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SC Administrative Law Court Decisions

SCDOR vs. J & W Corporation of Greenwood, Inc., d/b/a Flamingo, et al

South Carolina Department of Revenue

South Carolina Department of Revenue

J & W Corporation of Greenwood, Inc., d/b/a Flamingo; World Wide Satellite Inc., L.H. Ingram, President, d/b/a Hilton Head Amusements; and Henry E. Ingram, Jr.

For the Petitioner: Arlene D. Hand, Esquire

For the Respondents: No Appearance




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.


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.


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").


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.



Ralph King Anderson, III

Administrative Law Judge

Columbia, South Carolina

October 11, 1995

Brown Bldg.






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