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. B & C Enterprises, Inc., et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
B & C Enterprises, Inc. and Collins Entertainment Corporation, d/b/a The Video House, 1238 Kings Highway S., North Myrtle Beach, S.C.
 
DOCKET NUMBER:
98-ALJ-17-0297-CC

APPEARANCES:
Nicholas P. Sipe, Esquire for Petitioner

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

James H. Harrison, Esquire for Respondent Collins Entertainment Corporation
 

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" at three video gaming rooms (Video House II, Video House III and Video House IV) in a mall-type structure 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 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 III and Video House IV 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 Three Thousand Five Hundred Dollars ($3,500) 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 January 21, 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 three video gaming rooms, including those known as "Video House III" and "Video House IV."
  2. 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 II," "Video House III" and "Video House IV" are held in the name of B & C Enterprises, Inc.
  1. 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).
  2. The following Class III video game machine licenses were affixed to Class III video game machines located in Video House IV: 034550 (expired May 31, 1997), 034557 (expired May 31, 1997), 034558 (expired May 31, 1997), 034579 (expired May 31, 1997) and 035420 (expired May 31, 1997).
  3. The ten subject machines located at the Video House on January 21, 1997 were licensed to and owned by Collins Entertainment Corporation.
  4. Collins Entertainment Corporation did not have any management authority or control of the location or its employees.
  5. At 1:12 p.m. on January 21, 1997 agents 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.
  6. During the inspection, one of the SLED agents played Class III video games in Video House II, Video House III and Video House IV.
  7. No employee was present in Video House IV at any time while the SLED agent played the Class III video games that room.
  8. Although no employees were present in Video House III for most of the time the SLED agent played Class III video game machines located within that room, an employee intermittently entered the room to monitor the players of Class III video game machines therein.
  9. A male customer was in Video House IV while the SLED agent played a Class III video game machine located therein.
  10. At the time of the SLED inspection, all Class III video game machines within Video House III and Video House IV were operational.
  11. All doors leading from the common area to rooms containing Class III video game machines within the subject location were left opened at the time of the SLED inspection.
  12. The SLED inspection occurred at a normal time for business operations at The Video House.
  13. Each of the rooms containing Class III machines at 1238 Kings Highway South was open for business during the time of the SLED inspection.
  14. 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 a 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 machine in a manner not in compliance with Department of Revenue 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. Frequently during business hours, no employee was located in Video House III; therefore 27 S.C. Code Ann. Regs. 117-190(2) (Supp. 1997) was violated.
  3. Since no employee was located in Video House IV at any time the SLED agent played the Class III video game machines therein, an employee was not on a premises containing Class III video game machines during business hours, in violation of 27 S.C. Code Ann. Regs. 117-190(2) (Supp. 1997).


  1. Since Respondent B & C Enterprises, Inc. failed to have "one separate employee on the premises during business hours" within Video House III and Video House IV, in violation of 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997), each of those rooms failed to meet the "single place or premises" requirements provided for by S.C. Code Ann. § 12-21-2804(A) (Supp. 1997).
  2. 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).
  3. Video House III and Video House IV failed to meet the requirements of S.C. Code Ann. § 12-21-2804(A) (Supp. 1997); therefore, the licenses of machines located therein must be revoked.
  4. 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.
  5. B & C Enterprises, Inc. violated S.C. Code Ann. § 12-21-2804 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.
  6. Because Respondent Collins Entertainment Corporation exercised no control over Video House III or Video House IV, it did not fail to have at least one separate employee on the 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 III and Video House IV are establishments in which licenses are being revoked, no license may be issued for a machine in those establishments for a period of six months from the date of revocation.




  1. 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.
  2. In the present case, a monetary penalty of $3,500 imposed upon the retail operator B & C Enterprises, Inc. for violation of the "single place or premisses" provision is appropriate and reasonable.
  3. While the practical effect of revoking expired licenses under S.C. Code Ann. § 12-21-2804 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 as the penalties apply as of the date of the violation, not the date of the hearing.
  4. 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 Three Thousand Five Hundred Dollars ($3,500) 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: 034542, 034693, 035154, 035169, 042779, 034509, 034647, 034703, 3805512, 3805513, 034550, 034557, 034558, 034579 and 035420.









IT IS FURTHER ORDERED that no licenses be issued for Class III video game machines at Video House III and Video House IV, 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.

 

 

 

 

 

Copyright © 2021 South Carolina Administrative Law Court