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Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
SCDOR vs. Anderson County Lodge #10, et al

AGENCY:
South Carolina Department of Revenue

PARTIES:
Petitioners:
South Carolina Department of Revenue

Respondents:
Anderson County Lodge #10, Fraternal Order of Police, and Ashy International, Inc.
 
DOCKET NUMBER:
98-ALJ-17-0489-A-CC

APPEARANCES:
Geoffrey R. Bonham, Esquire for Petitioner

Kymric Y. Mahnke, Esquire for Respondents
 

ORDERS:

FINAL ORDER AND DECISION ON REMAND

ORDER ON REMAND



Pursuant to the Order of the Honorable James E. Lockemy, Presiding Judge of the Court of Common Pleas, County of Greenville, South Carolina (with respect to Docket No. 98-ALJ-17-0488-A-CC), and the Order of the Honorable L. Casey Manning, Presiding Judge of the Court of Common Pleas, County of Anderson, South Carolina (with respect to Docket No. 98-ALJ-17-0489-A-CC), these matters were remanded to the Administrative Law Judge Division for further findings of fact and conclusions of law as to the reasonableness of the penalty assessed by the Petitioner, South Carolina Department of Revenue (Department) against the Respondents in these cases. Upon remand, these matters were reassigned to the undersigned. The parties stipulated to the resolution of these matters based on the record of the hearing previously held. In accordance with the Orders of Remand, the Final Order and Decision of the Honorable Alison Renee Lee in these cases, dated March 2, 1999, is hereby rescinded in its entirety and the following Order substituted therefor.



STATEMENT OF THE CASE

This matter comes before the Administrative Law Judge Division on a citation issued by the South Carolina Department of Revenue (DOR) against the Respondents for failure to timely remit 16.5% of the value of bingo cards they had received, a violation of the Bingo Tax Act of 1996, S.C. Code Ann. §§ 12-21-3910 et seq. (Supp. 1997). For the violations, DOR seeks a $5,000 fine against Greenville Lodge No. 858, The Benevolent and Protective Order of Elks of the United States of America, and Ramon Ashy, Jr., and a $5,000 fine against Anderson County Lodge #10, Fraternal Order of Police, and Ashy International, Inc.

The Respondents sought review of the DOR determination, arguing that the fines are excessive given the circumstances. After notice to the parties, this matter was heard on February 23, 1999. 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).

FINDINGS OF FACT

I make the following Findings of Fact, taking into account the burden on the parties to establish their respective cases by a preponderance of the evidence and taking into consideration the credibility of the witnesses:

Greenville Lodge No. 858

1. Ramon Ashy, Jr. managed and supervised the day-to-day operations of bingo games for Greenville Lodge No. 858, The Benevolent and Protective Order of Elks of the United States of America ("Elks' Lodge").

2. On October 1, 1997, a representative of Ramon Ashy, Jr. applied for and received a bingo card purchase voucher for $155,000 worth of cards.



3. Ramon Ashy, Jr. and the Elks' Lodge did not remit $25,575 (16.5% of the value of bingo cards purchased on October 1, 1997) to DOR until November 4, 1997.

4. On January 28, 1998, DOR issued a Regulatory Violation and Proposed Assessment Report charging Ramon Ashy, Jr. and the Elks' Lodge $5,000 for failure to for failure to timely remit 16.5% of the value of bingo cards received.

5. On February 27, 1998, Ramon Ashy, Jr. filed a protest of the Regulatory Violation and Proposed Assessment Report.

6. On July 15, 1998, DOR upheld its initial assessment of a $5,000 fine in its Final Determination.

7. On July 30, 1998, Ramon Ashy, Jr. and the Elks' Lodge requested a hearing to contest DOR's Final Determination.

Anderson County Lodge #10

8. Ashy International, Inc. managed and supervised the day-to-day operations of bingo games on behalf of Anderson County Lodge #10, Fraternal Order of Police ("Police Lodge").

9. On October 1, 1997, a representative of Ashy International, Inc. applied for and received a bingo card purchase voucher for $137,500 worth of bingo cards.

10. Ashy International, Inc. and the Police Lodge failed to remit $22,687.50 (16.5% of the total face value of the cards purchased on October 1, 1997) by October 16, 1997 but instead paid the amount on October 21, 1997.

