WSR 97-18-031

PROPOSED RULES

GAMBLING COMMISSION

[Filed August 26, 1997, 1:32 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-15-052 on July 14, 1997.

Title of Rule: Gambling services supplier rules, WAC 230-02-205, 230-02-206, 230-04-119, 230-04-124, 230-04-125, 230-08-025, 230-12-223, 230-12-225 and 230-12-300; and repealing WAC 230-12-220 and 230-30-220.

Purpose: These rules define gambling services suppliers and gambling services supplier representatives for licensing and regulation purposes; clarifies licensing requirements; establishes record-keeping requirements; adds gambling service suppliers to prohibitions against conditioning repair or service upon exclusive arrangements; and adds resident agent requirement.

Statutory Authority for Adoption: RCW 9.46.070 (4), (14), and (20).

Summary: See Purpose above.

Reasons Supporting Proposal: Activities of gambling services suppliers and representatives need to be regulated; cost of regulation needs to be recouped through license fees.

Name of Agency Personnel Responsible for Drafting: Soojin Kim, Lacey, (360) 438-7654 ext. 310; Implementation: Frank Miller, Lacey, (360) 438-7654 ext. 302; and Enforcement: Ben Bishop, Lacey, (360) 438-7654 ext. 370.

Name of Proponent: Staff, private.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: See Purpose above.

Proposal Changes the Following Existing Rules: See Purpose above.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Proposal is exempt under RCW 19.85.025(2), therefore, a small business economic impact statement is not required.

Section 201, chapter 403, Laws of 1995, does not apply to this rule adoption. This agency does not choose to make section 201, chapter 403, Laws of 1995, apply to this rule adoption.

Hearing Location: Icicle Inn/Best Western, 505 Highway 2, Leavenworth, WA 98826, (509) 548-8000, on October 10, 1997, at 10:00 a.m.

Assistance for Persons with Disabilities: Contact Susan Green by October 1, 1997, TDD (360) 438-7638, or (360) 438-7654 ext. 302.

Submit Written Comments to: Soojin Kim, Mailstop 42400, Olympia, Washington 98504-2400, FAX (360) 438-8652, by September 30, 1997.

Date of Intended Adoption: October 10, 1997.

August 26, 1997

Soojin Kim

Rules and Policy Coordinator

NEW SECTION

WAC 230-02-205 Gambling services supplier defined. A "gambling services supplier" is any person who provides gambling related services for compensation, whether direct or indirect, to any licensed operator or Class III tribal gaming facility, and who is not an employee of the operator receiving such services.

(1) Gambling related services include at least the following:

(a) Providing consulting or advisory services regarding gambling activities;

(b) Providing gambling related management services;

(c) Providing storage, counting services, and/or specialized recordkeeping services for the gambling activity (except general recordkeeping services provided by a professional accountant); or

(d) Providing any other service or activity where influence may be exerted over any gambling activity licensed by the commission.

(2) The term "gambling services supplier" does not include licensed manufacturers or distributors who service and repair pull tab dispensing devices, bingo equipment or any other authorized gambling equipment.

(3) The term "gambling services supplier" does not include general legal or accounting services unrelated to the management or operation of gambling activities.

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NEW SECTION

WAC 230-02-206 Gambling services supplier representative defined. A "gambling services supplier representative" is any natural person who represents a gambling services supplier and who is directly involved in providing a service listed in WAC 230-02-205(1).

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NEW SECTION

WAC 230-04-119 Licensing of gambling services suppliers. Prior to providing any type of gambling related service to any licensed operator or Class III tribal gaming facility, a gambling services supplier shall first obtain a license or certification from the commission. The following requirements and restrictions apply to certification and licensing of gambling services suppliers:

(1) For purposes of this title, a license is required to provide any service related to licensed gambling activities as defined in WAC 230-02-205.

(2) The applicant shall include upon the application form supplied by the commission, sufficient information to determine the types of services provided, personal and financial information to determine applicant identity and qualifications, as well as all other information and materials required elsewhere in these rules.

(3) The applicant shall notify the commission within thirty days of any change in the information submitted on or with the application form.

