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SC Administrative Law Court Decisions

SCDOR vs. North South Amusement Company

South Carolina Department of Revenue

South Carolina Department of Revenue

North South Amusement Company

For the Petitioner: Jeffrey M. Nelson, Esquire

For Respondent: James M. Griffin, Esquire




This matter comes before me upon Respondent's request for a hearing after being cited for violating the Video Game Machines Act (the Act), specifically, S.C. Code Ann. §§ 12-21-2720 and 12-21-2738 (Supp. 1998). More specifically, the South Carolina Department of Revenue (Department) contends that the Respondent violated S.C. Code Ann. Section 12-21-2720(A)(3) (Supp. 1998) by failing to have the required "Class III" machine licenses on three machines. A hearing was held before the Administrative Law Judge Division (ALJD or Division) on February 10, 2000.


Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of evidence:

General Findings

1. Notice of the time, date, place and subject matter of the hearing was given to the Department and the Respondent.

2. On November 16, 1998, South Carolina Law Enforcement Division (SLED) Special Agent Clayton W. Pope (Agent Pope) conducted an inspection of The Village Market, Inc. (The Market), located at 2185 Neely Store Road, Rock Hill, South Carolina. The Market contained four Class III machines. Agent Pope's inspection revealed that had three of the four Class III machines had "temporary" or "six month" licenses affixed to them that had expired on September 30, 1998.

3. The owner of the Class III machines at The Market is Doug McManus, the owner of North South Amusement Company. The three Class III machine licenses that expired on September 30, 1998 are:




4. Following the inspection, Agent Pope issued a Preliminary Findings Report to Doug McManus. Thereafter, on October 4, 1999, the Department issued its Final Agency Determination which set forth that Mr. McManus violated S.C. Code Ann. § 12-21-2720 (Supp. 1998) by failing to meet the licensing requirements of that section for the above three machines.

Licensing History

5. Mr. McManus customarily purchased two year licenses for the Class III machines he owned. Since, his biannual licenses were renewed every other June, he would personally inspect each machine he owned in May prior to the expiration of the two year licenses to determine the exact number of licenses he needed to purchase. Following that practice, on or about the last Monday in May 1998, Mr. McManus went to his local Department of Revenue office to purchase approximately forty biannual Class III machine licenses for the machines owned by his business, North South Amusement Company. The licenses he held were current at that time but were to expire the next week-end. Mr. McManus, therefore, purchased forty new biannual licenses. However, the Department had imposed a moratorium on the issuance of biannual licenses during that time because the Department was attempting to revamp its licensing application procedures. Therefore, the day after his purchase of those forty licenses, an employee from his local Department called Mr. McManus and requested that he return the two year licenses and exchange them for six month licenses. Because Mr. McManus had not yet affixed the new licenses to his machines, he agreed to the exchange.

At the time of this violation, six month Class III licenses issued by the Department ran from April to September and October to March. Though the Department allowed monthly proration of biannual licenses, a licensee had to pay the entire licensing fee for a six month license despite the date of its purchase. In other words, the Department did not prorate the Respondent's six month licenses he was "encouraged" to exchange in lieu of the biannual licenses, even though they were, in effect, only good for four months.

The three Class III licenses placed on the machines in The Market were the six month licenses that the Department requested that the Respondent purchase because of its moratorium on biannual licenses. Moreover, the Department encouraged the Class III licensee to come in before the last day of the licensing period so that the Department would not be flooded with license requests on the last day. As a result of his compliance with the Department's requests, the Respondent was "compelled" to purchase the six month licenses.

In the past, the Respondent inspected this location as he did all of his locations prior to June to determine if the machine licenses needed to be renewed. However, since the owner of The Market met with the Respondent at his office in the normal course of business to account for the proceeds from the machines on a weekly basis, the Respondent did not routinely inspect the machines at this location. Therefore, the Respondent simply failed to remember that this location held machines upon which the six month licenses were affixed.

6. Pursuant to S.C. Code Ann. § 12-21-2738 (Supp. 1998) and S.C. Revenue Procedure 99-1, the Department is seeking a fine of Two Thousand Five Hundred ($2,500.00) Dollars for each Class III machine failing to have a machine license. Additionally, the Department is seeking Four Thousand ($4,000.00) Dollars in licensing fees per machine, pursuant to Revenue Procedure 99-1. Therefore, the Department is seeking a total fine in the amount of Nineteen Thousand Five Hundred ($19,500.00) Dollars against the Respondent in this matter.

7. The six month licenses ran to September 30, 1998. The Department discovered this violation on November 16, 1998. The Respondent immediately purchased new biannual licenses for the above three machines on that date. Since the licenses were purchased in the middle of the month, the licenses were retroactive to November 1, 1998. Therefore, though, the machines were operated unlicensed for forty-six days, the net loss to the State of South Carolina of the licensing fees for the thirty-one days was Five Hundred Nine and 58/hundredths ($509.58) Dollars (3 machines x $169.86 per machine).


