ORDERS:
FINAL ORDER AND DECISION
I. Statement of the Case
The South Carolina Department of Revenue (DOR) brought this matter against Thomas W. Northern/Gold Rush Promotions
(Gold Rush) and the Senior Citizens Association in Florence County (Citizens) concerning a violation of the Bingo Tax Act
of 1996. DOR seeks a $5,000 penalty against Gold Rush and Citizens for failure to remit in a timely fashion the 16.5 percent
tax imposed by the Bingo Tax Act of 1996. Having considered all of the evidence and the arguments, a $5,000 penalty is
appropriate.
II. Issue
Should Gold Rush or Citizens be required to pay an administrative penalty of $5000 for violating S.C. Code Ann. § 12-21-4270 (Supp. 1998)?
III. Analysis
1. Positions of Parties
DOR asserts that Gold Rush and Citizens are liable for a penalty of $5,000 for failing to timely remit to DOR the 16.5% tax
imposed by S.C. Code Ann. § 12-21-4270 (Supp. 1998). Neither Gold Rush nor Citizens dispute the fact that tax was
untimely paid. Rather, both assert extenuating circumstances militate against a penalty of $5,000.
2. Findings of Fact
Based on the preponderance of the evidence, the following findings of fact are entered:
Gold Rush applied for and received a Bingo Card Purchase Voucher on October 16, 1998 authorizing the purchase of
$238,000 of bingo cards. Gold Rush was aware that the 16.5 percent tax was due within fifteen days. However, neither
Gold Rush nor Citizens paid the 16.5 percent tax of $39,270 by the due date of October 31, 1998.
The tax was not paid since neither Gold Rush nor Citizens had the required funds. Further, the bingo game for which the
cards were purchased did not produce a sufficient amount of income to cover both the expenses associated with the game
and the 16.5% tax due on the cards. In an effort to pay the tax due, on October 30, 1998, Gold Rush attempted to secure a
short term loan to pay the $39,270 tax liability. However, the bank was unable to process the loan as timely as hoped
resulting in the tax not being paid until November 6, 1998.
3. Conclusions of Law
Based on the Findings of Fact, I conclude the following as a matter of law:
A failure to pay the 16.5 percent tax on the total face value of bingo cards purchased within fifteen days of DOR 's receipt of
the purchase application is a violation of S.C. Code Ann. § 12-21-4270 (Supp. 1998). Here, no dispute exists that the tax
was not timely paid. Given the late payment, the issue is what penalty results from a failure to timely pay the tax.
A. Statutory Penalty
The failure to timely pay the tax subjects the violator to a penalty of up to $5,000. See S.C. Code Ann. § 12-21-4140 ("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 [for which e]ach violation and each day in violation of a provision of this article constitutes a
separate offense."). Further, the penalty is a joint and several liability of Gold Rush and Citizens. S.C. Code Ann. § 12-21-3960 (Supp. 1998). Both Gold Rush and Citizens contend a $5,000 penalty is excessive under the circumstances of this
case, and they seek a waiver or reduction of the penalty.
B. Amount of the Penalty
The ALJ has the authority to establish the amount of the penalty. Inherent in and fundamental to the quasi-judicial powers of
an ALJ, as the trier of fact in contested cases under the Administrative Procedures Act,(1) is the authority to decide the
appropriate penalty when such is disputed. Walker v. South Carolina ABC Comm'n, 305 S.C. 209, 407 S.E.2d 633
(1991).
A failure to pay the bingo tax is a serious violation. The law is clear that the tax is due within fifteen days of DOR's receipt
of the application for purchase of bingo cards. Further, the General Assembly just as clearly stated that each day past
October 31, 1998 constitutes a separate offense. Thus, Gold Rush and Citizens, having not paid the tax until November 6,
1998, could have been subjected to a penalty of up to $30,000. Hence, the penalty sought by DOR is far less than the
maximum penalty available. Further, the statute also authorizes the revocation of the promoter's and the sponsor's licenses.
No revocations are sought here and thus again, less than the maximum penalty is being requested. Accordingly, given the
nature of the violation, a penalty of $5,000 is proper.
C. Mitigating Factor
Even though the penalty is less than the maximum, Gold Rush and Citizens seek to reduce the amount of the penalty by
arguing that a mitigating factor exists in that the bingo games failed to produce enough funds to cover the tax liability. I do
not find such a circumstance to be a persuasive mitigating factor.
While other factors may warrant consideration, a significant consideration is whether the alleged mitigating factor
demonstrates reasonable cause to reduce the penalty. Kroger Co. v. Department of Revenue, 673 N.E.2d 710 (Ill. 1996).
Reasonable cause is generally absent if ordinary business care is absent. Id. Certainly, what constitutes ordinary business
care must be determined by the peculiar facts of each particular case. Armstrong's, Inc. v. Iowa Dept. of Revenue, 320
N.W.2d 623 (Iowa 1982). However, the lack of ordinary business care is strongly suggested if the facts show the taxpayer
simply failed to pay what it knew it owed. See, e.g. Hearst Corp. v. Iowa Dept. of Revenue and Finance, 461 N.W.2d 295
(Iowa 1990) (where lack of ordinary business care was established and corresponding lack of reduction of penalty was
ordered where taxpayer knowingly failed to remit tax due as required by law).
Here, Gold Rush knew it owed the tax. Indeed, the tax liability arises at the moment the request for the bingo cards is made,
but by legislative grace the payment of that tax is extended for an additional fifteen days. See S.C. Code Ann. § 12-21-4270
(Supp. 1998) (bingo cards obtained only by "making an application and remitting [16.5% tax]. Payment . . . must be made . .
. by certified check within fifteen days of receipt of the application."); see also Stephens v. Hendricks, 228 S.C. 458, 90
S.E.2d 632, 633 (1955) (where sales tax liability arose at the time of the sales transaction even though the payment of the tax
was not required for an additional twenty days, with such period being a "grace period for payment.").
Knowing the tax was due and unpaid, however, Gold Rush chose to expend its available funds for other purposes. In fact,
Gold Rush relegated the payment of the tax to whatever funds were left after paying all other expenses. Such a means of
paying taxes owed is not the exercise of ordinary business care. Rather, ordinary business care presents an adequately
capitalized operation capable of paying taxes due without having to rely upon expected profits to pay known liabilities. Thus,
the lack of funds is not a mitigating factor.
IV. Order
Pursuant to S.C. Code Ann. § 12-21-4140 (Supp. 1998), Thomas W. Northern, d/b/a Gold Rush Promotions, and Senior
Citizens Association in Florence County are liable for a penalty of $5,000 for violating S.C. Code Ann. § 12-21-4270 (Supp.
1998)
AND IT IS SO ORDERED.
RAY N. STEVENS
Administrative Law Judge
Dated: June 4, 1999
Columbia, South Carolina
1. S.C. Code Ann. § 1-23-310 et seq. (1986 & Supp. 1998) |