(4) The applicant shall comply with all applicable laws of the United States and the state of Washington and all applicable rules of the commission.

(5) A gambling services supplier shall not also be licensed as a manufacturer, distributor or representative of gambling equipment or paraphernalia.

(6) A gambling services supplier shall not purchase or deliver gambling equipment and/or paraphernalia for an operator.

(7) In no circumstance may a gambling services supplier assume ultimate responsibility for an operator's gambling activity.

(8) Fees for the purposes of this section shall be as follows:

Gambling Services Supplier

Class A Storage, counting, and/or specialized recordkeeping services only - $553

Class B* Other services as defined in WAC 230-02-205 - $2000

* In addition to the annual fee, the commission will assess all applicants the following:

One hundred twenty-five dollars for each contract related to gambling services provided; and

The actual costs incurred in conducting the investigation and inspection necessary for initial certification.

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AMENDATORY SECTION (Amending Order 227, filed 9/18/91, effective 10/19/91 WAC 230-04-124 Licensing of manufacturer((s and)), distributor((s)) and gambling services supplier representatives. (((1))) Prior to selling or supplying to any person gambling equipment ((or gambling)), paraphernalia or related services for use in connection with licensed gambling activities, a representative or agent of a licensed manufacturer ((or)), distributor, or gambling services supplier shall first obtain a license from the commission. The following definitions and restrictions apply:

(((2))) (1) A sole owner, partner, major officer and/or owner of a substantial interest in ((a corporation)) an entity licensed as a manufacturer or distributor shall not be required to be additionally licensed as a representative to engage in the selling or supplying of the manufacturer's ((or)), distributor's, or gambling services supplier's products or services. Office, clerical or warehouse personnel ((employed by the manufacturer or distributor)) who have contact with the public and potential customers occasionally and only by telephone or at the manufacturer's ((or)), distributor's, or gambling service supplier's own premises when working under the immediate and direct supervision of the owner, a partner, or major officer of a corporation, shall also be exempt from this licensing requirement. A manager or supervisor who is not a sole owner, partner or a major officer or owner of a substantial interest ((in a licensed manufacturer or distributor)) and whose duties and responsibilities include the supervision of selling, supplying and/or the promotion of ((the manufacturer's or distributor's)) products or services shall be licensed as required by this rule prior to performing such functions. A manufacturer ((or)), distributor, or gambling services supplier shall not allow an unlicensed person to represent them in such transactions and shall take all measures necessary to prevent an unlicensed person from doing so.

(((3))) (2) On or before the first day he or she actually performs work as a representative, a person shall submit a complete application for a license to the commission. The application shall not be deemed complete until all questions on the application form and attachments are fully and truthfully answered and the form, with all attachments and the required fee, as set forth in WAC 230-04-204, has been delivered to the commission office during regular business hours (or actually deposited in the United States mail properly addressed to the commission): Provided, That the fee for a gambling services supplier representative is the same as for a distributor representative.

(((4))) (3) The manufacturer ((or)), distributor, or gambling services supplier for which the representative will work shall sign the application of each such representative acknowledging that the applicant will be representing them with their full knowledge and consent.

(((5))) (4) In addition to the above requirements, an applicant applying for a license as a distributor(('s)) or gambling services supplier representative shall:

(a) Complete a training course provided by the commission within 30 days after the first day worked; and

(b) Represent only one licensed distributor or gambling services supplier at a time and shall not represent a manufacturer: Provided, That this rule shall not bar the distributor's representative from representing his own distributor who is also licensed as a manufacturer.

[Statutory Authority: RCW 9.46.070 and 9.46.0331. 91-19-093 (Order 227), 230-04-124, filed 9/18/91, effective 10/19/91. Statutory Authority: RCW 9.46.070 (4), (11) and (14). 89-24-002 (Order 201), 230-04-124, filed 11/27/89, effective 12/28/89.]