8. The licensing history of these machines provide salient facts that mitigate the appropriate monetary penalty in this case. The Respondent had a practice of inspecting his machines to insure that he renewed the biannual licenses. Not only was that practice interrupted by the Department's moratorium but also by the Department's insistence that the Respondent purchase the six month licenses, thereby costing the Respondent a significant amount of money. Additionally, there was no showing by the Department that the Respondent has previously violated the Video Game Machines Act. Therefore, I find that the appropriate penalty in this case is Two Thousand Nine and 58/hundredths ($2,009.58) Dollars for North South Amusement Company for failing to maintain three licensed or properly licensed coin-operated devices at The Village Market, Inc.


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

1. The Administrative Law Judge Division has jurisdiction to hear this matter pursuant to S.C. Code Ann. § 12-4-30 (D) (Supp. 1998) and S.C. Code Ann. § 1-23-320 (Supp. 1998).

2. The Department contends that the Respondent violated S.C. Code Ann. §§ 12-21-2720 and 12-21-2738 (Supp. 1998). Section 12-21-2720(A) sets forth, in relevant part:

Every person who maintains for use or permits the use of, on a place or premises occupied by him, one or more of the following machines or devices shall apply for and procure from the South Carolina Department of Revenue a license effective for two years for the privilege of making use of the machine in South Carolina and shall pay for the license a tax....

(Emphasis added).(1)

3. Machines licensed under Section 12-21-2720(A)(3) include video games with a free play feature operated by a slot in which a coin or thing of value is deposited. S.C. Code Ann. § 12-21-2720 (Supp. 1998).

4. S.C. Code Ann. § 12-21-2738 (Supp. 1998), entitled "Penalties for Failure to Comply," sets forth:

A person who fails, neglects, or refuses to comply with the terms and provisions of this article or who fails to attach the required license to any machine, apparatus, billiard, or pocket billiard table, as herein required, is subject to a penalty of fifty dollars for each failure, and the penalty must be assessed and collected by the department.

If the violation under this section relates to a machine licensed pursuant to Section 12-21-2720(A)(3), the applicable penalty amount is two thousand five hundred dollars. This penalty must be deposited to the credit of the general fund of the State.

(Emphasis added).

5. Under the Criminal Violations portion of Revenue Procedure 99-1, the penalty amount for Type III device offenses is Two Thousand Five Hundred ($2,500.00) Dollars. Under that section, Revenue Procedure 99-1 also sets forth:

Note: The machine owner must also pay the license fee required. This license fee will not be prorated.

Based on this language, the Department is seeking an additional licensing fee of Four Thousand ($4,000.00) Dollars per machine against the Respondent. However, the "Procedures" portion of Revenue Procedure 99-1 also sets forth that it is a "guideline only and... does not establish a binding norm."

6. The trier of fact must weigh and pass upon the credibility of evidence presented. See S.C. Cable Television Ass'n v. Southern Bell Tel. and Tel. Co., 308 S.C. 216, 417 S.E. 2d 586 (1992). Additionally, the Administrative Law Judge, as the current fact-finder, must also impose a penalty based on the facts presented at the contested case hearing. It is a generally recognized principle of administrative law that the fact-finder has the authority to impose an administrative penalty after the parties have had an opportunity to have a hearing and be heard on the issues. See Ohio Real Estate Comm'n v. Aqua Sun Investments, 655 N.E. 2d 266 (Ohio 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. App. 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). To that end, the Administrative Law Judge must consider relevant evidence presented in mitigation. Mitigation is defined as a lessening to any extent, great or small. It may be anything between the limits of complete remission on the one hand and a denial of any relief on the other. In a legal sense, it necessarily implies the exercise of the judgment of the court as to what is proper under the facts of the particular case. 58 C.J.S. Mitigation p. 834-835 (1948).

Based on the facts set forth above, I find the Respondent's attempts to purchase biannual licenses for his machines along with his cooperation with the Department to be mitigating factors in this instance. I also find that a reduced fine is appropriate because the Respondent was "double-billed" for the months of April and May on each of the three licenses. However, I find that a fine is nonetheless warranted because of the Respondent's oversight in replacing the three expired licenses.


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

ORDERED that a fine of Two Thousand Nine and 58/hundredths ($2,009.58) Dollars is imposed upon North South Amusement Company.



Ralph King Anderson, III

Administrative Law Judge

July 26, 2000

Columbia, South Carolina

1. It appears the Department, in preventing the Respondent from purchasing biannual licenses, may have contributed to the potential for this violation. The second 1992 amendment to this statue added the language, "effective for two years," and it was in effect at the time of this violation.

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