South Dakota Has Made Millions From Out-of-State Car Registrations

It's like the Cayman Islands for car registrations.

via AP Images

The first step you must take after buying a new-to-you car in the United States is registering it with your local department of motor vehicles. This process earmarks the vehicle to an owner and is necessary to score a license plate needed to traverse public roads. While most people do this in the state they reside in, others find loopholes to register their vehicles in other states to save thousands on taxes, forego local inspection and emissions requirements, and a handful of other reasons.

One of the hottest states for those looking to sneak around regulations and extra expenses is South Dakota. For whatever reason, the Mount Rushmore State, like Montana and others, has become a bit of a safe haven for those looking to skirt their home states' regulations.

According to a 2018 report by the Rapid City Journal, when an expatriate named Aldis Barsketis emigrated from the United States to Mexico, he noticed there was an astounding number of cars sporting South Dakota tags. Surely there couldn't be that many people from the Mount Rushmore State on vacation at the same time, right?

As it turns out, Barsketis was onto something. After doing a bit of research, he found a loophole that permitted him to register his vehicle in Clay County while living in Mexico. It didn't take long before he shared his secret with the world, even though he couldn't point out Clay County on a map. Clay County Treasurer Cathi Powell estimated that up to 90 percent of nonresident registrations may be linked to other non-residents and expats residing out of state and even out of the country.

Despite the initial investigation taking place in 2018, the practice is very much so alive and well today. One of the most popular places for out-of-state buyers to flock is, in fact, South Dakota. The DMV's mail-in process for vehicle registration has attracted thousands of automobile owners to register their wheels in the state. As of 2018, there were 58,334 out-of-state vehicles registered with the Department of Revenue's Motor Vehicle division which represent nearly five percent of all 1.2 million vehicles currently titled in South Dakota.

For example, some of these Ferrari 488 Pistas and a variety of Lamborghinis have been spotted cruising around in Mexico with South Dakota and Montana license plates recently.

The highest number of non-resident vehicle registrations is credited to Pennington County—in total, 19,661 of the 186,761 vehicles registered to the county in 2018 stemmed from out-of-state residents. The second highest, Clay County, had just 7,241 registrations during the same time; however, that represented more than one-fourth of all vehicles registered in the county. The practice is so popular that there are even companies with the sole purpose of facilitating out-of-state vehicle registrations in South Dakota.

Though we find it hard to believe, the report claims that there isn't an exact figure that shows how much extra money the South Dakota Department of Revenue has earned from this practice, as the registration fee varies based on vehicle age, type, and weight class. Apparently accounting software and Microsoft Excel haven't reached South Dakota yet.

That said, when the Rapid City Journal reached out to the department in 2018, it "estimated" an annual take of nearly $7 million. The Drive reached out to the South Dakota Department of Revenue to see how this number has fluctuated since 2018 but did not receive a response at the time of writing.

And while this represents financial success for South Dakota, one can't help but wonder how much money other states are losing. Some states like California are poised to lose hundreds of dollars per vehicle if its residents register the vehicle outside of their home state.

So is this an extravagant workaround that benefits the people, or an unethical loophole being used as a revenue generator? Either way, it's a method people have used to register tens of thousands of vehicles, and that's no small feat.

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