August 30, 2004

Gary R. Viken, Secretary
Department of Revenue
445 East Capitol Avenue
Pierre, SD  57501-3185

OFFICIAL OPINION 04-03

Legality of Placement of Coin Operated Mechanical Pull-Tab Dispensing Devices

Dear Secretary Viken:

You have requested an official opinion from this Office regarding the following factual situation:

FACTS:

The Secretary of the Department of Revenue is responsible for regulating the sale and use of pull-tab devices sold and used pursuant to the provisions of SDCL ch. 22‑25.  Recently, a charitable organization indicated that it intends to purchase coin operated mechanical pull-tab dispensing devices and then place the devices at various third party business locations in South Dakota, e.g. restaurants and on-sale beer and liquor establishments.  The charitable organization does not intend to operate any of the devices on its own premises.  

Based upon the above facts you have raised the following question:

QUESTION:

May a licensed distributor or manufacturer sell a coin operated mechanical pull-tab dispensing device to a charitable organization that intends to place the device in a third party business location?  

IN RE QUESTION:

The question you have raised involves a constitutional provision, various statutes and amendments.  At the time the Constitution of the State of South Dakota was adopted, all forms of gambling were prohibited.  Article III, Section 25 provided:

The Legislature shall not authorize any game of chance, lottery, or gift enterprise, under any pretense, or for any purpose whatsoever.  

In 1970, this provision was amended to authorize the legislature to allow bona fide veterans, charitable, educational, religious, or fraternal organizations, civic and service clubs, volunteer fire departments, and other public spirited organizations to conduct games of chance when the entire net proceeds of such games of chance are devoted to educational, charitable, patriotic, religious, or other public spirited uses.  See SL 1970 ch. 1.  

Following the amendment of the state constitution, the legislature authorized two games of chance, bingo and lotteries.  Relevant provisions with subsequent amendments are set forth in  SDCL ch. 22‑25‑23 to 22‑25‑25.1 inclusive.  In 1988, the  legislature amended SDCL ch. 22‑25 to add provisions regulating lottery, and bingo equipment and supplies, including pull-tabs.  See SL 1988 ch. 188, SDCL 22‑25‑28 to 22‑25‑51.  As part of the regulation of pull-tabs, the legislature restricted how pull-tabs could be sold or furnished.  In the 1988 version of SDCL 22‑25‑41, the legislature prohibited the dispensing of pull-tabs through various devices, stating:

No coin-operated machine or mechanical pull-tab dispensing device may be sold or otherwise furnished to any organization in this state by a distributor or manufacturer licensed pursuant to §§ 22‑25‑28 to 22‑25‑51, inclusive.  

See also SL 1988 ch. 188, § 12.  

In 1994, the legislature created an exception to this prohibition amending SDCL 22‑25‑41 with a second sentence which provided:

However, a licensed distributor or manufacturer may sell or furnish a coin operated mechanical pull-tab dispensing device if the device is only sold or furnished to and only used by a congressionally chartered veteran's organization that qualifies under § 22‑25‑25.1.  

S.L. 1944, ch. 169.

Finally, during the 2004 Legislative Session, the legislature again amended SDCL 22‑25‑41 to add fraternal and charitable organizations to the exception.  The statute now provides:

No coin-operated machine or mechanical pull-tab dispensing device may be sold or otherwise furnished to any organization in this State by a distributor or manufacturer licensed pursuant to §§ 22‑25‑28 to 22‑25‑51, inclusive.  However, a licensed distributor or manufacturer may sell or furnish a coin operated  mechanical pull-tab dispensing device if the device is only sold or furnished to and only used by a fraternal or charitable organization or congressionally chartered veterans organization that qualifies under § 22‑25‑25.1.

See also SL 2004, ch. 156, § 1.

The question you have raised involves an exception to the constitutional prohibition on gambling and the statutory prohibition on the use of coin operated pull-tab machines and mechanical dispensing devices.  Any exception to these general prohibitions must be strictly construed and limited to objects fairly within their terms.  Poppen v. Walker, 520 N.W.2d 238, 242 (S.D. 1994).  In addition, your question involves issues of statutory construction.  This Office utilizes the rules of statutory construction adopted by the courts.  In Martinmaas v. Engelmann, 2000 S.D. 85, ¶ 49, 612 N.W.2d 600, 611, the court stated:

The purpose of statutory construction is to discover the true intention of the law which is ascertained primarily from the language expressed in the statue.  The intent of a statute is determined from what the legislature said, rather than what the courts think it should have said, and the court must confine itself to the language used.  Words and phrases in a statute must be given their clear meaning and effect.  When the language in a statute is clear, certain and unambiguous, there is no reason for construction, and the court's only function is to declare the meaning of the statute as clearly expressed.  Since statutes must be construed according to their intent, the intent must be determined from the statute as a whole, as well as enactments relating to the same subject.

Further, when reviewing an amendment, it is presumed that the legislature changed the wording of the statute for a reason.  State v. Schroeder, 2004 S.D. 21, ¶ 12, 674 N.W.2d 827, 831.

It is clear from a review of SDCL 22‑25‑41, as enacted in 1988, that the legislature initially determined that  pull-tabs should be sold the same as chances for any other lottery game, i.e.,  through human interaction.  See SDCL 22‑25‑25.  Further, it is clear that the legislature in 1994 intended to change the law to authorize the restricted sale and use of coin operated mechanical pull-tab dispensing devices.  These devices, could only be sold or furnished to, and only used by, congressionally chartered veterans organizations that qualify under SDCL 22‑25‑25.1.  These veterans organizations generally include the local American Legion and VFW organizations that own or lease facilities for the conducting of their organization's activities. In 2004, the legislature amended 22‑25‑41 to add additional entities that could use mechanical pull-tab dispensing devices, adding "fraternal or charitable organization."  The 2004 Amendment  changed only the identity of  entities ("adding fraternal or charitable" organizations) that qualified as users of the mechanical pull-tabs under the exception.

Based upon review of the statutory scheme, it is my opinion that the legislature, by using the language--"If the device is only sold or furnished to and only used by" (emphasis added)-- intended to limit the placement and operation of machines to specifically identified organizations. By including "and only used by," the legislature prohibited placement of the machines by congressionally chartered veteran's organization, a fraternal or charitable organization, at any third party location.  A contrary interpretation of the words "and only used by" would render the words without meaning and render them surplusage.  In construing statutes it must be presumed no part is intended to be "mere surplusage."  State v. 1-90 Truck Haven Service, Inc., 2003 S.D. 51, ¶ 8, 662 N.W.2d 288, 291.

In my opinion, the initial exception for congressionally chartered veterans organizations was intended to allow those coin operated mechanical pull-tab devices only when they were located in the organization's facility.  Given the language "and only used by," and the nature of the organizations that fell within the exception, this office had informally advised the Department of Revenue and other inquirers that coin operated mechanical pull-tab dispensing devices could only be sold to a veteran's organization that intended to use the device in a facility where it conducted its operations, such as the VFW or American Legion Club.

The answer to your question is therefore "no."  A licensed distributor or manufacturer may not sell a coin operated mechanical pull-tab dispenser to a charitable organization that intends to place the device in a third party business location.

Very truly yours,

LAWRENCE E. LONG
ATTORNEY GENERAL

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