I bought a car in South Dakota in 1984 when there was no excise tax on used cars between SD residents, moved to Alaska for two years, and now I'm back trying to re-register. Can SD make me pay the excise tax now even though I never owed it before?
Plain-English summary
A South Dakotan bought a used car from another SD resident in September 1984. Under the SD tax law in effect at the time, no tax was imposed on resale between SD residents (only first/initial registrations were taxed). The buyer got a SD title without paying tax. In December 1984, he moved to Alaska, transferred the title and registration there, and lived in Alaska for two years.
In January 1987 he moved back to South Dakota and tried to re-register his car. The Department of Revenue refused to issue a SD title unless he paid $134.25 in motor vehicle excise tax under SDCL Chapter 32-5B (a new tax structure that had been enacted in 1985, while he was in Alaska).
He pushed back, arguing he had no taxable event in SD (no sale after July 1, 1985) and that the only reason the question came up was that he was bringing his car back to the state. Representative Frerichs asked the AG whether the Department of Revenue was right.
AG Roger Tellinghuisen sided with the Department of Revenue. The reasoning involved a careful walk through tax statute history.
The old tax (pre-1985). SDCL 32-5-31 imposed an "initial registration" tax. It was paid only once, on the first registration of a vehicle in SD, regardless of how many subsequent sales or out-of-state interludes the vehicle had. Resales between SD residents weren't taxed under this regime. The constituent's 1984 SD purchase wasn't taxed because it was a resale, not a first registration.
The new tax (post-1985). Chapter 12, Section 241 of the 1985 Session Laws repealed the old initial-registration tax and replaced it with the SDCL Chapter 32-5B motor vehicle excise tax. The new tax is paid on "any registration which follows a sale," whether the sale is private or through a dealer. The new tax is "in lieu of" the sales tax or use tax that would otherwise apply, as the US Supreme Court's Western Airlines (1987) decision had recently clarified.
The credit for taxes paid elsewhere. SDCL 32-5B-11 (as amended in 1986) gives a credit against the SD excise tax for sales tax, use tax, motor vehicle excise tax, or similar tax already paid "by the applicant to this or any other state." The 1986 amendment was significant: the original 1985 version only mentioned "any other state"; the 1986 amendment added "this or any other state," which the AG read as the Legislature recognizing that returning SD residents might have paid tax to SD itself in the past and should get credit for it.
The constituent's situation. The constituent had not personally paid any tax on the vehicle: not in 1984 (because it was a resale and the old law didn't tax resales), not in Alaska (because Alaska's registration apparently didn't involve a tax that would qualify for the credit). So there was no prior tax payment by him to credit against. The Department of Revenue could and did impose the full SD excise tax.
The general rule. The tax law in effect at the time of registration controls, not the tax law at the time of the original purchase. The AG cited two of his own predecessors' opinions from the 1930s and 1940s for this principle (1941-42 AGR 210, 1937-38 AGR 421). The fact that the 1984 SD purchase wasn't taxed doesn't shield future SD registrations of the same vehicle from being taxed under later law.
Currency note
This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. SDCL Chapter 32-5B has been amended numerous times since 1987. The current motor vehicle excise tax rate may differ from the rate in effect in 1987, and the credit provisions of SDCL 32-5B-11 may have been refined further. Returning SD residents in 2026 facing the same factual pattern should consult the current statutes and the current Department of Revenue rules.
What the opinion meant at the time
For returning SD residents in 1987, the opinion was a clear warning. The fact that you didn't pay SD tax when you first got the car doesn't insulate you from current SD tax when you re-register. The SD excise tax under the 1985 law applied to any registration following a sale, and the constituent's prior 1984 SD purchase counted as a sale that was now being re-registered.
For the Department of Revenue, the opinion ratified its administrative practice of imposing the excise tax on returning residents whose vehicles had not previously been subject to an equivalent tax that could be credited.
For tax-credit-claiming residents, the opinion clarified that the credit under SDCL 32-5B-11 required actual prior tax payment by the applicant. A pre-1985 SD purchase that wasn't taxed (because the old initial-registration tax didn't apply) didn't generate a credit. An Alaska registration that didn't involve sales or excise tax didn't generate a credit either.
For the legislators who had passed the 1985 act, the opinion confirmed that the "in lieu" framing carried legal weight: SDCL 32-5B is the excise tax governing motor vehicle registration following a sale; it's not just an add-on but a substitution for sales and use tax that would otherwise apply.
