ORDERS:
FINAL ORDER AND DECISION
This matter comes before me pursuant to S.C. Code Ann. § 12-4-30(D) and § 1-23-310 et
seq. (Supp. 1996), upon Respondent's 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
Respondent violated R. 117-190 by not having "at least one separate employee on the premises
during business hours." DOR contends that seven game rooms were open and operational
without an employee present. Respondent dispute the allegations. A hearing of this matter was
held before the Administrative Law Judge Division on September 30, 1997. Based upon the
relevant and probative evidence and the applicable law, I find Respondent violated R. 117-190
and Section 12-21-2804. Accordingly, the thirty-five machine licenses in the subject rooms are
hereby revoked, no class III machines may be operated in the game rooms for a period of six
months, and a fine of $1,000 is hereby imposed.
FINDINGS OF FACT
By a preponderance of the evidence, I find:
- Mr. Wizard's Fireworks, Inc. d/b/a Chances Games, owns and operates a video gaming
business in a mall-type structure containing seven video gaming rooms located at 1301
Highway 17 North, North Myrtle Beach, South Carolina,
- At the hearing, DOR conceded that Mr. Wizard's Inc. was not named as a party to this
action.
- Respondent Quick Foods, Inc., d/b/a Gamexpress Amusements, is the licensee and owner
of thirty-five Class III video game machines located in the seven game rooms of Chances,
located at 1301 Highway 17 North, North Myrtle Beach, South Carolina.
- Respondent Quick Foods, Inc., d/b/a Gamexpress Amusements provides the logo,
signage, decor, and marketing for "Chances" at 1301 Highway 17 North, North Myrtle
Beach, South Carolina, and other locations in South Carolina.
- Daryl Starnes, an officer or employee of Respondent Quick Foods, Inc., d/b/a
Gamexpress Amusements, assisted Mr. Wizard's Fireworks, Inc. in preparing and
opening the video gaming business known as Chances at 1301 Highway 17 North, North
Myrtle Beach, South Carolina.
- Quick Foods, Inc., d/b/a Gamexpress Amusement receives a portion of the profits
generated from the operation of its machines at Chances at 1301 Highway 17 North,
North Myrtle Beach, South Carolina, which is managed by Mr. Wizard's Fireworks, Inc.
- By virtue of its involvement in the opening and marketing of Chances, and its realization
of revenue from the operation of machines at the location, Quick Foods, Inc., d/b/a
Gamexpress Amusement, has a measure of control, though not primary, over the
operation and management of the location.
- On June 13, 1996, DOR Revenue Officers Jack Grainger and Rick Hall conducted an
inspection of the video gaming businesses located at 1301 Highway 17 North, North
Myrtle Beach, South Carolina.
- The Revenue Officers entered the location through an unlocked door from the outside
which led into the common area.
- 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 an employee at the location.
- Each of the seven rooms were open for business at the date and time of inspection, each
having its door open, and containing five class III machines apiece which were lighted
and operational.
- One employee, located at the cashier desk, was present at the location at the time of
inspection.
- There was no employee in any of the game rooms at the time of the inspection.
- No persons, other than the revenue officers, were present or playing the video machines
in any of the game rooms at the time of inspection.
- The following video game machine licenses were affixed to machines located in the
respective game rooms:
Hi Roller, Rm A
040103
3807822
3807821
3807815
3807814
Jack Potts, Rm B
3807820
3807818
3807819
3807817
3807816
Diamonds, Rm C
040101
040100
040107
040113
040109
Anne Up, Rm D
3807799
3807800
3807801
3807802
3807803
Dubble Down, Rm E
3807808
3807807
3807806
3807805
3807804
Red Chips, Rm F
028321
3807534
3807527
040110
040111
Ace High, Rm G
3807809
3807810
38078 11
3807812
3807813
- As a result of the inspection, Revenue Officers Grainger and Hall issued a Regulatory
Violation and Proposed Assessment Report, 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.
- Copies of the Violation Report were left with the employee on duty.
- DOR seeks a $5,000 fine against Respondent Quick Foods, Inc., d/b/a Gamexpress
Amusements, as the owner and licensee of the machines.
- DOR does not seek a fine against Mr. Wizard's Fireworks, Inc. as the retail operator in
this matter.
- Notice of the time, date, place and subject matter of the hearing was given to the
Petitioner and the Respondent.
CONCLUSIONS OF LAW
Based upon the above Findings of Fact, I conclude as a matter of law, the following:
- 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).
- The Video Game Machines Act ("Act") which regulates video game machine activity in
South Carolina 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.
- 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.
- 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.
- 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).
- Each of the seven game rooms were open for business at the time of the inspection.
- 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). If a game room containing operational Class III video game machines 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. See South Carolina Dep't of Revenue and Taxation v. Mickey Stacks, 95-ALJ-17-0742-CC (March 8, 1996), aff'd Court of Common Pleas, Richland County, Civil
Action No. 96-CP-40-0889 (March 21, 1997).
- In that none of the subject game rooms had "one separate employee" on the business
premises at the time of inspection, each of the seven game rooms was being operated in
violation of one of the "single place or premises" requirements set forth in Regulation
117-190.
- The operation of video machines in each of the subject seven 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) is a violation of S.C. Code Ann. § 12-21-2804.
- 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.
- Pursuant to S.C. Code Ann. § 12-21-2804(A) (Supp.1996), 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 § 12-21-2804(F), however, must be imposed only on person(s) involved in the operation and
management of the location where the violation of Section 12-21-2804(A) occurred.
- 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."
- 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 fact-finder, it is the administrative law judge'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). 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(A) (Supp. 1996). S.C.
Code Ann. § 12-4-30(D) (Supp. 1996).
- Respondent, though not primarily responsible for the management of the subject location,
had adequate interest and control of the operation of the machines to be held accountable
for having "permitted to be used" licenses for the operation of more than five Class III
machines at a single place or premise, and therefore liable for assessment of a fine under
the provisions of S.C. Code Ann. § 12-21-2804(F).
- Because of Respondent's limited role in the management and operation of the subject
location, a $1,000.00 fine is reasonable and appropriate.
- 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 thirty-five class III video game
machine licenses owned by Quick Foods, Inc., d/b/a Gamexpress Amusements, and now or
formerly affixed to video game machines located at 1301 Highway 17 North, North Myrtle
Beach, South Carolina in the business known as Chances Games are hereby revoked:
Hi Roller, Rm A
040103
3807822
3807821
3807815
3807814
Jack Potts, Rm B
3807820
3807818
3807819
3807817
3807816
Diamonds, Rm C
040101
040100
040107
040113
040109
Anne Up, Rm D
3807799
3807800
3807801
3807802
3807803
Dubble Down, Rm E
3807808
3807807
3807806
3807805
3807804
Red Chips, Rm F
028321
3807534
3807527
040110
040111
Ace High, Rm G
3807809
3807810
38078 11
3807812
3807813
IT IS FURTHER ORDERED that no class III video game machine licenses shall be
utilized in any of the seven game rooms located at 1301 Highway 17 North, North Myrtle Beach,
South Carolina, for a period of six months from the date of revocation of the licenses.
IT IS FURTHER ORDERED that Respondent shall pay a fine of $1,000 to the South
Carolina Department of Revenue.
AND IT IS SO ORDERED.
_____________________________
STEPHEN P. BATES
ADMINISTRATIVE LAW JUDGE
November 19, 1997
Columbia, South Carolina |