AMENDATORY SECTION (Amending Order 262, filed 12/5/94, effective 1/5/95)

WAC 230-04-125 Distributor(('s)) or gambling services supplier representative license ((may be reissued when changing distributors))--Restrictions and procedures for changing employment. All licensed distributor or gambling services supplier representatives shall abide by the following restrictions and procedures when changing employers:

What happens if I leave the employment of the distributor or gambling services supplier I represent?

(1) In the event that a licensed distributor(('s)) or gambling services supplier representative ceases to represent the distributor under which a license was granted((,)) for any reason, the representative shall immediately notify the commission. Upon termination of employment the license shall ((be automatically suspended)) immediately become void and shall be returned to the commission((: Provided, That a person may apply to have the remaining term of a license represent a different distributor. The fee for this transfer shall be as required by WAC 230-04-204. The distributor which the distributor's representative seeks to represent shall sign the application for transfer acknowledging that the applicant for transfer will be representing the distributor with the distributor's knowledge and consent)).

What steps must I complete prior to beginning employment to represent another distributor or gambling services supplier?

(2) Prior to beginning employment to represent any other distributor or gambling services supplier, a previously licensed distributor or gambling services supplier representative shall submit a new application. The application shall include a statement that the previous employer has been notified of the change in employment and shall be signed by the distributor or gambling services supplier wishing to employ the distributor or gambling services supplier representative.

(3) A previously licensed distributor or gambling services supplier representative shall not represent a new employer prior to receiving a license from the commission. Prior to granting a license to a previously licensed individual, the commission may conduct an investigation to determine the continued qualification of the individual. Such investigation may include inquiries to the previous employer.

What is the fee for obtaining a license to represent another distributor or gambling services supplier?

(4) The fee for a license to represent a different distributor or gambling services supplier shall be the same as a license renewal, as set forth in WAC 230-04-204. The expiration date for such license shall be as set forth in WAC 230-04-190.

[Statutory Authority: Chapter 9.46 RCW. 94-24-056 (Order 262), 230-04-125, filed 12/5/94, effective 1/5/95. Statutory Authority: RCW 9.46.070 (5), (7), (8), (9), (11), (14) and (19). 84-13-038 (Order 140), 230-04-125, filed 6/15/84; Order 14, 230-04-125, filed 3/27/74; Order 9, 230-04-125, filed 12/19/73.]

AMENDATORY SECTION (Amending Order 305, filed 11/21/96, effective 1/1/97)

WAC 230-08-025 Accounting records to be maintained by distributors ((and)), manufacturers, and gambling services suppliers. Every licensed distributor ((and)), manufacturer, and gambling services supplier shall keep and maintain a complete set of records which include all details of all activities of the licensee related to the conduct of the licensed activity.

What system of accounting must I use and how long must I keep my records?

(1) (([These] [The required])) These records shall be recorded using the double entry accounting system and maintained in accordance with generally accepted accounting principles. This system shall ((also be on the same basis as)) be capable of being reconciled to the licensee's federal income tax return. All records shall be maintained for a period of not less than three years following the end of the licensee's fiscal year. These records shall be updated at least once a month and provide a monthly balance for each account.

What are the minimum requirements that must be included in a record system?

((The minimum record system shall include the following:))

(2) Sales invoices - every manufacturer ((and)), distributor, and gambling services supplier shall record every sale of equipment or services, any return or refund, or any other type of transfer of punchboards/pull tabs, pull tab dispensing devices or bingo equipment including cards, by completing a standard sales invoice or credit memo. Distributors shall use an invoice in a format prescribed and approved by the commission that includes a separate line for each identification and inspection services stamp number. This invoice shall provide space for the operator to either attach a records entry label or enter the identification and inspection services stamp number and the date the device was placed out for play. These spaces shall be adjacent to the written entry of the identification and inspection services stamp number made by the distributor. These invoices shall set out the following information:

(a) Each invoice must be prenumbered at the time of purchase. The numbering must be consecutive, using not less than four digits: Provided, That ((manufacturers and distributors may use)) a computer generated numbering system may be utilized if the same system is used for all sales and specific numbers can not be input by use of a manual override function;

(b) The date of sale. For distributors only: If the date of delivery is different, then the delivery date must also be entered;

(c) The customer's name and an adequate business address;