11. On February 15, 1998, DOR issued a Regulatory Violation and Proposed Assessment Report charging Ashy International, Inc. and the Police Lodge $5,000 for failure to for failure to timely remit 16.5% of the value of bingo cards received.

12. On March 13, 1998, Ashy International, Inc. and the Police Lodge filed a protest of the Regulatory Violation and Proposed Assessment Report.

13. On July 15, 1998, DOR upheld its initial assessment of a $5,000 fine in its Final Determination.

14. On July 30, 1998, Ashy International, Inc. and the Police Lodge requested a hearing to contest DOR's Final Determination.



General Findings

15. The Bingo Tax Act of 1996 became effective October 1, 1997, the same day the Respondents purchased the subject bingo paper.

16. The Bingo Tax Act of 1996 changed the mechanism by which promoters acquire bingo paper. Under the act, as amended, upon receipt of the application for bingo cards, DOR notifies a licensed distributor that it may release the face value of the bingo cards requested to the licensed organization or promoter. In addition, the Bingo Tax Act of 1996 raised the admissions tax imposed on each player.

17. The Bingo Tax Act of 1996 effectively raised the cost of purchasing bingo, and, therefore, negatively affected bingo players' desire to participate in bingo games. In the case of the Respondents, attendance at their bingo games decreased by approximately half.

18. The Respondents underestimated the negative effects the Bingo Tax Act of 1996 would have on the demand for bingo when they ordered bingo paper on October 1, 1997; accordingly, they purchased an amount of bingo paper in excess of that required for operation of bingo games. In addition, much of the bingo paper purchased by the Respondents on October 1, 1997 was "back-ordered" and unavailable from the distributor, and thus unavailable for use by the Respondents in bingo games, until after the 16.5% charge was due.

19. As a result of their purchasing more bingo paper than required, the Respondents lacked funds to pay the required 16.5% charge in a timely manner.

20. As of the date of the hearing, the Respondents have not been late in paying the required 16.5% charge on any other occasion.

21. Department officials in the Greenville District uniformly initially assess a $5,000 penalty for failure to timely remit 16.5% of the value of bingo cards received, regardless of the circumstances of individual violations.



CONCLUSIONS OF LAW

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

1. The Division holds jurisdiction over the parties and subject matter of this dispute.

2. In administrative violation cases, the Department bears the burden of proving its case by a preponderance of evidence. See National Health Corp. v. South Carolina Dep't of Health and Envt'l Control, 298 S.C. 373, 380 S.E.2d 841 (Ct. App. 1989).

3. "The game of bingo, when conducted by charitable, religious or fraternal organizations exempt from federal income taxation or when conducted at recognized annual State and county fairs, shall not be deemed a lottery prohibited by this section." South Carolina Const. Art. XVII, § 7.

4. "Organizations may conduct bingo in this state only by license. The license confers no property right. It is a permit issued pursuant to the State's police power." Army Navy Bingo, Garrison No. 2196 v. Plowden, 314 S.E.2d 339, 340, 281 S.C. 226, 229 (1984).

5. The promoter and the nonprofit organization are jointly and severally liable for all taxes, penalties, interest, and fines imposed by the Bingo Act. S.C. Code Ann. § 12-21-3960 (Supp. 1997).

6. Section 12-21-4270 (Supp. 1997) provides as follows:

Each licensed nonprofit organization or promoter, in the name of a licensed organization, may obtain bingo cards approved by the department by making application and remitting sixteen and one-half percent of the total face value of the cards to be purchased. Payment to the State for the issuance of bingo cards must be made by certified check within fifteen days of receipt of the application.

7. Upon receipt of an application for bingo cards, the department notifies a licensed distributor that the distributor may release the face value of the bingo cards requested to the licensed organization or promoter. S.C. Code Ann. § 12-21-4270 (Supp. 1997). Any unused bingo cards

may be returned to the department for refund and destruction. S.C. Code Ann. § 12-21-4210 (Supp. 1997).

8. Respondents Ramon Ashy, Jr. and the Elks' Lodge violated S.C. Code Ann. § 12-21-4270 (Supp. 1997) by failing to remit 16.5% of the total face value of the cards purchased to the Department within fifteen days of receipt of the application.

9. Respondents Ashy International, Inc. and the Police Lodge violated S.C. Code Ann. § 12-21-4270 (Supp. 1997) by failing to remit 16.5% of the total face value of the cards purchased within fifteen days of receipt of the application.



