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. Quick Foods, Inc., d/b/a Gamexpress Amusements

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Quick Foods, Inc., d/b/a Gamexpress Amusements
 
DOCKET NUMBER:
97-ALJ-17-0261-CC

APPEARANCES:
For the Petitioner: Nicholas P. Sipe, Esquire

For the Respondent: James M. Griffin, Esquire
 

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:

  1. 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,
  2. At the hearing, DOR conceded that Mr. Wizard's Inc. was not named as a party to this action.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. The Revenue Officers entered the location through an unlocked door from the outside which led into the common area.
  10. 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.
  11. 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.
  12. One employee, located at the cashier desk, was present at the location at the time of inspection.
  13. There was no employee in any of the game rooms at the time of the inspection.
  14. 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.
  15. 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

  1. 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.
  2. Copies of the Violation Report were left with the employee on duty.
  3. DOR seeks a $5,000 fine against Respondent Quick Foods, Inc., d/b/a Gamexpress Amusements, as the owner and licensee of the machines.
  4. DOR does not seek a fine against Mr. Wizard's Fireworks, Inc. as the retail operator in this matter.
  5. 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:

  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 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.
  4. 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. 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).
  2. Each of the seven game rooms were open for business at the time of the inspection.
  3. 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).
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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."
  9. 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.
  10. 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).
  11. 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).
  12. Because of Respondent's limited role in the management and operation of the subject location, a $1,000.00 fine is reasonable and appropriate.
  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 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


Brown Bldg.

 

 

 

 

 

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