That's pretty much the way it works, in my experience. Never been busted for it myself, but an associate was driving a car registered in Wyoming (family residence) with a NH license while in VT was.
There were other circumstances. He was drunk off his ass, driving an unsafe vehicle (no rear brakes) in a snowstorm on crappy tires. Not surprisingly, he went off to do some soil sampling in the deep bush. The cops threw the book at him, and among the charges were violation of this rule. I don't know where and if the rule applies, or if it still does. This was some years ago.
Originally Posted by trixterNorCal
I just want to be clear:
If I reside in State A and thus my license is from State A but I have a summer home in State B with vehicles permanently there so licensed there and I then drive to State C while on holiday I have somehow broken a law?
I have done this, not the summer home but license from one state, car from another driving into a 3rd. Nothing has ever come up even after traffic stops. I tried to google for it but there are a bunch of unrelated things for "three state rule".