Just did a service on my rear axle drained the fluid using the drain plug on the Mag-hytec cover. When I refilled it it only took 5 quarts not the 8 I think it took when it was installed. Where did the extra fluid stay and how do I drain it.

I Stand Alone

 

I just drained/refilled mine (same cover) and it took exactly 2 gallons/8 quarts, so your line of thinking is correct.

Was the truck level?

 

Check your axle seals? Is the plug at the very bottom? Although I doubt it could be high enough to hide 3 quarts of fluid LOL

 

I believe many guys raise one wheel up at a time in order to drain the oil in the axle shafts. That may be where it's hiding.