September 25, 1987

Honorable Kent E. Frerichs
State Representative
Route 2, Box 47
Wilmot, South Dakota 57279-9430

OFFICIAL OPINION NO. 87-30 

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The old law which was repealed by the enactment of Chapter 241, Laws of 1985, provided that a tax was to be imposed in addition to any other license fee, registration fee and compensation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  The imposition of the fee was repealed by Chapter 12, Section 241, Laws of 1985, and replaced by that chapter "An Act to levy a motor vehicle excise tax in lieu of the motor vehicle initial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-l 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