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. Collins Entertainment Corporation, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Collins Entertainment Corporation and B & C Enterprises, Inc., d/b/a The Video House, 1238 Kings Highway S., North Myrtle Beach, S.C.
 
DOCKET NUMBER:
98-ALJ-17-0296-CC

APPEARANCES:
Nicholas P. Sipe, Esquire for Petitioner

James H. Harrison, Esquire for Respondent Collins Entertainment Corporation

H. Buck Cutts, Esquire for Respondent B & C Enterprises, Inc.
 

ORDERS:

FINAL ORDER AND DECISION

This matter comes before me upon Respondents' request for a contested case hearing after being cited by the South Carolina Department of Revenue for administrative violations of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) for failure to have "at least one separate employee on the premises during business hours" and for failure to have a working utility meter in each video gaming room at 1238 Kings Highway South, North Myrtle Beach, South Carolina.

A contested case hearing in this matter was held in Columbia, South Carolina, on

September 14, 1998. Based upon the relevant and probative evidence and the applicable law, I find and conclude the retail operator, B & C Enterprises, Inc., violated S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997). Accordingly, the machine licenses in Video House I and Video House III are revoked, and no Class III machines shall be operated in those rooms for a period of six (6) months. B & C Enterprises, Inc. is ordered to pay a monetary penalty of Four Thousand Dollars ($4,000) for violation of the "single place or premises" provision. No fine is imposed against Collins Entertainment Corporation.

FINDINGS OF FACT

By a preponderance of the evidence, I find:

  1. On or about April 24, 1997, a video gaming business known as "The Video House" operated at 1238 Kings Highway South, North Myrtle Beach, South Carolina, in a mall-type structure containing four video gaming rooms, known as "Video House I," "Video House II," "Video House III" and "Video House IV."
  2. Video House I, Video House II, Video House III and Video House IV are connected by a common area.
  3. B & C Enterprises, Inc. owns and operates The Video House.
  4. Business retail tax licenses for Video House I, Video House II, Video House III and Video House IV are held in the name of B & C Enterprises, Inc.
  5. The following Class III video game machine licenses were affixed to Class III video game machines located in Video House I: 028636 (expired May 31, 1997); 042544 (expired May 31, 1997); and 042775 (expired May 31, 1997).
  6. The following Class III video game machine licenses were affixed to Class III video game machines located in Video House III: 034589 (expired May 31, 1997); 034647 (expired May 31, 1997); 034703 (expired May 31, 1997); 3805512 (expired May 31, 1997); and 3805513 (expired May 31, 1997).
  7. The machines located at the Video House on April 24, 1997, were licensed to and owned by Collins Entertainment Corporation.
  8. Collins Entertainment Corporation did not have any management authority or control of the location or the employees of B & C Enterprises, Inc.
  9. At approximately 6:30 p.m. on April 24, 1997, agents Stacey Snow and Philip Grimsley of the State Law Enforcement Division ("SLED") commenced an undercover inspection of the video gaming businesses at 1238 Kings Highway South, North Myrtle Beach, South Carolina.
  10. When asked by an employee of The Video House if they were officers of the State, the officers replied negatively.


  1. During the inspection, the doors to Video House I, Video House II, Video House III and Video House IV were open, and the machines therein were operational.
  2. Throughout the inspection, an employee and a customer were located in Video House II.
  3. Grimsley played Class III video games within Video House III for approximately ten minutes during the inspection. During that time, no one else was present in the room.
  4. Grimsley left Video House III and went to Video House I, where he played Class III video game machines for forty minutes.
  5. No employees were located in Video House I while Grimsley played Class III video game machines, except for a two-minute span when an employee interrupted Grimsley's playing of a Class III video game machine to replace paper in the machine.
  6. An employee was located in Video House IV during the entire inspection.
  7. All doors leading from the common area to rooms containing Class III video game machines within the subject location were open at the time of the SLED inspection.
  8. The SLED inspection occurred at a normal time for business operations at The Video House.
  9. Each of the rooms containing Class III machines at 1238 Kings Highway South was open for business during the time of the SLED inspection.
  10. Each of the rooms containing Class III machines at 1238 Kings Highway South contained functional utility meters at the time of the inspection.
  11. Notice of the time, date, place and subject matter of the hearing was given to the Petitioner and Respondents.


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 the Administrative Procedures Act (APA), S.C. Code Ann. §§ 1-23-310 et seq. (1976 & Supp. 1997), S.C. Code § 12-4-30(D), and §§ 12-60-1310 through 12-60-1350 of the South Carolina Revenue Procedures Act (RPA).
  2. The Video Game Machines Act, S.C. Code Ann. §§ 12-21-2770 et seq. (Supp. 1997) became effective on July 1, 1993, 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. South Carolina Tax Comm'n, 6:93-1491-3 and 6:93-1493-3 (U.S. Dist. Ct., Greenville, S.C., Nov. 15, 1993); cf. 1994 Op. S.C. Att'y Gen. 21.
  3. The Video Game Machines Act § 12-21-2804(A) prohibits any 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.
  4. Operation of a Class III video game machines in a manner not in compliance with 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997), which defines "single place or premises" for purposes of the Video Games Machines Act, constitutes a violation of S.C. Code Ann. § 12-21-2804(A).
  5. 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997) provides as follows :

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.

(Emphasis added).

