SC Administrative Law Court Decisions

This matter comes before me pursuant to S.C. Code Ann. § 12-4-30(D) and § 1-23-310 et seq. (Supp. 1996), upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue (hereinafter referred to as "DOR") for administrative violations of the Video Game Machines Act, S.C. Code Ann. § 12-21-2804(A) (Supp. 1996), and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996). The sole issue for determination is whether the Respondents violated R. 117-190 by not having "at least one separate employee on the premises during business hours." DOR contends that two game rooms were open and operational without an employee present. Respondents dispute the allegations. A hearing of this matter was held before the Administrative Law Judge Division on August 14, 1997. Based upon the relevant and probative evidence and the applicable law, I find Respondents violated R. 117-190 and Section 12-21-2804. The ten machine licenses in the subject rooms are hereby revoked, and no machines may be operated in the game rooms for a period of six months. Also, a fine of $2,000 is hereby imposed.

It is undisputed that at the time of inspection on June 13, 1996, there were five operational Class III video game machines located in One Stop 4, and five operational Class III video game machines located in One Stop 5. It is also undisputed that both rooms were open for business and that persons were playing the machines. DOR alleges that neither open room contained an employee, as required by law. Respondent contends that a separate employee was assigned to and stationed in each individual game room at the time of inspection and that an additional employee was working at the payout counter in the common area.

The determination in this case is ultimately a question of witness credibility. Mr. Ward was not present at the commencement of the inspection. The only eye witness testimony offered at the hearing came from Revenue Officer Tillman and Christy Wilson, a One Stop Place employee at the time of the inspection. Officer Tillman testified that she encountered two female employees in the common area but no employees in either open game room. All persons in the game rooms were playing the machines. Christy Wilson refuted the assertion that no employees were in the game rooms, and Respondent pointed out that the revenue agents conducting the inspection failed to take the common sense measure of inquiring in each game room as to the identity of those inside and whether anyone in the respective game rooms was an employee.

There is no doubt the inspection could have been conducted more thoroughly and professionally, with more information gathered. The testimony of Officer Tillman, however, is sufficient to establish that the game rooms in question lacked the requisite employees at the time of inspection, and I find her testimony more persuasive and convincing than that of Christy Wilson. Accordingly, I find and conclude that One Stop 4 and One Stop 5, located at One Stop Palace, Inc. at 4920 Highway 72, Waterloo, South Carolina were operated in violation of

S.C. Code Ann. § 12-21-2804(A).

By a preponderance of the evidence, I find:

1. One Stop Palace, Inc., located at 4920 Highway 72, Waterloo, South Carolina, is owned by Respondent T. Scott Ward and operates as a video gaming business in a mall-type structure containing eight video gaming rooms.
2. Respondent T. Ward Scott is the licensee and operator of Class III video game machines located in the game rooms of One Stop Palace, Inc.
3. On June 13, 1996, the Department's agents, Daphne M. Tillman and Vickie Fleming, conducted an inspection of the One Stop Palace, Inc. video gaming business.
4. The main entrance to One Stop Palace, Inc. opens into a common area, which contains a payout counter.
5. Two of the eight rooms, One Stop 4 and One Stop 5, were open for business at the date and time of inspection. The other six rooms were closed and are not the subject of this proceeding.
6. The inspection included walking into the common area and the open game rooms, listing the license numbers for machines located in the open game rooms, taking photographs of the location, examining the business licenses, retail tax licenses, and utility meters for the location, and talking to employees and the manager of the location.
7. One Stop 4 and One Stop 5 each contained five(5) Class III video game machines owned by T. Scott Ward.
8. The following video game machine licenses were affixed to machines located in the respective game rooms:

