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SC Administrative Law Court Decisions

SCDOR vs. Edward Brown and Bryan McNalley, a partnership, et al

South Carolina Department of Revenue

South Carolina Department of Revenue

Edward Brown and Bryan McNalley, a partnership;
2001 Enterprise; and Great Games, Inc.

Nicholas P. Sipe, Esquire for Petitioner

C. Tyrone Courtney, Esquire for Respondent.




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, Edward Brown and Bryan McNalley, a partnership; 2001 Enterprises; and Great Games, Inc., 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.

Any issues raised in the proceedings or hearing of this case but not addressed in this Order are deemed denied. ALJD Rule 29(B). Further, the filing of a motion for reconsideration is not a prerequisite to any party filing a notice of appeal of this Order.


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. Respondents, Edward Brown and Bryan McNalley, a partnership, are owners of the business at 1377 Edgefield Road, North Augusta, South Carolina.

2. The video game machines are owned by Great Games, Inc., and 2001 Enterprises. 3. 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.

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

a. The premises contained eight game rooms; seven rooms appeared to be open to the agents, the lights were on, the doors were open, and the machines were operational and available for play; one room had the doors closed.
b. Each of the eight 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 front of the business to the left as you enter the premises. There are two separate hallways with four game rooms on the right and left hand side of the hallways.
d. The eight game rooms are known and operated as Pyramid, Aladdin, The Sands, Circus, Golden Nile, Stardust, Caesar's Palace and Golden Nugget.
e. Each of the eight game rooms contained five video game machines.
f. Machines located in four game rooms are being cited for revocation of their Class III license. No employees were located in these rooms during the Department's site inspection.
g. The game rooms known as Aladdin, The Sands, Circus Circus, and Caesar's Palace are not affected because employees were stationed at the entrances to these game rooms or the room was closed.
h. An employee did, however, leave her post at Caesar's Palace to close the door to the Stardust game room.

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

Pyramid, Room #1 Golden Nile, Room #5 Stardust, Room #6
025328 46528 40172
025277 46540 465432
025279 46522 46554
025276 46581 465623
46582 Unreadable licence on machine 025280
Golden Nugget, Room #8

6. 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).

7. Five employees and the manager were at the location on the day of the inspection.

8. Respondents dispute the facts as determined by the Department. They allege that Room #6, Stardust, was not open for business. At the time of inspection, the doors were open partially. The employee from Caesar's Palace closed the doors as the revenue officers approached. The revenue officer testified the door was partially opened. Inside the room the lights were on and the machines were plugged in and available for play. No customers were inside the location.

9. The manager, present at the time of the inspection, admitted that no employees were located inside three of the rooms. In Pyramid, the employee was away calling in a lunch order which was being picked up. In Golden Nile, the employee was in the office retrieving money. In Golden Nugget, a machine malfunctioned and the employee left to obtain the keys to the machine. This employee was only about 15 feet from the room and had a clear view of the room.


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 administration 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. 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).

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.

8. As in S.C. DOR v. Mickey Stacks, if an employee is not present in a game room while the room is accessible to customers to play video machines, no matter the reason, the game room is being operated in violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1995), as not meeting the single place or premises definition. To prevent a violation from occurring, if an employee leaves a game room during business hours, the licensee must immediately either replace the employee with another, close the game room from public access, or render the video game machine in that room inoperable. It is not inconvenient or a burden on the licensee to simply close the doors to indicate that the machines in that room are not available for play. In this case, three employees left their rooms without having a replacement or without doing any act to show that the machines in those rooms could not be played in the employee's absence.

9. The evidence, although disputed, indicates that Stardust Room #6, was not open for play. The revenue agent indicated that the doors were partially closed, no one was in the room and no one had left the room. No employee was in the room or at the door. When the agents walked down the hall towards Stardust and Caesar's Palace, the employee sitting at the door of Caesar's Palace got up and closed the door to Stardust. While the actions of the employee are capable of more than one inference, the facts (that the door was partially closed (or open), no one was in the room and no customers were located in that area of the hall) support the inference that the machines in this room were not available for play.

B. Validity of Regulation

10. 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).

11. 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).

12. 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).

13. 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

14. 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.

15. 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.

16. 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).


Based upon the foregoing Findings of Fact and Conclusions of Law, the Department of Revenue properly issued a citation against the Respondent, Edward Brown and Bryan McNalley, a partnership; 2001 Enterprises; and Great Games, Inc., of North Augusta, South Carolina for violation of S.C. Code Ann. § 12-21-2804(A) and 27 S.C. Code Reg. § 117-190 for not having employees in three of the game rooms, Aladdin, Golden Nile and Golden Nugget. The citation issued involving Stardust is dismissed.

The licenses of the video poker machines listed in the three rooms as contained in the Findings of Fact are hereby revoked and a fine of $3,000 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.




Administrative Law Judge

January ______, 1997

Columbia, South Carolina

Brown Bldg.






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