  1. 27 S.C. Code Ann. Regs. 117-190(2) (Supp. 1997) requires an employee to be on a premises containing Class III video game machines during business hours.
  2. Since no employees were located in Video House I or Video House III during portions of the SLED inspection, an employee was not on those premises containing Class III video game machines during business hours, in violation of 27 S.C. Code Ann. Regs. 117-190(2) (Supp. 1997).
  3. Since B & C Enterprises, Inc. failed to have "one separate employee on the premises during business hours" within Video House I or Video House III, each room failed to meet the


"single place or premises" requirements provide for by S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).

  1. DOR "shall revoke the licenses of machines located in an establishment which fails to meet the requirements of this section." S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).
  2. During the SLED inspection, Video House I and Video House III failed to meet the requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997); therefore, the licenses of the machines located therein must be revoked.
  3. Section 12-21-2804(F) provides that only those persons directly involved in the management or operation of a location in violation of § 12-21-2804(A) are subject to monetary fines of up to $5,000.
  4. As the retail operator of Video House I and Video House III, B & C Enterprises, Inc. violated S.C. Code Ann. § 12-21-2804 (Supp. 1997) by permitting to be used permits for the operation of more than five Class III machines at a single place or premises and is, therefore, subject to a monetary penalty.
  5. Substantial compliance is not a valid defense for violation of § 12-21-2804(A), although such compliance may be relevant as a mitigating factor in the determination of penalties.
  6. Because Respondent Collins Entertainment Corporation exercised no control over Video House I or Video House III, it did not fail to have at least one separate employee on those premises during business hours, nor did it "apply for, receive, maintain, or permit to be used" more than five Class III video game machine licenses at a single place or premises; therefore, it should not be assessed a monetary penalty under S.C. Code Ann. §§ 12-21-2804(A) and 12-21-2804(F) (Supp. 1997).
  7. Section 12-21-2804(A) also provides that "[n]o 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."
  8. Because Video House I and Video House III are establishments in which licenses have been revoked, no license may be issued for a machine in those establishments for a period of six months from the date of revocation.




  1. In the present case, a monetary penalty of $4,000 imposed upon the retail operator B & C Enterprises, Inc. for violation of the "single place or premisses" provision is appropriate and reasonable.
  2. Entrapment is an affirmative defense in which a law enforcement officer originates the idea of a crime and then induces a party to carry out conduct that constitutes the crime when the induced party was not otherwise disposed to commit the crime. United States v. Prytz, 822 F. Supp. 311 (D.S.C. 1993), aff'd, 35 F.3d 557 (4th Cir. 1994).
  3. As "[o]ne pleading entrapment has the burden of showing that he was induced, tricked or incited to commit a crime, which he would not otherwise have committed," State v. Johnson, 295 S.C. 215, 217, 367 S.E.2d 700, 701 (1988), the defense of entrapment is available only in criminal cases. See South Carolina Dep't of Revenue v. Smith, 97-ALJ-17-0314-CC (November 19, 1997).
  4. "Inducement" may be defined as government conduct which creates a substantial risk that an undisposed person or otherwise law-abiding citizen would commit the offense. United States v. Ortiz, 804 F.2d 1161 (10th Cir. 1986).
  5. "[I]n the detection of many types of crime, the Government is entitled to use decoys and to conceal the identity of its agents." Lewis v. United States, 385 U.S. 206, 209 (1966), citing Grimm v. United States, 156 U.S. 604 (1895); Andrews v. United States, 162 U.S. 420 (1896). Cf. Christopher Slobogin, Deceit, Pretext, and Trickery: Investigative Lies by the Police, 76 Or. L. Rev. 775, 778 (1997) ("Typically, an undercover agent gives or presents a fake identity and a fabricated history, denies any involvement with the police, and engages in any number of other lies").
  6. The SLED agents' denial of their involvement with police did not induce, trick or incite any employee of The Video House to commit a crime, which he would not otherwise have committed; therefore, no entrapment was involved in the inspection.
  1. "Section 12-21-2720 is not a penal statute. There is no provision for penalty or forfeiture." South Carolina Dep't of Revenue and Taxation v. Rosemary Coin Machines, Inc., 331 S.C. 234, 246, 500 S.E.2d 176, 182 (Ct. App. 1998), rehearing den'd June 19, 1998.




  1. While the practical effect of revoking expired licenses under S.C. Code Ann. § 12-21-2804 is that there is nothing to surrender, the statute makes no distinction between expired and unexpired licenses. The statute mandates revocation of the licenses on machines located in an establishment that fails to meet the requirements of the section; therefore, upon a finding that the statute has been violated, revocation of the licenses is required. See South Carolina Dep't of Revenue v. Cudney, 96-ALJ-17-0541-CC (August 28, 1997). Accordingly, the fact that all licenses involved in this action have expired is immaterial to determination of penalties since the penalties apply as of the date of the violation, not the date of the hearing.
  2. 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(C).


ORDER

IT IS THEREFORE ORDERED that B & C Enterprises, Inc. pay a penalty of Four Thousand Dollars ($4,000) to the South Carolina Department of Revenue for violation of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997) and 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997).

IT IS FURTHER ORDERED that the following Class III video game machine licenses be revoked immediately: 0028636, 042544, 042575, 034589, 034647, 034703, 3805512, and 3805513.

IT IS FURTHER ORDERED that no Class III video game machines be used at Video House I or Video House III, 1238 Kings Highway South, North Myrtle Beach, South Carolina for a period of six (6) months from the date of this order.

AND IT IS SO ORDERED.

__________________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

October 23, 1998

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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