One Stop 4 One Stop 5

043983 043988

043982 043984

043986 043985

043987 043990

043989 043991

1. At the time of inspection, Revenue Officer Daphne M. Tillman entered One Stop Palace, and two female employees were observed at or near the payout counter in the common area.
2. At the time of the inspection, persons were in One Stop 4 or One Stop 5, all of whom were playing the machines.
3. At the time of the inspection, no employees were located on the premises of One Stop 4 or One Stop 5.
4. Respondent T. Scott Ward was not on the premises when the Department agents arrived to conduct the inspection, but he arrived prior to the conclusion of the inspection.
5. As a result of her inspection, Revenue Officer Tillman issued a Regulatory Violation and Proposed Assessment Report against One Stop Palace, Inc., citing Respondent with an alleged violation of S.C. Code § 12-21-2804(A) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996) for operation of more machines in a single place or premise without an employee present in One Stop 4 and One Stop 5.
6. Copies of the Violation Report were left with Mr. Ward.
7. The Department seeks a $5,000 fine against T. Scott Ward as the licensee and a $5,000 fine against One Stop Palace, Inc. as the retail operator, for the violations.
8. Respondents have never been cited for any other violations of the video Game Machines Act.
9. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and the Respondents.

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 and decide 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 Video Game Machines Act ("Act") which regulates video game machine activity in South Carolina was enacted in 1993, became effective on July 1, 1993, and is codified at S.C. Code Ann. §§ 12-21-2770, et seq. (Supp. 1996). The purpose of the Act is to regulate the video game machines industry and to prevent large-scale casino type gambling operations in the State of South Carolina. See Reyelt v. S.C. Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); See also 1994 Op. S.C. Att'y Gen. No. 94-21.
3. S.C. Code Ann. § 12-21-2804(A) prohibits a person from applying for, receiving, maintaining, or permitting to be used permits for the operation of more than five (5) Class III machines at a single place or premises.

1. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996), promulgated by DOR, clarifies the meaning of the phrase "single place or premises" as set forth in Section 12-21-2804(A). The regulation provides in relevant part (emphasis added):

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 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.

1. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) expressly authorizes the Department to enforce the provisions of this section and also provides that the penalty for exceeding the maximum number of video game machines permitted in a single place or premises requires the revocation of the licenses of machines located in the establishment.
2. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Tel. Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992). The trial judge who observes a witness is in the best position to judge the witness's demeanor and veracity and evaluate their testimony. See Mann v. Walker, 285 S.C. 194, 328 S.E.2d (Ct. App. 1985); Marshall v. Marshall, 282 S.C. 534, 320 S.E.2d 44 (Ct. App. 1984); McAlister v. Patterson, 278 S.C. 481, 299 S.E.2d 322 (1982); Peay v. Peay, 260 S.C. 108, 194 S.E.2d 392 (1973).
3. Respondents failed to have "one separate employee" in One Stop 4 and One Stop 5 at the time of inspection, in violation of the requirement set forth in Regulation 117-190.
4. Failing to satisfy one requirement is a sufficient ground constituting a violation of the single place or premises requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996).
5. Respondents violated S.C. Code Ann. § 12-21-2804 by operating video machines in two locations which fail to meet all requirements of the "single place or premises" criteria set forth in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1996).
6. S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) further provides: "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."
7. S.C. Code Ann. § 12-21-2804(F) (Supp. 1996) provides that a person who violates S.C. Code Ann. § 12-21-2804(A) is subject to a fine of up to $5,000.

12. Because this is the first violation against Respondents and appears to be one of ignorance rather than willfulness, a fine of $2,000 is reasonable.

13 Pursuant to ALJD Rule 29B, any issues or motions raised at the hearing but not addressed in this Order are deemed denied.

ORDER

IT IS THEREFORE ORDERED that the following ten (10) video game machine licenses owned by T. Scott Ward, located at 4920 Highway 72, Waterloo, South Carolina in the business known as One Stop Palace, Inc. are revoked:

One Stop 4 One Stop 5

043983 043988

043982 043984

043986 043985

043987 043990

043989 043991

IT IS FURTHER ORDERED that no video game machine licenses shall be utilized in game rooms One Stop 4 and One Stop 5 for a period of six months from the date of revocation of the licenses.

IT IS FURTHER ORDERED that One Stop Palace, Inc. shall pay a fine of $2,000 to the South Carolina Department of Revenue.

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

September 2, 1997

Columbia, South Carolina