South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Rainbow Inn & Deli Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Rainbow Inn & Deli Inc. And Challenger's Club, Inc., d/b/a Gold Dust Casino, Quinn G. Marinacci, and Micin Assoc.
 
DOCKET NUMBER:
95-ALJ-17-0178-CC

APPEARANCES:
For the Petitioner: William L. Todd, Esquire

For the Respondents: H. Buck Cutts, Esquire
 

ORDERS:

DECISION AND ORDER

STATEMENT OF CASE

This matter comes before me upon request for a Hearing by the Respondents after being cited for violating S.C. Code Ann. § 12-21-2804 (A)(Supp. 1994). The South Carolina Department of Revenue and Taxation ("Department") contends that the Respondents operated more than eight video poker machines in a "single place or premise."

A Hearing was held before the Administrative Law Judge Division in Columbia, South Carolina, on September 6, 1995. I find the Respondents violated Section 12-21-2804 (A).

FINDINGS OF FACT

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

1. Notice of the time, date, place and subject matter of the Hearing was given to the Petitioner and the Respondent.

2. Quinn Marinacci owns a business entitled "Gold Dust Casino." The business is located at 10127 N.Kings Highway, Myrtle Beach, South Carolina. The Gold Dust Casino houses the Rainbow Inn & Deli (Deli) and the Challengers's Club (Club). These businesses are not separately advertised. Rather the entire location is advertised as the "Gold Dust."

3. The Department delivered a copy of S. C. Revenue Procedure 94-2 and Information Letter 94-13 to all South Carolina video poker machine opeators shortly after May 25, 1994.

4. The Deli and the Club each have eight (8) Class III video poker machines at the Gold Dust location. These sixteen (16) machines are located in a single room. In March 1995, the Deli's machines were located at each end of the room and the Club's machines were located in the middle. In August of 1995, the Deli's machines were located one side of the room while the Club's machines were located on the other side. There were no walls, lattices or even rails separating these machines on either occasions. In other words, the machines were separated only by space.

5. All of the expenses for the Deli and the Club other than the lease are paid through the accounts of the Deli. The Deli leases the building from Duke Enterprises and then sub-leases an undefined space to the Club for 95% of the machines profits.

6. There is little separation between the businesses. The businesses do not maintain separate employees. In fact, Mr. Marinacci described the employee situation as "hit and miss" as to whether there would be an employee at the location for both businesses. Furthermore, there was only one "pay out" sheet for all eighteen machines. In addition, all the income from the machines went into one account and was thereafter distributed to pay expenses and profits.

7. After the Department reviewed the facts pursuant to the officers' investigation, a violation report was issued against the Respondents. The Department seeks revocation of the Class III video poker machine licenses and a $5,000 penalty. I find that the Respondents violated S.C. Code Ann. § 12-21-2804(A) by having more than eight machines in one location.

CONCLUSIONS OF LAW

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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1994) and S.C. Code Ann. § 1-23-320 (Supp. 1994).

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1994). That section provides:

"No person shall apply for, receive, maintain, or permit to be used, and the commission [Department] shall not allow to be maintained, permits or licenses for the operation of more than eight machines authorized under S.C. Code Ann. § 12-21-2720 (A)(3) at a single place or premise. . . .

3. The Video Game Machines Act ("Act") regulates the video poker machines at issue in this case. The Act does not define the term "single place or premise." The Honorable G. Ross Anderson held that the above term is "sufficiently defined and susceptible of a common and ordinary meaning to provide a person of ordinary intelligence a reasonable notice of the prescribed conduct." Reyelt et al. v. South Carolina Tax Commission, CA No. 6: 93-1491-3 (D.S.C. July 5, 1994).

4. Machines licensed under Section 12-21-2720(A)(3) include video games with a free play feature operated by a slot in which a coin or thing of value is deposited. S.C. Code Ann. § 12-21-2720 (Supp. 1994).

5. S.C. Code Ann. § 12-21-2804(A) (Supp.1994) states that the penalty for failing to comply with the maximum number of machines in a "single place or premise" is the revocation of the licenses of machines located in the establishment.

6. S.C. Code Ann. § 12-21-2804(F) (Supp. 1994) states that a person who violates Section 12-21-2804(A) may be fined up to five thousand dollars.