(d) A full description of each item sold or service provided, including the identification and inspection services stamp number for each item, if attached, and all information required by WAC 230-08-040;

(e) The quantity and sales price of each individual item, including individual items of merchandise to be used as prizes on punchboards and pull tabs;

(f) The gross amount of each sale to each customer including all discount terms and the total dollar amount of any discount;

(g) The sales invoice shall be prepared in at least three parts((: Provided, That invoices for sales to operators shall be prepared in at least four parts)). Invoices shall be distributed and maintained as follows:

(i) The original shall be issued to the customer((: Provided, That an additional copy of distributor invoices shall be provided to the operator));

(ii) One shall be retained in an invoice file by customer name; and

(iii) One shall be retained in an invoice file by invoice number or in an alternative manner that accounts for each invoice numerically. This provision may be waived if the licensee receives written commission approval.

(h) Information documenting the sales of progressive jackpot pull tabs must be separately tracked, invoiced, and maintained in its own filing system. Provided, that a computerized system, which is capable of separately tracking this information and providing immediate output of the data, is sufficient for this requirement.

(i) Credit memos for returned items shall be prepared in the same detail as (a) through (g) of this subsection.

(3) Sales journal - the sales journal shall contain at least, but not be limited to, the following by month:

(a) The date of the sale;

(b) The invoice number of the sale;

(c) The customer name or person remitting a payment;

(d) Sales shall be categorized at least by the following as applicable:

(i) Punchboards that pay out cash prizes;

(ii) Punchboards that pay out merchandise prizes;

(iii) Pull tabs that pay out cash prizes;

(iv) Pull tabs that pay out merchandise prizes;

(v) Pull tab dispensing devices;

(vi) Merchandise that is intended for use as a prize on a punchboard or pull tab series;

(vii) Bingo equipment;

(viii) Other types of sales directly related to gambling activities, including but not limited to, equipment leases((, equipment)) or sales, ((and)) supplies, and gambling related services; and

(ix) Sales and leases of general purpose equipment and supplies indirectly related to gambling activities, including cash registers, scales, tables, chairs, glue sticks, souvenirs, etc.

(e) Total amount of the invoice.

(4) Cash disbursements book (check register) - this record shall include a recording of all checks issued by the licensee, cash payments made by the licensee, or payments made by any other means. All expenses by the licensee, both gambling and nongambling related, shall be documented by invoices or other appropriate supporting documents. Entries to this record shall contain at least, but not limited to, the following information by month:

(a) The date the check was issued or payment made;

(b) The number of the check issued;

(c) The name of the payee; and

(d) Each disbursement shall be categorized by type of expense.

(5) Cash receipts - all cash receipts shall be recorded in an original book of entry whether it be a sales journal, a check register, or a separate cash receipts journal, and at a minimum shall include a recording of not only cash sales, but also cash received from all sources, and shall contain at least, but not limited to, the following by month:

(a) The date the payment was received;

(b) The name of the person remitting the payment;

(c) The amount of payment received.

(6) General ledger - each licensee whose gambling related sales exceed $500,000 per year, shall have a general ledger which shall contain, in addition to all other accounts by month, a separate sales account for each type of sale;

(7) Bank reconciliation - a bank reconciliation shall be performed each month((. In addition, all funds that have not been deposited at year end shall be reconciled in an account titled "cash on hand"));

(8) Copies of all financial data which support tax reports to any and all governmental agencies;

(9) Copies of all agreements entered into regarding sales or leasing of gambling related services, gambling equipment or paraphernalia. These agreements shall fully disclose all terms and conditions;

(10) Manufacturer shall maintain records that provide an accountability trail for all identification and inspection services stamps purchased. These records shall include enough details to allow audit of all used, unused, and damaged stamps and includes the following minimum items:

(a) The name of the purchaser;

(b) The date of the sale; and

(c) The invoice number recording the sale.

(((10))) (11) An alternative format may be used for subsections (2)(a), (2)(g)(ii), (2)(g)(iii), (2)(h), (3), and (4), of this section upon advance written approval from the commission.

