertisement for the playing of video game machines can reasonably be interpreted to be an advertisement for the sale of playing cards actually sold inside Nicki's. This conclusion is strengthened by the language that accompanies the playing card advertisement located on the window outside Nicki's: "MAXWELLS PLAYING CARDS...SOLD HERE...HOYLE, BICYCLE, CASINO AND OTHERS....SOLD HERE FOR HOME ENTERTAINMENT ONLY."

6. The facsimiles of symbols cited by the Department as an advertisement for the playing of video game machines can reasonably be interpreted to be an advertisement for the sale of toy slot machines actually sold inside Nicki's.

7. The facsimiles of playing cards and symbols painted on the front window of Nicki's are advertisements for the sale of playing cards and toy slot machines located within the establishment.

8. Because the principal revenue sources of Nicki's are its movie rentals and sales, and its sales of novelties and gifts (including playing cards and toy slot machines), it is insignificant that Nicki's may derive more income from the playing of video game machines than it does from the sale of playing cards and toy slot machines.

9. Because the cited window facsimiles do not constitute prohibited advertising of video game machines, the citation should be dismissed and no penalty should be assessed against Nicki's.

ORDER

Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby:

ORDERED that Nicki's has not violated S.C. Code Ann. §12-21-2804(B) (Supp. 1994) of the Video Game Machines Act and is not subject to any penalty. The Department's Amended Petition and the citation issued against Nicki's are dismissed. In light of this finding, it is unnecessary to address the remaining argument raised by Nicki's.

IT IS SO ORDERED.

_______________________________

Marvin F. Kittrell

Chief Judge

Columbia, South Carolina

August 7, 1995


Brown Bldg.

 

 

 

 

 

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