South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Scott's of Heath Springs, Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Scott's of Heath Springs, Inc., Scott's of Heath Springs, Inc., d/b/a Scott's
 
DOCKET NUMBER:
97-ALJ-17-0036-CC

APPEARANCES:
For the Petitioner: Carol McMahan, Esquire

For the Respondent: Francis L. Bell, Jr., Esquire
 

ORDERS:

FINAL DECISION

STATEMENT OF CASE


This matter comes before me upon request for a Hearing by the Respondent after being cited for violating S.C. Code Ann. § 12-21-2804 (A)(Supp. 1996). The South Carolina Department of Revenue (Department) contends that the Respondent operated more than five video poker machines in a "single place or premise." A Hearing was held before the Administrative Law Judge Division on April 10, 1997.

I find the Respondent 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, 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. The Department issued a violation report against Scott's of Heath Springs (Scott's) on June 14, 1996, charging the Respondent with having nine Class III video game machines in Scott's. The Department offered no evidence as to whether each business located in Scott's had a separate electric meter, business license or a State sales tax license. Rather the sole issue for determination is whether the Respondent violated S.C. Code Regs. § 117-190 (Supp. 1996) by not having "at least one separate employee on the premises during business hours."

3. On June 14, 1996, Revenue Officer Theresa King, conducted an investigation of Scott's located at 3672 Kershaw Hwy., Kershaw, South Carolina. Scott's is a convenience store with five rooms located in the back of the store. Two of those rooms, Rooms A and B, are operated as video game businesses.

4. On June 14, 1996, Rooms A and B were open for business. Each of the two open game rooms contained five video game machines. However, one of the machines in Room B was out of order. The ten (10) Class III machines licenses located in the above businesses were owned by Scott's. The following video game machine licenses were located in the respective game rooms:

Room A:

3807583

3807584

3807585

3807586

3807587

Room B:

040025

040026

040027

040028

040029 (out of order) 5. The only employees on the premises of Scott's were two cashiers located at the cash register in the convenience store of the location. There were no employees located on the premises of Room A or B.

6. The Respondent's Class III machines licenses in Room B expire on May 31, 1997 and the licenses for the machines in Room A expire on May 31, 1998. The Department seeks the imposition of a Five Thousand ($5,000.00) fine against the Respondent, revocation of the machine licenses and the restriction that no license be issued for the Respondent's location for six months.

7. I find that the Respondent violated S.C. Code Ann. § 12-21-2804 by having more than five machines in one location. I further find that the appropriate penalty in this case is a $750 fine for each violation and revocation of the licenses affixed to the Class III machines in operation at the location on June 14, 1996.

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. 1996) and S.C. Code Ann. § 1-23-320 (Supp. 1996).

2. The Department contends that the Respondents violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996). That section provides:

After July 1, 1994, the commission [Department] may not issue nor authorize to be maintained any licenses or permits for more than five machines authorized under Section 12-21-2720(A)(3) at a single place or premises.

3. 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. 1996).

4. S.C. Code Ann. § 12-21-2804(A) (Supp.1996) 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.

5. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) states that a person who violates Section 12-21-2804(A) may be fined up to five thousand dollars.

6. The Video Game Machines Act ("Act") does not define the term "single place or premise."

7. The Honorable G. Ross Anderson held that the term "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 et al. v. South Carolina Tax Commission, CA No. 6: 93-1491-3 (D.S.C. July 5, 1994). On June 23, 1995, S.C. Code Regs. 117-190 (Supp. 1996) became effective. It provides as follows:

The Video Game Machines Act, found in Article 20, Chapter 21 of Title 12, limits the number of machines that may be located in a "single place" or "premises."

A single place or premises must be a fixed location. It does not include moving property such as a boat or a train, unless such property is permanently affixed to a specific location.

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 have at least one 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 a separate state sales tax license? 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.

8. The Respondent contends that this case should be dismissed because the Department's violation report did not specifically charge each video game room with a violation. The Respondent relies on the Final Decision of the Honorable Stephen P. Bates in S.C. Department of Revenue v. Mickey Stacks Docket No. 95-ALJ-17-0742-CC. In that case Judge Bates held that:

A Violation Report must be written for each specific game room lacking a separate employee working within its confines for which customers were able to enter and operate machines. An officer must determine the specific game rooms in violation and identify those with particularity in the citation, rather than merely subtracting the total number of employees in the mall from the total number of game rooms and then citing the appropriate number of game rooms on an arbitrary basis.

In this case there were no employees for the Department to subtract because neither Room A or B had employees working on the premises. A notice must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). "Due Process requires that a litigant be placed on notice of the issues which the court is to consider." Bass v. Bass, 272 S.C. 177, 249 S.E.2d 905 (1978). I find that the violation report provided the Respondent with adequate notice of the violations committed in both game rooms.

9. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E. 2d 266 (Ohio 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S.W. 2d 835 (Mo. App. S.D. 1995); Matter of Henry Youth Hockey Ass'n, 511 N.W. 2d 452 (Minn. App. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A.2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S.W. 2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A.2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A.2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A. 2d 14 (Pa. 1994).

Prior to governmental restructuring, a commission, sitting in its adjudicatory capacity imposed penalties for violations of statutory provisions administered by the Commission's subordinate agency. In its capacity as the fact-finder, the Tax Commission would conduct an adjudicatory hearing in all contested cases arising under Title 12 of the South Carolina Code, and would render an order containing findings of fact and conclusions of law. As the fact-finder, it was the commission's prerogative "to impose the appropriate penalty based on the facts presented." Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633, 634 (1991). With the advent of restructuring and the abolition of the Tax Commission, however, the Administrative Law Judge Division was given the authority to hear "all contested cases, as defined by Section 1-23-310 and as previously considered by the three [Tax] commissioners. . . ." S.C. Code Ann. §12-4-30(D) (Supp. 1996). The Administrative Law Judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. Parties are entitled to present evidence on all issues arising out of the contested agency action and the tribunal responsible for conducting the contested case proceedings has the authority to decide the issues based on the facts presented, and make the final decisions on all the issues, including the appropriate penalty.

ORDER


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

ORDERED that a fine of $750 is imposed for each offense upon the Respondent, resulting in a total fine of $1,500.

IT IS FURTHER ORDERED that the following licenses for the nine Class III video game machines located in Scott's game rooms A and B at 3672 Kershaw Hwy., Kershaw, South Carolina, are hereby revoked:

Room A:

3807583

3807584

3807585

3807586

3807587

Room B:

040025

040026

040027

040028

IT IS FURTHER ORDERED that no licenses shall be issued for any Class III machine to be operated in any of the above game rooms for a period of six (6) months from the date of this Final Decision.



___________________________

Ralph King Anderson, III

Administrative Law Judge




Columbia, South Carolina

May 28, 1997


Brown Bldg.

 

 

 

 

 

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