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. James L. Jackson, Jr., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
James L. Jackson, Jr., James L. Jackson, d/b/a Blackstock Feed and Seed, d/b/a Blackstock Saddle and Tack, d/b/a Blackstock Grocery, Sammy Coley
 
DOCKET NUMBER:
97-ALJ-17-0070-CC

APPEARANCES:
For the Petitioner: Carol I. McMahan, Esquire

For the Respondent: James M. Griffin, 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 premises." A Hearing was held before the Administrative Law Judge Division on May 15, 1997.

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 following facts were agreed upon and stipulated to by the Petitioner, South Carolina Department of Revenue and the Respondent, James L. Jackson, Jr.:

a. On May 30, 1996, James L. Jackson sold his land with improvements, located in Blackstock, South Carolina, to Sammy Coley pursuant to a written contract, attached hereto as Exhibit "A," requiring that Mr. Coley pay eighteen (18) consecutive monthly payments.

b. On or about June 2, 1996, Mr. Jackson vacated the premises and turned the property over to Mr. Coley.

c. Mr. Coley placed 15 Class III video game machines on this property (five machines at each of three separate businesses).

d. On June 13, 1996, agents from the South Carolina Department of Revenue inspected these locations and determined that Mr. Coley was operating video game machines in violation of S.C. Code § 12-21-2804(a) and S.C. Code Reg. 117.190.

e. Mr. Coley has admitted his violation, paid a $5,000.00 fine and submitted the subject licenses to the South Carolina Department of Revenue for revocation.

f. James L. Jackson, Jr., did not have any involvement with the operation of the businesses or the ownership of the machines on June 13, 1996, which is the date of the inspection.

g. On June 13, 1996, James L. Jackson, Jr. did not know of or permit the violation of S.C. Code Ann. § 12-21-2804(a) and S.C. Code Reg. 117-190.

h. On or about November 1996, Mr. Coley stopped making payments to Mr. Jackson that were required under the Contract of Sale and Mr. Jackson was forced to repossess the property.

I. Mr. Jackson is the current owner of the subject property and operates Class III video games at this location.

j. Mr. Coley does not currently own or operate any of the Class III machines at the subject location.

k. On or about January 7, 1997, Mr. Jackson received the notice of violation by the South Carolina Department of Revenue.

3. The Department seeks the restriction that no permit be issued for the Respondent's location f`or six months pursuant to the revocation of the machine licenses at this location for having more than five machines at a single place or premise.



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 since the previous owner of the Respondent's location violated S.C. Code Ann. § 12-21-2804(A)(Supp. 1996) that no Class III machine licenses should be allowed for use at this location for a six months period. That section provides in part that:

The commission shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section. 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 the revocation.

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

5. The Honorable G. Ross Anderson held that the term "single place or premises" is and "establishment" 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.

6. The Respondent contends that the term "establishment," found in S.C. Code Ann. §12-21-2804(A) (Supp. 1996) does not have the same meaning as "single place or premises." The Respondent argues that an establishment is simply a business, meaning an entity rather than a particular location or structure, and when that business is no more, then the penalties set forth in §12-21-2804 should not apply to a subsequent business that operates out of the same location. However, the Department has consistently interpreted the prohibition against issuing new licenses found in §12-21-2804(A) to mean the actual geographic location where the violation occurred. "Where an administrative agency has consistently applied a statute in a particular manner, its construction should not be overturned absent cogent reasons." Gilstrap v. S.C. Budget and Control Board, 310 S.C. 210, 423 S.E.2d 101 (1992). The Petitioner has not demonstrated that there is sufficient reason to change this long-standing interpretation of §12-21-2804(A).(1)

The cardinal rule of statutory interpretation states that the sole function of the courts in interpreting or construing statutes is to determine and effectuate the intent of the Legislature. Laird v. Nationwide Ins. Co., 243 S.C. 388, 134 S.E.2d 206 (1964). In §12-21-2804(A). Furthermore, the words of a statute are presumed to have meaning. Fulghum v. Bleakly, 273 S.C. 79, 254 S.E.2d 301 (1994). The Legislature expressly sought to prohibit an establishment from operating for six months after a violation of the "single place or premises" requirements. Since licenses are issued to individuals, rather than locations, an operator may use licenses at any location in the state, unless otherwise prohibited by law. Allowing a location to receive new licenses simply because the business entity using the location has changed would create a significant risk for fraud, as operators who are under the six-month suspension could simply create a new business entity and avoid the suspension. Therefore, such a statutory interpretation would render the provision pratically meaningless. "Court[s] must avoid construing a statute so as to lead to an absurd result." Stone v. State, 313 S.C. 533, 443 S.E.2d 544 (1994).

ORDER


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

IT IS 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

June 16, 1997

1. As §12-21-2804(A) definitively sets forth revocation as the appropriate penalty for a violation of the "single place or premises" requirements, this tribunal need not address the Petitioner's argument that he does not meet the requirements for revocation set forth in §12-21-2804(F).


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