SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before me pursuant to a citation issued by the South Carolina Department of Revenue (hereinafter referred as to "Department") against the Respondent, Jimmy L. Martin, Great Games, Inc., and Great Games of North Augusta, Inc., (hereinafter referred to as "Great Games") for violating S.C. Code Ann. § 12-21-2804 (A) (Supp. 1995), by allowing the use of more than five video poker machines in a "single place or premises" as defined in 27 S. C. Code Regs. 117-190 (Supp. 1995). After notices to the parties, a hearing on was conducted on November 26, 1996.

FINDINGS OF FACT

I make the following Findings of Fact, taking into consideration the burden on the Petitioner to establish its case by a preponderance of the evidence and taking into account the credibility of the witnesses:

1. Respondent, Jimmy L. Martin, is the owner of Great Games, Inc. and Great Games of North Augusta. Great Games owns and operates the Treasure Chest mall located at 1518 Edgefield Highway in North Augusta, South Carolina.

2. A site inspection was conducted by two revenue officers on the morning of February 15, 1996. The revenue officers gathered information, took pictures, obtained relevant documentation and issued a citation to Petitioner.

3. The facts regarding the location at that time were:

a. The premises contained sixteen game rooms; eight of which were open for business. Of the eight rooms open, the lights were on, the doors were open, and the machines were operational and available for play.

b. Each of the sixteen game rooms is surrounded by an exterior wall or fire wall with a Gallery. All rooms are accessible through a single entrance which leads into a common area.

c. The payout desk is located in the center of the right and left sides of the premises. There are eight game rooms on the left; and eight game rooms on the right.

d. The eight open game rooms, are known and operated as Sunken Treasure, Land Lover's Loot, Captain's Treasure, Captain Hook's Hideaway, Diamond and Doubloons, Island Paradise, Rubble and Rubies, and Captain's Gallery.

e. Each of the eight game rooms contained five video game machines, except Captains Hook's Hideaway, which contained four video game machines. Thirty-nine (39) Class III Video game machines were in operation. No Class III video game machines were located in the common area.

f. Customers were present in some of the eight rooms.

g. Three (3) employees and General Manager, David Stremke, were on the premises. The employees were near the payout desk and the manger was in the office. None of the employees were stationed in the open rooms.

h. Employees would go to a particular game room to service the needs of the customers.

3. Each of the video game machines located in the eight rooms at the mall, are owned and operated by Jimmy L. Martin, d/b/a Great Games, Inc.

4. Video games machines with the following license numbers were located in the following rooms:

5. Based upon the information gathered on February 15, 1996, the Department issued a citation against Respondent for permitting the use of more than five machines at a single place or premises and for failure to have employees present in the game rooms, in violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) and 27 S.C. Code Regs. 117-190 (Supp. 1995). The Department seeks revocation of thirty-nine (39) Class III video poker licenses, a $5,000 fine and an Order prohibiting the use of any Class III video poker machines in the structure located at 1518 Edgefield Road in North Augusta, for a period of six (6) months from the date of the license revocation

6. The Department requires the doors to the rooms to be closed if the machines are not available for play and requires employees to be physically located in each room that is open for business.

CONCLUSIONS OF LAW

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

A. Violation of the Statute

1. Pursuant to S. Code Ann. § 12-4-30 (D) (Supp. 1995) and Chapter 23 of the Title 1 of the 1976 Code, as amended, the South Carolina Administrative Law Judge Division has jurisdiction in this matter.

2. S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) prohibits the operation of more than five video game machines authorized under S.C. Code Ann. § 12-21-2720(A)(3) at a single place or premises.

3. Machines licensed under S.C. Code Ann. § 12-21-2720(A)(3) include video games with 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. 1995).

4. Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1995), the Department is authorized to promulgate regulations to assist in the administrative and enforcement of the Video Game Machines Act.

5. 27 S.C. Code Regs. 117-190 (Supp. 1995) defines "single place or premises" for purposes of interpreting the Video Game Machines Act, including Section 12-21-2804(A). It provides:

A "single place" or "premises" means a structure surrounded by exterior walls or firewalls consistent with the requirements of the applicable building code (or where no building code is applicable, a one hour rated firewall), provided such exterior walls and firewalls may not have any windows, doors or other openings leading to another area where video game machines are located.

If a structure surrounded by exterior walls has two or more areas where video game machines are located, each surrounded by exterior walls or firewalls as defined and required above, the Department must review all the facts and circumstances to determine if each area in reality constitutes a single place or premise for video game machines. In determining whether each entity is in fact a single place or premises, the Department of Revenue will consider the following factors: (1) Does each entity or business have a separate electric utility meter? (2) Does each entity or business have at least one separate employee on the premises during business hours? (3) Does each entity or business have a separate local business license where required? (4) Does each entity or business have separate sales tax licenses? A positive answer to these four questions is required for each area to be considered a "single place or premise" for purposes of the Video Game Machines Act.

