It’s no secret that South Dakota’s low taxes and lenient vehicle registration policies have made the state a haven for out-of-staters who license vehicles here.

License plates are cheap, and so is the state’s excise tax on vehicles. There’s no state income tax, and the law allowing out-of-state people to register their vehicles does not require them to set foot in the state to get South Dakota plates. The state is especially popular with people who live full time in recreational vehicles, a growing trend among baby boomers heading off to retirement.

But South Dakota officials are attempting to crack down on abuses of the system. Debra Hillmer, director of the state Division of Motor Vehicles, recently sent a memo to county treasurers asking them to demand more information from out-of-state residents before issuing licenses. A similar memo went to 10 mail-forwarding businesses, services popular with people who live outside the state but have vehicles registered here.

The goal, Hillmer said, is to discourage falsified applications and collect information on where people really reside. Ultimately, that information could be used by other states to crack down on their residents who license cars, boats and motor homes here.

But critics say it could cost South Dakota millions of dollars by discouraging out-of-state registrations. South Dakota’s licensing fees help counties pay for road repairs, and the state collects a 3 percent excise tax on vehicles purchased and then licensed in South Dakota. New motor homes can cost hundreds of thousands of dollars and the tax revenue adds up.
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