7. The Department issued S.C. Revenue Procedure #94-2 on March 23, 1994. This document advised video poker operators of the factors considered by the Department in determining whether a business is a "single place or premise" pursuant to S.C. Code Ann. § 12-28-2804(A) (Supp. 1994). The twelve factors set forth by the Department were:

a. Is the ownership of the business establishment independent of the ownership of any other business establishment operating video game machines? Is the ownership the same? If the ownership is not the same, is there any relationship between the owners (i.e., common stockholder)?
b. Does each business establishment have its own licenses, such as those required by the State, city, county, etc.? Do they operate under the same licenses?
c. Does each business establishment keep its own books and records? Are the books and records kept together? Does each business establishment maintain its financial accounts, such as bank checking and investment accounts? Do they maintain joint financial accounts?
d. If the business establishment leases its location, is that lease agreement separate from any lease agreement entered into by any other business establishment operating video game machines? Are these business establishments operating under the same lease agreement?
e. If the business establishment does not own the video game machines in its location, is the machine profit sharing or lease agreement with a licensed coin operator separate from any machine profit sharing or lease agreement entered into by any other business establishment operating video game machines? Are these business establishments operating under the same machine profit sharing or lease agreement?
f. Does each business establishment have its own, separate and distinct, address listed through the United States Postal Service or a 911- emergency system? Is the address for both business establishments the same?
g. Does each business establishment have its own signs and business marquis? Do they operate under the same signs and marquis?
h. Do the business establishments operate under different names? Do they operate under the same name?
i. Does each business establishment have its own employees? Do the same employees work for both establishments?
j. Does each business establishment have its own account with each of the utility companies (i.e., telephone, water, power)? Do they operate under the same account?
k. How are the business establishments physically separated (i.e., walls, no walls, lattice work, separate or common amenities, etc.)?
l. Does each business establishment file its own returns for any taxes that may be due (i.e., property tax - PT-100, admissions tax - L-511, sales and use tax - ST-3, In, etc.)? Do they remit such taxes on the same return?

8. After the Department issued Revenue Procedure #94-2, the Department then issued Information Letter #94-13 clarifying the Revenue Procedure. In that letter, the Department adopted an Attorney General's opinion issued March 24, 1994 that explained that "subdividing a single building or structure with partitions to create so-called discrete 'premises' is contrary to the legislative scheme."

9. The Respondents argue that the Department applied these guidelines and revenue procedures as unpromulgated regulations. However, if such guidelines and revenue procedures do not constitute a binding norm, they are not required to be promulgated. See Ryder Truck Lines, Inc. v. United States, et al., 716 F.2d 1369 (11th Cir. 1983); Home Health Service v. S.C. Tax Comm'n, __ S.C. ___, 440 S.E.2d 375 (1994). Accordingly, since the Department remained free to consider the individual facts of each case, and exercise its discretion in applying the factors, the guidelines and revenue procedures did not establish a binding norm. Id. Additionally, in making the finding that the Respondent's had more than eight Class III video poker machines at this "single place or premise," this tribunal considered all the evidence presented at the hearing concerning this issue and made this determination on the weight and credibility of that evidence. The Department's twelve factors were not binding upon this decision in any manner.

10. The Respondents argue that the Department was required to promulgate regulations before enforcing the provisions limiting the number of video poker machines allowed in a "single place or premise." S.C. Code Ann. § 12-21-2804 (Supp. 1994) expressly authorizes the "commission" [Department] to enforce the provisions of this section and also authorizes the Department to revoke the license of an establishment that fails to comply with the provisions of this section. While S.C. Code Ann. § 12-21-2798 (Supp. 1994) provides: "the commission shall promulgate rules and regulations pertaining to the machines and persons licensed by it," this section does not impose a specific duty on the Department to promulgate regulations with respect to S.C. Code Ann. § 12-21-2804(A). When the legislature grants general authority to an agency to promulgate regulations, it is logically consistent that an agency would adopt or promulgate regulations as necessary to enable the agency to accomplish its objectives. See David E. Shirley, South Carolina Administrative Law 4-4 (1989). It is equally logical that an agency need not promulgate regulations if they are not necessary to accomplish its objectives, that is, to enforce clearly defined laws. In this case, as set forth above, a "single place or premise" is "sufficiently defined and susceptible of a common and ordinary meaning to provide a person of ordinary intelligence a reasonable notice of the prescribed conduct." Reyelt, supra.

11. The Respondents further contend that they were denied due process. The Respondent's received notice, opportunity to be heard and to present evidence and the opportunity to cross-examine the Department's witnesses at the hearing. Therefore, the Respondent's were not denied due process in the proceeding. See Huellmantel v. Greenville Hosp. Systems, 303 S.C. 549, 402 S.E.2d 549 (Ct. App. 1991).

12. The Respondent violated S.C. Code Ann, § 12-21-2804(A) (Supp. 1994). Upon finding a violation of Section 2804(A) revocation of the machine's licenses found in the location is mandatory.

ORDER

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

ORDERED, that the Respondent's video poker machines located at 10127 N.Kings Highway, Myrtle Beach, South Carolina on August 19, 1994, are revoked and a fine of $3,000.00 is imposed upon the Respondent, Quinn G. Marinacci.

AND IT IS SO ORDERED.

___________________________

Ralph King Anderson, III

Administrative Law Judge



Columbia, South Carolina

December 29, 1995


Brown Bldg.

 

 

 

 

 

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