6. With respect to the employee requirement, the regulation requires that each individual game room have a separate employee working in that room at all times during business hours. If a game room is accessible to customers and no employee is present in that room, the room is being operated in violation of Section 12-21-2804(A). An employee working in a common area or anywhere else outside the game rooms is not considered to be "on the premises" of the game room. See S.C. Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996); S.C. Revenue Ruling 95-13 (August 1, 1995). In this case, the uncontroverted evidence indicates that there was three employees located in the common area at the time of the inspection, and no employee were stationed in the game rooms. Employees only went to a particular room to service the needs of the customers. Furthermore, the evidence indicates that the premises were open for business at the time of the inspection. The machines were plugged in and available for play, and the doors to the game rooms were open.

7. The Respondents provided testimony demonstrating the conflicting interpretations of the regulation by Department agents charged with enforcement. The gist of the testimony was that some revenue officers allow the game rooms to be unattended for "comfort" breaks and others strictly adhere to the regulation. Although there may be a conflict among the Department's agents for enforcement, none of this assists Respondents here. The evidence clearly establishes that there were not enough employees to cover all of the game rooms and none of the employees were taking a "comfort" break so as to leave the rooms unattended. Rather, the evidence reveals that none of the employees were located at any of the open rooms. Therefore, I conclude that the Respondent violated S.C. Code Ann. §12-21-2804(A) by failing to have an employee present during business hours in each game room that was open.

B. Validity of Regulation

8. Pursuant to this statutory authority, the Department proposed and the General Assembly approved Regs. 117-190 in order to clarify the phrase "single place or premises" contained in S.C. Code Ann. §12-21-2804(A). "Administrative agencies may be authorized 'to fill up the details' by prescribing rules and regulations for the complete operation and enforcement of the law with its expressed general purpose." Young v. S.C. Dep't of Highways & Public Transp., 287 S.C. 108, 336 S.E.2d 879, 882 (Ct. App. 1985).

9. An administrative regulation is valid so long as it is reasonably related to the purpose of the enabling legislation. Hunter & Walden Co. v. S.C. State Licensing Bd. for Contractors, 272 S.C. 211, 251 S.E.2d 186 (1978); Young v. S.C. Dep't of Highways and Public Transp., supra. However, a regulation may only implement the law; it may not alter or add to a statute. Society of Professional Journalists v. Sexton, 283 S.C. 563, 324 S.E.2d 313 (1984).

10. The purpose of the Video Game Machines Act is to prevent large-scale casino type gambling operations in the State of South Carolina. See 1994 Op. Atty. Gen. No. 94-21 at 51; Reyelt v. S.C. Tax Comm'n, No. 6:93-1491-3 and 6:93-1493-3 (U.S. District Ct., Greenville, S.C., Nov. 15, 1993).

11. The requirements of Regs. 117-190, including the requirement that each business have an employee on the premises at all times during business hours, do not constitute an impermissible alteration or addition to Section 12-21-2804(A). Instead, the regulation merely clarifies the phrase "single place or premises" in order to allow for uniform enforcement of the law. Furthermore, the regulation is reasonably related to and is designed to further the purpose of the Video Game Machines Act in that it creates an impediment to the establishment of large-scale gambling operations. Accordingly, the Department acted within its authority when it promulgated Regs. 117-190.

C. Penalty

12. S.C. Code Ann. § 12-21-2804(A) (Supp. 1995) states that the penalty for failure to comply with the limitation on the number of machines permitted within a "single place or premises" is the mandatory revocation of the licenses of machines located in the establishment. In addition, no 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 revocation.

13. S.C. Code Ann. § 12-21-2804(F) (Supp. 1995) states that a person who violates Section 12-21-2804(A) may be fined up to five thousand dollars.

14. As the finder of fact, it is the administrative law judge's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. S.C. ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). In the present case, the administrative law judge has the authority to establish the monetary fine within the allowable range provided for by S.C. Code Ann. § 12-21-2804(F) (Supp. 1995). S.C. Code Ann. § 12-4-30(D) (Supp. 1995).

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, the Department of Revenue properly issued a citation against the Respondent, Jimmy L. Martin, Great Games, Inc., and Great Games of North Augusta, South Carolina.

The licenses of the video poker machines listed in the Findings of Fact are hereby revoked and a fine of $5,000 is imposed upon the Respondent.

IT IS FURTHER ORDERED that no licenses shall be issued for any machine to be operated in the subject premises for a period of six (6) months from the date of this Order.

AND IT IS SO ORDERED.

___________________________________

ALISON RENEE LEE

Administrative Law Judge

December ______, 1996

Columbia, South Carolina