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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. American Amusement Company, Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
American Amusement Company, Inc., and Petro Mart, Inc., d/b/a Petro Mart, 7621 Garners Ferry Road, Columbia, SC
 
DOCKET NUMBER:
97-ALJ-17-0203-CC

APPEARANCES:
Nicholas P. Sipe, Esquire, for Petitioner

Dwight F. Drake, Esquire, and Zoe Sanders Nettles, Esquire, for Respondent American Amusement Company, Inc.
 

ORDERS:

ORDER AND DECISION

STATEMENT OF THE CASE

This matter came before me pursuant to a citation issued by the Department of Revenue for violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) by allowing the use of more than five Class III licenses acquired pursuant to S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996) for machines in a "single place or premises," as defined in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1995). After notice to the parties, a hearing was conducted on July 17, 1996. The Respondent argues (1) the regulatory provisions cited were not intended to apply to small convenience stores; (2) the regulatory provisions are penal in nature and must be construed most favorably to the Respondents; and, (3) businesses may comply with the "single place or premises" requirement of 27 S.C. Code Ann Regs. 117-190 (Supp. 1996) by having an employee outside the premises.

Any issues raised or presented in the proceedings or hearing of this case not specifically addressed in this Order are deemed denied. ALJD Rule 29(B).

FINDINGS OF FACT

I make the following Findings of Fact, taking into account the burden on the parties to establish their respective cases by a preponderance of the evidence and taking into consideration the credibility of the witnesses:

Petro Mart, Inc. operates Petro Mart, a convenience store located at 7621 Garners Ferry Road in Columbia, Richland County.

On June 13, 1996, Don Frick and Bill Riley, agents of the Department of Revenue (DOR), inspected the Petro Mart during business hours and observed that the location consisted of a convenience store area and two game rooms.

During the inspection, the DOR agents observed that within each game room were located five video game machines (Class III machines) licensed under S.C. Code Ann. § 12-21-2720(A)(3) (Supp. 1996), viz.:

Game Room 1 Game Room 2

044161 043367

044162 043368

044163 043369

044165 043370

044171 043387

At least two patrons were operating Class III video game machines in Game Room 1 at the time of the inspection.

The ten Class III video game licenses were issued to Respondent American Amusement Company, Inc.

American Amusement Company, Inc. leased the video game machines to Petro Mart.

American Amusement Company, Inc. and Petro Mart are entities owned and controlled independently of one another.

Petro Mart, Inc. held a retail sales tax license for each of the game rooms containing Class III video game machines.

During the inspection, all doors between the convenience store area and the game rooms were open; the lights in the game rooms were on; and, the Class III video game machines were on and operating.

No employees were located in either game room.

Employees were located in the convenience store area during the inspection.

Respondent Petro Mart, Inc. permitted the use of more than five Class III machines at a single place or premises.

CONCLUSIONS OF LAW

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

Pursuant to S.C. Code Ann. § 12-4-30(D) (Supp. 1996) and S.C. Code Ann. § 1-23-320 (Supp.1996), the Administrative Law Judge Division has jurisdiction to hear this matter.

Petitioner DOR alleges that on June 13, 1996, Respondents violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1995) by operating more than five Class III video game machines at a single place or premises.

Section 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 Class III machines at a single place or premises.

Pursuant to S.C. Code Ann. § 12-21-2798 (Supp. 1996), the Department is authorized to promulgate regulations to assist in the administration and enforcement of the Video Game Machines Act.

Regulations authorized by the Legislature have the force of law. Norton v. Opening Break, 313 S.C. 508, 443 S.E.2d 406 (1994).

27 S.C. Code Ann. Regs. 117-190 was promulgated to clarify the meaning of the phrase "single place or premises" as set forth in Section 12-21-2804(A). This regulation provides in part:

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.

27 S.C. Code Ann. Regs. 117-190 (1996) (emphasis added).

An administrative regulation is valid so long as it is reasonably related to the purpose of the enabling legislation. Hunter & Walden Co. v. South Carolina State Licensing Bd. for Contractors, 272 S.C. 211, 251 S.E.2d 186 (1978); Young v. South Carolina Dep't of Highways and Pub. Transp., 287 S.C. 108, 336 S.E. 2d 313 (Ct. App. 1984). 27 S.C. Code Ann. Regs. 117-190 (1996) is reasonably related to the purpose of its enabling legislation; accordingly, it is a valid regulation.