10. S.C. Code Ann. § 12-21-4140 provides that "[a] penalty of up to five thousand dollars and revocation of the license at the discretion of the department may be imposed for a violation of this article. Each violation and each day in violation of a provision of this article constitutes a separate offense."

11. S.C. Revenue Procedure 97-7 recommends a fine of $5,000 for a first violation of S.C. Code Ann. § 12-21-4270. A fine of $5,000 and revocation are recommended for a second offense. However, Revenue Procedure 97-7 also provides that the recommendations are guidelines only and that "[t]here often will be circumstances present that call for either more severe or less severe sanctions for an offense or a group of offenses discovered during an inspection, an audit, or otherwise."

12. Respondents Ramon Ashy, Jr. and the Elks' Lodge are liable jointly and severally for a penalty of up to $5,000. S.C. Code Ann. § 12-21-4140 (Supp. 1997); S.C. Code Ann. § 12-21-3960 (Supp. 1997).

13. Respondents Ashy International, Inc. and the Police Lodge are subject jointly and severally to a penalty of up to $5,000. S.C. Code Ann. § 12-21-4140 (Supp. 1997); S.C. Code Ann. § 12-21-3960 (Supp. 1997).

14. It is a generally recognized principle of administrative law that the fact finder has the authority to impose an administrative penalty, based upon the facts presented, after the parties have had an opportunity to have a hearing and be heard on the issues. Walker v. S.C. ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633 (1991). See also Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N. E. 2d 266 (Ohio A. 2 Dist. 1995); Shadow Lake of Noel, Inc. v. Supervisor of Liquor Control, 893 S. W. 2d 835 (Mo. App. S. D. 1995); Matter of Henry Youth Hockey Ass'n., 511 N. W. 2d 452 (Minn. Ap. 1994); Vermont Agency of Natural Resources v. Duranleau, 617 A. 2d 143 (Vt. 1992); City of Louisville v. Milligan, 798 S. W 2d 454 (Ky. 1990); Com., Dept. of Transp. v. Slipp, 550 A. 2d 838 (Pa. 1988); Dept. of Transp. v. Miller, 528 A. 2d 1030 (Pa. 1987); State Police v. Cantina Gloria's, 639 A. 2d 14 (Pa. 1994). Under the circumstances of this case, I find that mitigating facts are present which warrant a reduction of the penalty imposed by the Department.



15. S.C. Code Ann. § 12-21-4140 (Supp. 1997) provides that "[a] penalty of up to five thousand dollars and revocation of the license at the discretion of the department may be imposed for a violation of this article. Each violation and each day in violation of a provision of this article constitutes a separate offense." (Emphasis added). It is evident from this statute that the legislature made a range of penalties permissible under the law, and in doing so, the legislature implicitly made the imposition of the penalty dependent upon the circumstances of each case. In addition, the Department's own revenue procedure, #97-7, provides that its recommended penalties are guidelines only and that the circumstances of each case may be taken into account in determining the actual penalty imposed for a particular violation. Under the facts of this case, Respondents were late in paying the 16.5% tax on one occasion--the same month in which the amendments to the Bingo Act became effective. Those amendments, which increased the cost of playing bingo, resulted in an unforeseeable decrease in attendance at Respondents' bingo sessions, and in turn prevented Respondents from having sufficient funds to pay the tax. Accordingly, under the circumstances, a reduced penalty is warranted.

16. A fine in the total amount of $1,000 against Respondents Ramon Ashy, Jr. and the Elks' Lodge for violation of S.C. Code Ann. § 12-21-4270 (Supp. 1997) is appropriate and reasonable under the circumstances of this case.

17. A fine in the total amount of $1,000 against Respondents Ashy International, Inc. and the Police Lodge for violation of S.C. Code Ann. § 12-21-4270 (Supp. 1997) is appropriate and reasonable under the circumstances of this case.





ORDER

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

ORDERED that Ramon Ashy, Jr. and Greenville Lodge No. 858, The Benevolent and Protective Order of Elks of the United States of America remit a total of $1,000 to the South Carolina Department of Revenue.









IT IS FURTHER ORDERED THAT Ashy International, Inc. and the Anderson County Lodge #10, Fraternal Order of Police ("Police Lodge") remit a total of $1,000 to the South Carolina Department of Revenue.

AND IT IS SO ORDERED.





__________________________________

Marvin F. Kittrell

Chief Judge



October 11, 2000

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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