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Administrative Law Court
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SC Administrative Law Court Decisions

SCDOR vs. Rusty Corporation

South Carolina Department of Revenue

South Carolina Department of Revenue

Rusty Corporation

For the Petitioner: Carol I. McMahan, Esquire

For the Respondent: Pro Se




This matter comes before me pursuant to S.C. Code Ann.§§ 1-23-310 et seq. (1986 & Supp. 1996) and 1-23-600 (E) (Supp. 1996), upon request for a contested case hearing by Rusty Corporation ("Respondent"). Respondent was cited with an administrative violation of S. C. Code Ann. § 12-21-2802 (Supp. 1996) for allegedly failing to prominently display penalty signs on four (4) video machines licensed under S. C. Code Ann. § 12-21-2720 (Supp. 1996). The South Carolina Department of Revenue ("Department") seeks an order from this court finding the alleged violations on January 21, 1997, at Respondent's location at 1210 South Granard Street, Gaffney, South Carolina ("location"). Further, the Department seeks a penalty of $300.00 for each violation for a total penalty of $1,200.00.

The Respondent, through its owner, Rasiklal J. Patel, denies the alleged violations and contests the citation. It argues that the "penalty notices" were displayed at all four machine locations.

After timely notice to the parties, a contested case hearing was held at the Anderson County Courthouse, Anderson, South Carolina on October 15, 1997.

Based upon a thorough review of the record and of the testimony and evidence presented at the hearing, I conclude that the Respondent violated the provisions of S.C. Code Ann. § 12-21-2802 (Supp. 1996) and find that a penalty in the amount of One Hundred ($100.00) Dollars per machine is appropriate under the circumstances.


Without objection, Petitioner placed into evidence the following exhibits:

Exhibit 1: Determination Letter and Notice of Violation Letter from the Department dated July 18, 1997 and May 30, 1997, respectively;

Exhibit 2: Letter from Respondent dated July 21, 1997, requesting a contested case hearing;

Exhibit3: Findings Report with memo to file by SLED agent Milton Robert Jones, IV, dated January 21, 1997 and January 29, 1997, respectively;

Exhibit 4: Respondent's application for four (4) coin-operated devices/machines dated May 31, 1996;

Exhibit 5: Respondent's application for a business license dated January 3, 1996;

Exhibit 6: S. C. Rev. Procedure # 97-2;

Exhibit 7: Copy of the "penalty sign" required by S. C. Code Ann. § 12-21-2802.


Having carefully considered all testimony and arguments presented at the hearing and taking into account the credibility of the witnesses, accuracy of the evidence and reviewing all of the exhibits carefully, I make the following findings by a preponderance of the evidence:

1. This Division has personal and subject matter jurisdiction.

2. Notice of the date, time, place and nature of the hearing was timely given to both parties.

3. Respondent operates a convenience store/BP station at 1210 South Granard Street, Gaffney, South Carolina.

4. On January 21, 1997, at approximately 9:57 a.m., an inspection was conducted at this business by SLED agents Milton Robert Jones, IV and Jerry R. Owen.

5. At the time of the inspection there were five (5) Class III video machines with license numbers 041928, 041922, 041956, 041937 and 041926 operational inside the location.

6. The machines are owned by Gault Amusement, Inc., a company owned by Michael W. Gault.

7. Upon entering the store SLED agents Jones and Owen introduced themselves to the store clerk, Jack Smoley, and explained to him the purpose of the visit.

8. The two SLED agents, accompanied by the store clerk, conducted an inspection of the five (5) Class III video machines at the convenience store to determine if each had the "penalty/warning sign" required by statute to be posted either on the machines or on the wall behind the machines. The sides and the backs of each machine were thoroughly examined by both SLED agents and the store clerk. The penalty sign was found on one of the machines. No notices or signs were posted or placed on the wall behind any of the machines.

11. SLED agent Jones wrote up a Findings Report and left a copy with the store clerk, Mr. Smoley.


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

1. This matter is properly before the Administrative Law Judge Division pursuant to the provisions of Chapter 23, Title 1 and S.C. Code Ann. § 12-4-30(D) (Supp. 1996).

