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25171 - S.C. Department of Revenue v. Stardust Amusement Company
SC Dep't of Revenue v. Stardust Amusement Co., et al.,

THE STATE OF SOUTH CAROLINA

In The Supreme Court



South Carolina

Department of Revenue, Appellant,



v.



Stardust Amusement

Company, Thomas H.

Starnes, d/b/a Midway

Truck Stop d/b/a

Tommy's, Respondents.



Appeal From Orangeburg County

Olin D. Burgdorf, Master-in-Equity



Opinion No. 25171

Heard October 6, 1999 - Filed July 10, 2000



AFFIRMED



Carol I. McMahan, Nicholas P. Sipe and Harry T.

Cooper, Jr., all of Columbia, for appellant.



Charles H. Williams and C. Bradley Hutto, both of

Williams & Williams, of Orangeburg, for

respondents.







FINNEY, C.J.: Appellant, South Carolina Department of

Revenue (Department), issued a "single place or premises" violation of S.C.



p.414


S.C. Department of Revenue v. Stardust Amusement Company





Code Ann. § 12-21-2804(A)(Supp. 1998) to respondents for failing to have an

employee present pursuant to Regulation 117-190. The respondents

appealed the violation to the Administrative Law Judge Division (ALJ) who

determined as a matter of law that there was no violation. Department then

appealed to the Circuit Court which affirmed the ALJ. We affirm.







FACTS:



Stardust Amusement Company (Stardust) is the licensee and owner of

ten (10) Class III video poker machines located in a mall type arrangement

in Orangeburg, South Carolina. On June 13, 1996, revenue officers for the

Department made a routine inspection of the Class III video poker machines

on the premises. The revenue officers entered through the main entrance

and after entering the common area, they observed two rooms that had

video poker machines in them. The video poker machines were on, the doors

to the rooms were open, there were no closed signs on the doors, and the

lights were on. There were no customers in the rooms and no employees.

Revenue Officer D. Jackson Rash (Rash) testified that two of respondents'

employees were in the common area. The two rooms with five machines in

them are adjacent to the common area.







Rash testified that had the employees been standing in the rooms

instead of the common areas then he would not have written a ticket.

Customers could not get into the rooms without walking past the employees

who were approximately five to ten feet away from the rooms. Rash testified

that the employees stated that they were assigned to the two locations.

He then charged respondents with a "single place or premises" violation of

S.C. Code Ann. § 12-21-2804(A) for failing to have an employee present

pursuant to Regulation 117-190.







ISSUE



Does the "separate employee" requirement of 27 S.C. Code Ann. Reg.

117-190 require that one separate employee be within the four walls of each

individual game room during business hours?







DISCUSSION





p.415


S.C. Department of Revenue v. Stardust Amusement Company





S.C. Code Ann. Reg. 117-190 provides:



A single place or premises must be a fixed location. It does

not include moving property such as a boat or a train, unless

such property is permanently affixed to a specific location.



A "single place" or "premises" means a structure

surrounded by exterior walls or firewalls consistent with the

requirements of the applicable building code (or where no

building code is applicable, a one hour rated firewall), provided

such exterior walls and firewalls may not have any windows,

doors or other openings leading to another area where video

game machines are located.



If a structure surrounded by exterior walls has two or more

areas where video games are located, each surrounded by

exterior walls or firewalls as defined and required above, the

Department must review all the facts and circumstances to

determine if each area in reality constitutes a single place or

premise for video game machines. 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 the purposes of

The Video Game Machines Act. (emphasis added)







The Department contends that the purpose of the regulation is to

provide a high degree of certainty in defining what constitutes a "single place

or premises" and that "on the premises" means exactly what it says. The

Department asserts that the most consistent view is the plain language of

"on the premises" which limits the employee to the physical space of the four

walls. The Department argues that the ALJ committed error in applying the



p.416


S.C. Department of Revenue v. Stardust Amusement Company





provisions of Regulation 117-190, based on the plain language of the statute

and regulation, the legislature's intent in its enactment of the Video Game

Machine Act (VGMA), and in filing to give deference to the Department's

long standing administrative application of these provisions. We disagree.







The Department also contends that the facts in this case parallel those

in McNickel's Inc., v. South Carolina Department of Revenue, 331 S.C. 629,

503 S.E.2d 723 (1998). We agree. In McNickel, we found that the

Department did not exceed its authority in imposing an employee

requirement under Regulation: 117-190. We noted that "[w]ithout at least

one employee, it would be possible for video poker operators to largely

circumvent the `single place or ;premises' requirement by securing separate

licenses for technically separate, but practically joined, businesses."

However, we also noted that "[d]uring the inspection only one employee was

found in the common area of the business (i.e. each business did not have at

least one of its own employees present). "(emphasis added) The problem in

McNickel was not that the employee was in the common area, but that there

was only one employee and two businesses.







In this particular case, the revenue officers found two employees in

the common area, one for each' business. Since there were no customers in

the rooms, and since customers could not get into the rooms without walking

past the employees, we agree with the ALJ and the circuit court that there

was no violation.







Under the specific facts of the present case, we AFFIRM the decision or

the circuit court.



TOAL, MOORE, BURNETT, JJ., and Acting Justice Alison Renee Lee,

concur.



p.417