S.E. 2d
THE STATE OF SOUTH CAROLINA
In The Supreme Court
McNickel's, Inc., Appellant
v.
South Carolina Respondent
Department of Revenue,
.
AAA Entertainment
Corporation, McNickel's,
Inc., and Nick Santaramo, Appellants,
v.
South Carolina
Department of Revenue, Respondent.
Appeals From Beaufort County
Thomas Kemmerlin, Jr., Master-In-Equity
Opinion No. 24819
Heard February 18, 1998 - Filed July 20, 1998
AFFIRMED
H. Fred Kuhn, Jr., of Moss & Kuhn, P.A., of
Beaufort, for appellants.
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MCNICKEL'S, INC. v. S.C. DEPARTMENT OF REVENUE
AAA ENTERTAINMENT CORP., et al. v. S.C. DEPARTMENT OF REVENUE
General Counsel Harry T. Cooper, Jr., Chief Counsel
for Regulatory Litigation Nicholas P. Sipe, and
Counsel for Regulatory Litigation Carol I. McMahan,
all of South Carolina Department of Revenue, of
Columbia, for respondent.
TOAL, A.J.: This case presents the question whether the South
Carolina Department of Revenue ("Department") exceeded its authority under
the Video Game Machines Act when it promulgated the "employee
requirement" in 27 S.C. Code Ann. Regs. 117-190 (Supp. 1997). We find
Department did not and, accordingly, affirm.
FACTUAL/PROCEDURAL BACKGROUND
Two businesses, Black Burner Cafe and Treasures Revived, are located
in a strip shopping center in Hilton Head, South Carolina. Black Burner
Cafe occupies #11 Northridge Road, while Treasures Revived occupies #13
Northridge Road. The businesses are accessible through a single entrance,
leading to a common area. From there, sliding glass doors open onto the two
businesses. Paneled walls separate Black Burner Cafe and Treasures
Revived. Each of these businesses has five Class III video poker machines
on its premises.
In July 1995, revenue officers for Department inspected the businesses
and issued a violation report to AAA Amusements, Inc., the licensee of the
video poker machines, for violating S.C. Code Ann. 12-21-2804 (Supp. 1997).
The report charged that AAA had allowed the use of more than five video
poker machines in a "single place or premises," as defined by 27 S.C. Code
Ann. Regs. 117-190. During the inspection, only one employee was found in
the common area of the businesses (i.e. each business did not have at least
one of its own employees present).
AAA appealed the violation report, and Department issued a final
determination upholding a fine and revocation of the licenses for the
machines. AAA and the others,1 (collectively "Business") appealed Depart-
ment's final determination to the Administrative Law Judge Division. The
administrative law judge upheld the violation on the grounds that each
business did not have an employee present in its game room during business
1 These included parties who were added because they are the current
business license holders or leaseholders at the premises.
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MCNICKEL'S, INC. v. S.C. DEPARTMENT OF REVENUE
AAA ENTERTAINMENT CORP., et al. v. S.C. DEPARTMENT OF REVENUE
hours.
Business appealed to the circuit court, which affirmed the
administrative law judge. Business now appeals to this Court, raising one
issue:
Did the South Carolina Department of Revenue exceed its
regulatory authority under the Video Game Machines Act when
it imposed the "employee requirement" found in South Carolina
Regulation 117- 190?2
LAW/ANALYSIS
Business argues that Department exceeded its regulatory authority
when it imposed the "employee requirement" found in Regulation 117-190.
We disagree.
The Video Game Machines Act, S.C. Code Ann. 12-21-2770 et seq.
(Supp. 1997), governs the licensing and use of video game "machines," which
are defined as "electronic video games machine[s] that, upon insertion of
cash, [are] available to play or simulate the play of games as authorized by
the commission utilizing a video display and microprocessors in which the
player may receive free games or credits that can be redeemed for cash."
S.C. Code Ann. 12-21-2772(5) (Supp. 1997).
Under section 12-21-2804, after July 1, 1994, "the commission may not
issue nor authorize to be maintained any licenses or permits for more than
five machines authorized under Section 12-21-2720(A)(3)3 at a single place or
2 McNickel's is one of the parties in Business's appeal. During the
pendency of the administrative appeal, McNickel's commenced in circuit court
a separate action seeking a declaration that Regulation 117-190 is invalid.
The circuit court ruled against McNickel's, and McNickel's now appeals.
Business's appeal, as well as the appeal of McNickel's, present the same
issues. Accordingly, we consolidate the appeal for the purpose of this opinion.
See Rule 213, SCACR (where the same question is involved in two or more
appeals in different cases, the appellate court may, in its discretion, order the
appeal to be consolidated).
3 See S.C. Code Ann 12-21-2720(A)(3) (Supp. 1997)("a machine of the
nonpayout type, in-line pin game, or video game with free play feature
operated by a slot in which is deposited a coin or thing of value except
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MCNICKEL'S, INC. v. S.C. DEPARTMENT OF REVENUE
AAA ENTERTAINMENT CORP., et al. v. S.C. DEPARTMENT OF REVENUE
premises." In July 1995, the Department promulgated the following
regulation:
The Video Game Machines Act, found in Article 20, Chapter
21 of Title 12, limits the number of machines that may be located
in a "single place" or "premises."
