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 August 29, 1995. I find the Respondents violated Section 12-21-2804.
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. J & W Corporation ("J & W") owns a business entitled "Flamingo." The business is located on
Highway 17 in Beaufort County, three miles North of the Savannah Bridge. J & W advertises the
Flamingo by a sign outside the business. That sign advertises "Flamingo" in large letters. The
names of the businesses operated within the Flamingo are located at the bottom of the sign in
small letters. See Petitioner's Exhibit No. 1.
3. On May 26, 1994, the Department's revenue officers, Sanders and Muckenfuss, delivered a
copy of Revenue Procedure 94-2 and Information Letter 94-13. At that time, the officers
informed the manager, Larry Cook, that the Flamingo had until June 1, 1994, to come into
compliance with the Video Game Machines Act ("Act"). On June 10, 1994, an inspection
revealed that the Flamingo reduced the number of the Class III video poker machines located on
the premises to eight machines. Thereafter, J & W sought an injunction against the Department
from the enforcement of the Act. The parties reached a Consent Order in that case setting forth
that no adverse action would be taken against J & W until the Department conducted an
investigation. This investigation would be held within a reasonable time so as to decide whether
J & W was in violation of the Act, Section 12-21-2804 (A) of the Act. On August 8, 1994,
revenue officers Muckenfuss, Kennedy and Sanders, found the facts listed below during their
investigation.
4. The Flamingo is a double-wide modular unit owned by J & W. The Flamingo has one main
entrance which opens into a large hallway. From that hallway, all of the business sections can be
entered. The sections are separated by petitions of latticework, with large openings allowing
movement into and out of the sections. Each section has eight Class III video poker machines.
The sections are designated as separate businesses by placards with the businesses names outside
the area. See Petitioner's Exhibits 5, 6, and 7. Additionally, the location has one office and one
snack bar. The snack bar in set up in the Flamingo check cashing section in which cokes may be
purchased for $.15 and chips for $.10. There is a sign posted in the area that reads, ". . . state law
requires you to purchase these items." Additionally, an ATM machine is located in the check
cashing area where customers can use credit cards to receive cash.
5. J & W leases the four sections located within the modular unit to each of the designated
businesses. Those businesses are:
a. Flamingo Check Cashing;
b. Freeport Shuttle;
c. Freeport Tours; and
d. Broadcreek Transportation.
Similarly, all of the video poker machines are leased to J & W from Henry Ingram. The Class III
machines are owned by Hilton Head Amusement, which is a business operated by Ingrams
Worldwide Satellite Corporation.
6. Each of the "so-called" businesses have held retail business licenses through J & W. However,
those licenses expired on June 30, 1994. All of the profits from the video poker machines located
within the sections are deposited into the J & W account identified as Flamingo. The business
sections do have separate telephone numbers which are paid by the corporation and prorated to
the four businesses.
7. Each business section has separate employees, though those employees move freely throughout
the location. The employer holding taxes for these employees filed a single tax return.
Additionally, there was only one corporate file number.
8. After the Department reviewed the facts pursuant to the officers' investigation, a violation
report was issued against J & W Corporation and Worldwide Satellite, Inc., d/b/a Hilton Head
Amusement. The Department seeks revocation of all thirty-two (32) of the Class III video poker
machine permits and a Five Thousand ($5,000.00) fine. I find that the Respondents violated S.C.
Code Ann. § 12-21-2804 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?
In analyzing the above factors, the evidence demonstrates that the Respondent violated Section
12-21-2804(A).
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 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. Furthermore, "[n]o license may be issued for a machine in an establishment in which a
license has been revoked for a period of six months from the date of the revocation." Therefore,
the current licenses for the 32 machines located in the Flamingo should be revoked and no
licenses should be issued at that location for six months. Any license that was subsequently issued
for the machines located in the Flamingo after these violations occurred was improvidently
granted and is therefore revoked. See 53 C.J.S. Licenses §52 (1987)("there is always an implied
power to revoke a license that is improperly issued").
ORDER
Based upon the Findings of Fact and Conclusions of Law, it is hereby:
ORDERED, that the video poker machines located at the Flamingo on Highway 17 on
September 20, 1994, are revoked and a fine of $3,000.00 is imposed upon the Respondent, L. H.
Ingram.
AND IT IS SO ORDERED.
___________________________
Ralph King Anderson, III
Administrative Law Judge
Columbia, South Carolina
October 11, 1995 |