Common questions
Q: Could the constituent have avoided the tax by not re-registering the car in SD?
A: He had no obligation to register the car if he wasn't going to drive it in SD or claim ownership of a SD-titled vehicle. But practically, anyone moving back wants to register their vehicle. The tax is the cost of doing so under SD law.
Q: What if he had paid Alaska tax when he registered there?
A: SDCL 32-5B-11 would have given him a credit against the SD excise tax for the Alaska tax. The credit could reduce or eliminate the SD tax depending on the amount of Alaska tax paid. The opinion noted that the credit is for tax "paid by the applicant"; if Alaska didn't impose a tax for the registration, there's nothing to credit.
Q: What does "in lieu of" mean for the excise tax?
A: The US Supreme Court's Western Airlines decision said an "in lieu" tax is one that's applied to the exclusion of other taxes on the same property. So the motor vehicle excise tax under SDCL Chapter 32-5B replaces, rather than adds to, sales tax or use tax on the vehicle.
Q: Does this rule apply to vehicles bought before the 1985 law was passed?
A: The opinion concluded that the law in effect at the time of registration controls, not the law at the time of the prior sale. So a 1984 SD purchase that wasn't taxed under the old law can still be subject to the new excise tax if the vehicle is re-registered after the new law took effect.
Q: Does this opinion still apply today?
A: The general rule that "the law at the time of registration controls" remains a standard principle, but specific statutory provisions in SDCL Chapter 32-5B have been amended. Don't rely on this 1987 opinion for current dollar amounts, rates, or specific credit calculations. Check current SDCL provisions and current Department of Revenue policy.
Q: What about military service members or government employees temporarily out of state?
A: SD has special rules for active-duty military and certain government service. Those rules weren't analyzed in this opinion. Returning service members should check the specific military/government service exemptions in current SDCL.
Q: Could the constituent have appealed the tax assessment?
A: Yes, administrative appeals and tax-court remedies were available. The AG opinion is advisory; the constituent could have litigated the specific assessment. The legal analysis suggests his odds of winning on the merits were poor under the Tellinghuisen reading.
Background and statutory framework
South Dakota's motor vehicle tax structure changed significantly in 1985. The old "initial registration" tax under SDCL 32-5-31 was a one-time tax paid at first registration; it didn't reach subsequent resales. The new motor vehicle excise tax under SDCL Chapter 32-5B applies to every registration that follows a sale, capturing private resales as well as dealer sales.
The shift moved SD from a one-time-only model to a recurring tax that captures the value of each vehicle transfer. Combined with the "in lieu" framing (excise instead of sales/use tax), the 1985 law created a more comprehensive revenue framework for motor vehicle transactions.
The credit provision in SDCL 32-5B-11 prevents double taxation. If a vehicle has been taxed in another state (or in SD itself, after the 1986 amendment), the SD excise tax allows credit for the amount already paid. This protects mobile residents from being taxed twice on the same vehicle.
The general principle that current law applies at registration goes back to the 1930s and 1940s, as the AG noted by citing his predecessors' opinions. The principle protects state tax authority: a buyer cannot lock in a favorable historical tax treatment by holding the vehicle through later tax law changes.
Citations and references
Statutes:
- SDCL Chapter 32-5B (motor vehicle excise tax)
- SDCL 32-5B-1, 32-5B-11, 32-5B-14
- SDCL 32-5-31, 32-5-47, 32-5-48 (old initial registration tax; repealed 1985)
- 1985 SD Session Laws Chapter 12, Section 241 (1985 act)
- 1986 SD Session Laws Chapter 242 (1986 amendment to credit provision)
Cases:
- Western Airlines, Inc. v. Board of Equalization of the State of South Dakota, 107 S.Ct. 1038 (1987)
Prior AG opinions:
- 1941-42 AGR 210
- 1937-38 AGR 421
Source
Original opinion text
Motor vehicle excise tax liability
Dear Representative Frerichs:
You have requested an official opinion regarding the following factual situation:
FACTS:
Constituent purchased a used motor vehicle from another South Dakota resident in September, 1984. Ownership was transferred, no tax was imposed or collected, and South Dakota title was issued. In December, 1984, constituent moved to Alaska and transferred the title and registration to Alaska. He was a resident of Alaska for two years. Constituent moved back to South Dakota and bought South Dakota license plates on January 19, 1987. By letter dated March 4, 1987, the Department of Revenue refused to title the vehicle in South Dakota unless a tax of $134.25 was paid. When constituent called the Division of Mother Vehicles on March 6, 1987, and asked why he was not charged the three percent used motor vehicle tax in 1984, he was told there was no law requiring it at that time.