It is well established that in interpreting a statute, the court's primary function is to ascertain the intention of the legislature. State v. Blackmon, 304 S.C. 270, 403 S.E.2d 660 (1991); First Sav. Bank, Inc. v. Gold Coast Ass'n, 301 S.C. 158, 390 S.E.2d 486 (Ct. App. 1990).

In ascertaining the intent of the legislature, a court should not focus on any single section or provision but should consider the language of the statute as a whole. Creech v. South Carolina Pub. Serv. Auth., 200 S.C. 127, 20 S.E.2d 645 (1942). Furthermore, in construing statutes, the language used should be given its plain and ordinary meaning without resort to subtle or forced construction to limit or expand the statute's operation. Bryant v. City of Charleston, 295 S.C. 408, 368 S.E.2d 899 (1988); Home Health Serv. v. South Carolina Tax Comm'n, 312 S.C. 324, 440 S.E.2d 375 (Ct. App. 1994).

Where terms of a statute are clear and unambiguous, they must be applied according to their literal meaning. Medlock v. 1985 Ford F-150 Pick Up, 308 S.C. 68, 417 S.E.2d 85 (1992); Green v. Zimmerman, 269 S.C. 535, 238 S.E.2d 323 (1977).

With respect to the "employee" requirement, Regulation 117-190 requires that each entity or business have at least one separate employee on the premises during business hours for a business to comply with the "single place or premises" requirements of Section 12-21-2804(A).

Any single place or premises that contains operational Class III video game machines while accessible to customers violates Section 12-21-2804(A) unless an employee is located therein.

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 South Carolina Dep't of Revenue & Taxation v. Stacks, 95-ALJ-17-0742-CC (March 8, 1996), aff'd Court of Common Pleas, Richland County, No. 96-CP-40-0889 (March 21, 1997).

S.C. Code Ann. § 12-21-2804(A) (Supp. 1996) expressly authorizes the "Commission" [Department] to enforce the provisions of this section and also authorizes the Department to revoke licenses utilized in a fashion that fails to comply with the provisions of this section.

Pursuant to S.C. Code Ann. § 12-21-2804(A) (Supp.1996), the penalty for exceeding the maximum number of video gaming machines permitted in a single place or premises is revocation of the licenses of the Class III machines located in the establishment.

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.

As the finder of fact, the administrative law judge may "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).

Under Section 12-21-2804(A), a license on a video poker machine must be revoked by virtue of its misuse under the Act, regardless if the actual violator is the retail licensee, machine owner, or lessee. A monetary fine under Section 12-21-2804(F), however, may only be imposed on the actual person directly involved in the violation of Section 12.21.2804(A).

Respondent Petro Mart, Inc., the retail licensee and operator of each game room maintained or permitted to be used licenses for the operation of more than five Class III machines at a single place or premises.

Because American Amusement, Inc. exercised no control over the two game rooms at Petro Mart, it should not be assessed a monetary penalty for failure to maintain a separate employee on each place or premises. Petro Mart had direct control over the business location of the machines and was in the best position to enforce compliance with the law.

Knowledge that Petro Mart, Inc., was not maintaining a separate employee for each game room cannot be imputed to American Amusement. The Department has not established that American Amusement "applied for, received, maintained or permitted to be used" licenses for the operation of more than five Class III machines at a single place or premises.

No machine license may be issued for, nor a machine be operated at, an establishment in which a license has been revoked for a period of six months from the date of the revocation. S.C. Code Ann. § 12-21-2804 (Supp.1996).

ORDER

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

ORDERED, that the ten Class III video game machine licenses are hereby revoked;

IT IS FURTHER ORDERED that the Respondent Petro Mart, Inc. shall remit to the South

Carolina Department of Revenue a fine of $2,500.00;

IT IS FURTHER ORDERED that no Class III video game licenses may be located at 7621 Garners Ferry Road in Columbia, Richland County, until six months have elapsed from the date of this order.

AND IT IS SO ORDERED.

__________________________________

ALISON RENEE LEE

Administrative Law Judge

January 9, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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