SC Administrative Law Court Decisions

The South Carolina Department of Revenue (DOR) seeks a total of $5,000 as a monetary penalty for a failure to identify the owner or operator of two Class III machines owned by Collins Entertainment Corp. (Collins). Collins opposes DOR's position and asserts that while the identifications were absent from the machines, the removal was caused by patrons, and further that if a violation occurred, a fine of $5,000 is too severe. Collins' disagreement with DOR's determination places jurisdiction in the Administrative Law Judge Division (ALJD). S.C Code Ann. §§ 12-60-1310, 12-60-1320, 1-23-600 (Supp. 1997). The hearing in this matter was held July 21, 1998 at the Edgar Brown Building, Columbia, South Carolina. Based upon the evidence and the argument presented by the parties, the penalty of $5,000 is proper.

Did two of Collins' Class III machines located at 301 N. McDuffie Street, Anderson, South Carolina have information attached identifying the owner or operator of those machines, and, if no, what is the applicable penalty?

1. Positions of Parties

DOR asserts the SLED Agents found no owner identification on two of the machines in question. Thus, DOR argues a violation occurred and a penalty of $2,500 must be imposed for each violation giving a total of $5,000. Collins argues the machine had an owner identification at one time but it was removed by an unauthorized and unknown individual. Under such circumstances, if a penalty is due, a penalty of less than $5,000 should be imposed.

2. Findings of Fact

Based on the preponderance of the evidence, the following findings of fact are entered:

Collins holds several licenses for Class III video game machines with some of the licenses in use on machines located at 301 N. McDuffie Street, Anderson, South Carolina. On January 23, 1997, SLED Agents conducted an inspection of the video gaming machines at that location. The inspection included determining whether an owner or operator identification was displayed on the machines.

The inspection revealed no owner or operator identification was displayed on two of the machines. As a result, on January 23, 1997, DOR issued a Preliminary Findings Report finding that Collins violated S.C. Code Ann. § 12-21-2748 by failing to affix an owner identification to two of the Class III video game machines located at the 301 N. McDuffie Street location. Further, on December 12, 1997, DOR issued a Final Determination on the alleged failure to affix owner identification to two of the Class III video game machines at this location.

The evidence establishes that a Collins employee services this machine on Friday of each week. The evidence further demonstrates that the owner identification decal was on the two machines prior to the machines being placed on the premises and that the machines had an owner identification at least as late as January 17, 1997. Further, Collins has had instances in which unknown individuals have without permission removed owner identification decals from his machines. The evidence is uncontradicted that on January 23, 1997, no owner or operator identification was displayed on two of the machines at the 301 N. McDuffie Street location.

This is not the first instance in which Collins has failed to have owner identification placed on his machines. Prior to the date of this decision, Collins violated the owner identification statute ten times and has been fined ten times. In fact, by the January 23, 1997 inspection, Collins had been notified of four violations of a failure to attach an owner identification on one or more of his machines:

Given the repeated nature of the violations, DOR seeks the maximum fine of $5,000.

3. Conclusions of Law

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

Licensed Class III machines must have attached information identifying the owner or operator of the machine with the identification placed on a visible area of the machine for inspection purposes. S.C. Code Ann. § 12-21-2748 (Supp. 1997). Failure to comply with the identification requirement subjects the violator to the applicable penalty and enforcement provisions of Chapter 21 and Chapter 54 of Title 12. Id.

The evidence here shows the SLED Agent found no owner identification on two of the machines in question. Further, no persuasive evidence establishes that the required identification was affixed to the machine on the date of inspection. Accordingly, on January 23, 1997, two Class III video game machines located at 301 N. McDuffie Street, Anderson, South Carolina were licensed to Collins but did not have the owner or operator identification affixed. Thus, in the instant case, Collins failed to comply with the statutory requirement of owner identification and, therefore, violated S.C. Code Ann. § 12-21-2748 (Supp. 1997).

In determining the penalty for a failure to affix an owner identification, due to the number of violations and their repeated nature, DOR's position is that the amount of the penalty should be the maximum $2,500 per violation allowed by S.C. Code Ann. § 12-21-2738 (Supp. 1997). Here, the facts demonstrate that Collins has violated the owner identification statute four times prior to the current citation of January 23, 1997. While Collins challenged the four citations, it was nonetheless on notice that greater care was needed in assuring owner identification was attached to its machines.

Collins has numerous machines located in every area of the State. Further, such large numbers present difficulties in assuring that unauthorized individuals do not remove the owner identifications from the machines. However, the fact an owner has a large number of machines in numerous locations does not warrant a reduction in the penalty. Rather, the decision to engage in a large scale use of the machines is a decision made by the owner and should not serve as a means to reduce the vigilance needed to comply with the law. In fact, Collins appears to agree with the need for vigilance since the evidence demonstrates Collin's current practices seek to assure ownership identification remains on the machine in that the use of tamper-proof decals are now being affixed. While the new practice is commendable as a means of avoiding future violations, such a new procedure is insufficient to decrease the fine for prior violations. Considered as a whole, a penalty of $5,000 is warranted.

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

Two of the Class III machines owned by Collins and located at 301 N. McDuffie Street, Anderson, South Carolina, failed to have attached information identifying the owner or operator of those machines. Accordingly, Collins is liable for a fine of $5,000.

AND IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

Dated: July 23, 1998

Columbia, South Carolina