2. The Video Game Machines Act, which regulates video poker machine activity in South Carolina, was enacted in 1993 and became effective on July 1, 1993. This Act is codified at S.C. Code Ann. § 12-21-2770 et seq. (Supp. 1996).

3. S. C. Code Ann. § 12-21-2802 (Supp. 1996) provides:

Each machine licensed under this article or Article 19 must have a prominently

displayed sign citing the penalties provided by Sections 12-21-2790, 12-21-

2792, and 12-21-2794 on the wall above the machine or affixed prominently to the machine. The commission shall make these signs available free of charge.

4. "Prominent" is defined by The American Heritage College Dictionary, 3d ed. at p. 1095, as something "[i]mmediately noticeable; conspicuous."

5. S. C. Code Ann. § 12-21-2720 (A)(3) (Supp. 1996) provides as follows:

Every person who maintains for use or permits the use of, on a place or

premises occupied by him, one or more of the following machines or devices shall apply for and procure from the South Carolina Department of Revenue a

license effective for two years for the privilege of making use of the machine in South Carolina and shall pay for the license a tax of fifty dollars for each machine in

item (1), two hundred dollars for each machine in item (2), and three thousand

dollars for each machine in item (3):

* * *

(3) a machine of the nonpayout type, in-line pin game, or video game with free play feature operated by a slot in which is deposited a coin or thing of value

except machines of the nonpayout pin table type with levers or "flippers" operated by the player by which the course of the balls may be altered or


6. S. C. Code Ann. § 12-54-40 (b)(3) (Supp. 1996) provides:

(b) There must be added to and become a part of the tax imposed by the tax or revenue laws, and collection as such:

(3) A person who is liable to obtain a license or purchase stamps for

identification purposes, who fails to obtain or display the license properly,

or who fails to affix the stamps properly, or fails to comply with statutory

provisions, is subject to a penalty of not less than fifty dollars nor more than five hundred dollars for each failure.

(Emphasis added).

Respondent is liable to obtain licenses for these machines pursuant to § 12-21-2720 (A)(3) and the failure to comply with the provisions of § 12-21-2770 subjects it to a fine.

7. Where a statute is clear and unambiguous, there is no room for construction and the terms of the statute must be given their literal meaning. Southeastern Fire Ins. Co. v. South Carolina Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969); Green v. Zimmerman, 269 S.C. 535 S.E.2d 323 (1977).

8. It is impossible for reasonable minds to differ as to the proper interpretation of S.C. Code Ann. § 12-21-2802 (Supp. 1996). That statute requires in unambiguous language that a "penalty notice" must be posted at each Class III video poker machine or on the wall behind the machine. After a thorough examination of the evidence presented concerning the five Class III video machines in this case and the wall behind them, I find and conclude that a penalty sign was found at only one machine location.

9. The Department seeks a penalty of Three Hundred ($300.00) Dollars for each violation. It argues that S. C. Code Ann. § 12-54-40 (b)(3) (Supp. 1996) authorizes a penalty of not less than Fifty ($50.00) Dollars nor more than Five Hundred ($500.00) Dollars for the failure by the Respondent to comply with § 12-21-2802 and that $300.00 is the appropriate penalty per machine violation.

10. I find and conclude that a more appropriate penalty to be assessed against the Respondent is the amount of One Hundred ($100.00) Dollars per machine which is found to be in violation of § 12-21-2802.

This was the first time Respondent was found in violation of this statutory provision or any other provision of the Video Game Machines Act or the Coin-Operated Machines and Devices and Other Amusements Act. Further, after the inspection was concluded by the SLED agents, within several hours Respondent had posted the penalty signs at each machine within the location.

Accordingly, I find that a total fine of Four Hundred ($400.00) Dollars should be assessed against Respondent.


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

ORDERED that Respondent shall pay a fine to the Department in the amount of Four Hundred ($400.00) Dollars for the four (4) violations of S. C. Code Ann. § 12-21-2802 on January 21, 1997.



Marvin F. Kittrell

Chief Judge

Columbia, South Carolina

October 29, 1997

Brown Bldg.






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