[Statutory Authority: RCW 9.46.070, 9.46.120, 9.46.0273, 9.46.310 and 34.05.313. 96-24-006 (Order 305), 230-08-025, filed 11/21/96, effective 1/1/97. Statutory Authority: RCW 9.46.070. 94-01-033, 230-08-025, filed 12/6/93, effective 1/6/94; 92-19-107 (Order 231), 230-08-025, filed 9/18/92, effective 10/19/92. Statutory Authority: RCW 9.46.070 (4), (11) and (14). 89-24-002 (Order 201), 230-08-025, filed 11/27/89, effective 12/28/89. Statutory Authority: RCW 9.46.070 (8), (11) and (14). 88-13-060 (Order 179), 230-08-025, filed 6/14/88. Statutory Authority: RCW 9.46.070 (8) and (11). 83-10-002 (Order 132), 230-08-025, filed 4/21/83.]

NOTES:

Reviser's note: RCW 34.05.395 requires the use of underlining and deletion marks to indicate amendments to existing rules, and deems ineffectual changes not filed by the agency in this manner. The bracketed material in the above section does not appear to conform to the statutory requirement.

NEW SECTION

WAC 230-12-223 Prohibited practices--Leases and compensation. (1) No person, association, or organization shall operate or conduct any gambling activity authorized on or within any leased premises if rental under such lease is to be paid wholly or partly on the basis of a percentage of the receipts or net profits derived from the operation of such gambling activity. Nor shall the rental under such lease exceed the usual rental for such premises in the same locality: Provided, That amusement games conducted as a part of, and upon the site of, a regional shopping center are exempted from the percentage of receipts or profits restriction of this section and RCW 9.46.120(2).

(2) No charitable or nonprofit organization shall enter into an agreement where the compensation to any person taking part in the management or operation of such activity is based upon a percentage of the receipts or income derived from the operation of such game. The payment to such persons of compensation which is other than reasonable under the local prevailing wage scale for employment of a comparable nature shall create a presumption of a violation of this section.

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AMENDATORY SECTION (Amending Order 80, filed 12/28/77)

WAC 230-12-225 Repair or service not to be conditioned upon exclusive supply arrangement. No licensed manufacturer ((or)), distributor, or gambling services supplier shall condition repair or service of any device or product upon an agreement by any person to purchase or obtain products or services solely from such manufacturer ((or)), distributor, or gambling services supplier or solely from any other person or combination of persons: Provided, That routine maintenance agreements shall not be considered a violation of this section.

[Order 80, 230-12-225, filed 12/28/77.]

AMENDATORY SECTION (Amending Order 228, filed 10/15/91, effective 11/15/91)

WAC 230-12-300 Resident agent to be appointed by foreign manufacturers, distributors, gambling services suppliers, and commercial amusement game operators. (1) All manufacturers, distributors, gambling services suppliers, or class B or above commercial amusement game operators engaged in the following activities within this state, or for use in this state, that do not own or otherwise maintain a business office or licensed premises within this state shall appoint a resident agent for the purpose of receipt and acceptance of service of process and other communications on their behalf from the commission:

(a) Manufacturing, selling or distributing gambling supplies or equipment; and

(b) Selling or providing gambling related services; and

(c) Renting or leasing of commercial amusement games and equipment.

(2) The resident agent shall be a natural person who is a resident and living in the state of Washington and who is eighteen years of age or older.

(3) The name and business address where service of process and delivery of mail can be made, and home address of such designated resident agent shall be filed with the commission and with any other state agency required by law.

[Statutory Authority: Chapter 9.46 RCW. 91-21-053 (Order 228), 230-12-300, filed 10/15/91, effective 11/15/91; Order 60, 230-12-300, filed 9/10/76; Order 33, 230-12-300, filed 2/21/75; Order 5, 230-12-300, filed 12/19/73.]

REPEALER

The following section of the Washington Administrative Code is repealed:

WAC 230-12-220 Agreement requiring payment by licensee based upon percentage of receipts from authorized activity--Prohibited.

REPEALER

The following section of the Washington Administrative Code is repealed: