The Daily Southerner, Tarboro, NC

April 26, 2013

Internet cafes a thing of the past


TARBORO — With the recent closing of three Internet cafes, the controversial business segment now appears to be part of the businesses of the past in Edgecombe County.

Edgecombe County Sheriff James Knight reported that the last three internet cafes voluntarily closed last week. Knight said his department was preparing to take legal action before they closed.

The largest operation was Lucky Lane on N.C. Highway 33. After getting pressure from law enforcement for operating the illegal business, Lucky Lane closed once but later reopened.

Perhaps the raid of Past Time internet cafe by Tarboro Police Department on April 16 triggered Lucky Lane to shut down. Three people, the owner and two employees, were charged with electronic gaming misdemeanors. Past Time was the last of three internet cafes to close in Tarboro.

Eight internet cafes operated in the county before they were ruled illegal.

"Some of them were located inside mom and pop stores and the owners didn't realize they were illegal," Knight said. "They were just trying to make a living. Once they found out they were illegal, they closed."

Last December, the N.C. Supreme Court reinstated a ban on sweepstakes-style Internet gambling operations, reversing a 2010 state appellate court ruling. That decision had declared the ban, passed by the Legislature, unconstitutional.

After the ruling, Edgecombe County law enforcement officials collaborated with the Edgecombe County District Attorney to map out a strategy to close the establishments. A letter was sent to the owners that specified the internet cafes are illegal in North Carolina. The letter also gave the owners a specified time to close the business.

In an attempt to legalize the businesses, a bill was introduced in the N.C. House of Representatives to legalize the operations. It proposed an excise tax on each video sweepstakes machine or device, and a tax on gross receipts. The legislation would require a person operating a video sweepstakes establishment to pay an annual license tax of $2,000 for the privilege of operating the establishment and a $1,000 per machine fee. Video sweepstakes operators must remit 4 percent of taxable gross receipts, as defined, from operating a video sweepstakes machine or device.  

According to the bill, if enacted, fiscal research estimates that the bill would generate between $98 million and $329 million for the state's general fund per fiscal year.  

The proposed bill also suggested that local privilege license tax for video sweepstakes operators to be capped at $1,000 on each video sweepstake establishment and may be levied by either the cities or the counties. In additional to the annual per establishment license tax of $1,000, counties and cities may impose an annual excise tax of $500 per machine. That revenue is local revenue and not a state expenditure.

The bill passed it first reading May 30 but later died June 20, 2012.

Some of Edgecombe County customers, like Doristine Vines, were disappointed that the bill did not pass. The Princeville resident was an avid customer of video sweepstakes businesses. Vines doesn't want to see the business close but she understand the political aspect.

"We must abide by the rules and regulations of the state," she said during a interview for The Daily Southerner Dec. 18, 2012 .