Based upon the above facts you have asked the following questions:
QUESTION:
Can the Department of Revenue levy the excise tax imposed by SDCL 32-5B-1 and refuse to issue title under SDCL 32-5B-14 even though there has been no sales transaction after July 1, 1985, on which to base the tax and the question appears to have arisen only because the constituent is requesting transfer of his title from another state to this state?
The old law which was repealed by the enactment of Chapter 241, Laws of 1985, provided that a tax was to be imposed in addition to any other license fee, registration fee and compensation for the use of the highways on the first or initial registration of a motor vehicle based on the purchase price or fair market value whichever was greater. (SDCL 32-5-31).
A nonresident of the state, as defined by SDCL 32-5-47, was not required to pay that tax provided that the state of his residence granted reciprocity to motor vehicles registered and owned by residents of South Dakota. (SDCL 32-5-48). The imposition of the fee was repealed by Chapter 12, Section 241, Laws of 1985, and replaced by that chapter "An Act to levy a motor vehicle excise tax in lieu of the motor vehicle initial registration fee and to provide penalties for violation thereof and to declare an emergency."
The United States Supreme Court has recently determined the meaning of an "in lieu" tax such as the title of this act declares it to be by saying that it is a tax which is applied to the exclusion of any other tax on the property. Western Airlines, Inc., et. al. v. Board of Equalization of the State of South Dakota, et. al., 107 S.Ct. 1038 (1987).
The old initial registration tax was only paid one time in the State and that was upon the first or initial registration no matter how many times the vehicle might thereafter leave the State, be relicensed and come back to South Dakota, if it could be shown that it had once been paid in the State. The tax imposed by SDCL 32-5B (Chapter 241, Laws of 1985) is a tax which is paid on any registration which follows a sale of the motor vehicle either by private or by retailers. Insofar as these persons are concerned, it is in lieu of a tax which might otherwise be imposed by the sales tax law or the Use Tax Act, SDCL 32-5B-1.
The chapter, as originally enacted provided in Section 7, "If any motor vehicle has been subjected previously to a sales tax, use tax or motor vehicle excise tax by any other state. . ." the amount levied in that state is to be compared with the tax due in South Dakota and only the difference was to be collected. Thus under that section of the law this transaction would not be subject to tax because no sale took place in another state.
In 1986, however, by Chapter 242 the Legislature amended that section to provide that, "If any motor vehicle has been subjected previously to a sales tax, use tax, motor vehicle excise tax or similar tax by this or any other state. . . ." no tax is owed to this state if the tax has been paid by the applicant to this or any other state.
It is apparent by this amendment that the Legislature contemplated the granting of credit to a South Dakota resident who had previously been subject to a tax upon the initial registration of a vehicle or is now attempting to license a vehicle and to set off the tax obligation imposed by SDCL 32-5B-1 against such other tax paid.
It is obvious that the 1986 amendment to SDCL 32-5B-11 recognized that residents might be liable for the excise tax on vehicles which had previously been registered in this State such as is the case here, but further gave them the benefit of deducting the amount of tax which they, as former registrant, had themselves paid to the State through language reading ". . . if the tax has been paid by the applicant to this or any other state. .." (Emphasis added.)
The individual in question here, although he purchased the car originally in South Dakota, was not himself subjected to any tax liability since at that time the liability was only for the first or original registration (SDCL 32-5-31) and not on subsequent registrations where the car was sold by either a private party or a dealer. The tax laws to be applied are those which are in effect on the date that registration is sought. This is consistent with the holding of this Office in 1941-42 AGR 210 and 1937-38 AGR 421. The fact that the registration by the owner in 1984 was not subject to the then original registration tax is not determinative of the present tax liability which must be resolved in accordance with the present law.
The answer to your question is that the vehicle is subject to the excise tax under SDCL 32-5B and the Department of Revenue may refuse to issue the title until such time as the tax is paid.
Sincerely,
Roger A. Tellinghuisen
ATTORNEY GENERAL