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 game machines 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 purposes of
The Video Game Machines Act.
S.C. Code Ann. Regs 117-190 (emphasis added).
Business argues that Department exceeded its regulatory authority
when it imposed a requirement that each business must have at least one
separate employee on the premises.
machines of the nonpayout pin table type with levers or 'flippers' operated by
the player by which the course of the balls may be altered or changed.").
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MCNICKEL'S, INC. v. S.C. DEPARTMENT OF REVENUE
AAA ENTERTAINMENT CORP., et al. v. S.C. DEPARTMENT OF REVENUE
While the Legislature may not delegate its power to make laws, in
enacting a law complete in itself, it may authorize an administrative agency
or board "to fill up the details" by prescribing rules and regulations for the
complete operation and enforcement of the law within its expressed general
purpose. Heyward v. South Carolina Tax Comm'n, 240'S.C. 347, 126 S.E.2d
15 (1962). An administrative regulation is valid as long as it is reasonably
related to the purpose of the enabling legislation. Hunter & Walden Co. v.
South Carolina State Licensing Bd. for Contractors, 272 S.C. 211, 251 S.E.2d
186 (1978). Although a regulation has the force of law, it must fall when it
alters or adds to a statute. Society of Professional Journalists v. Sexton, 283
S.C. 563, 324 S.E.2d 313 (1984). A rule may only implement the law. Banks
v. Batesburg Hauling Co., 202 S.C. 273, 24 S.E.2d 496 (1943).
In Hunter & Walden, we addressed the question of the validity of a
regulation promulgated by the State Licensing Board for Contractors. S.C.
Code Ann. 40-11-160 (1976) provided that the Board, shall not issue a
license to any contractor who contracts or intends to contract for a job in
excess of $75,000 "until such contractor furnishes the Board with a financial
statement certified by a certified public accountant . . . ." The Board had
promulgated a regulation providing that in order to comply with section 40-
11-160, a contractor must show a net worth of $50,000 to be licensed. This
Court found the regulation to be valid because it was "a natural amplification
of the Code Section which requires that a financial statement be submitted."
Hunter & Walden, 272 S.C. at 213, 251 S.E.2d at 186. The challenged
regulatory provision bore a reasonable relation to the statutory requirement
that a financial statement be submitted with a contractor's application.
More recently, in U.S. Outdoor Advertising, Inc. v. South Carolina
Department of Transportation, 324 S.C. 1, 481 S.E.2d 112 (1997), we held
that a Department of Transportation regulation was reasonably related to the
purpose of the Highway Advertising Control Act. The relevant statute
declared that a business does not qualify as a commercial or industrial
activity unless it is "visible from the main traveled way." The Department
of Transportation, by regulation, defined "visible" as "capable of being seen,
and readily recognized as a sign or commercial or industrial activity by a
person of normal visual acuity." We found that the regulation did not
impermissibly expand the requirement of visibility.
We find under the facts of the present case that Department did not
exceed its authority in imposing an employee requirement under Regulation
117-190. S.C. Code Ann. 12-21-2798 (Supp. 1997) provides: "The
department may promulgate regulations pertaining to the machines and
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MCNICKEL'S, INC. v. S.C. DEPARTMENT OF REVENUE
AAA ENTERTAINMENT CORP., et al. v. S.C. DEPARTMENT OF REVENUE
persons licensed by it."1 The critical question is whether Department
exceeded its authority by defining a "single place or premises" to require that
least one separate employee on the premises during business hours." See
S.C. Code Ann. Regs. 117-190.
Regulation 117-190 sets forth a number of criteria for determining
whether an entity is in fact a "single place or premises." These include such
tests as whether the entity has a separate utility meter; whether it has a
separate local business license; whether it has a separate state sales tax
license; and whether it has at least one employee on the premises during
business hours. We find that these criteria, including the last one, are
reasonably related to the purpose of the statute. Without 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. The single employee
criterion is reasonably related to determining whether each entity operates
as a separate place. The present regulation is a natural amplification of the
statute.
Business argues that Department can only regulate machines and
persons licensed by Department and cannot impose requirements upon a
business in which the machine is located. "Machines," "persons licensed," and
the "businesses" that operate them are so interconnected that it would be
difficult to issue a regulation bearing on one, but which would not have an
effect on another of these entities. Accordingly, we reject this argument.
CONCLUSION
Based on the foregoing, we AFFIRM the orders Upholding the validity
of Regulation 117-190.
FINNEY, C.J., MOORE and BURNETT, JJ-, and Acting Associate
Justice George T. Gregory, Jr., concur.
4 The section was amended in 1997. The section previously had provided:
"The commission shall promulgate rules and regulations pertaining to the
machines and persons licensed by it."
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