When North Dakotans get a manufacturer's rebate on a product, whether it's a bottle of detergent or a new car, they pay sales tax on the rebate. New vehicles should be exempt from the rebate tax, a legislator believes.

Rep. Don Vigesaa, R-Cooperstown, owns a DaimlerChrysler dealership in Cooperstown, and he said he has fielded a number of customer complaints about paying North Dakota's 5 percent excise tax on manufacturers' incentives.

Vigesaa described one example to the Senate's Finance and Taxation Committee during a Wednesday hearing - a Dodge Durango sport utility vehicle where the manufacturer's rebate grew from $4,000 near the start of the model year to $8,000 at the end.

Although the customer has $4,000 to $8,000 knocked off the SUV's price, he or she still must pay the excise tax on the sum, Vigesaa said. That adds $200 to $400 to the customer's cost.

"The consumer should pay the amount of tax on what they write the check for," Vigesaa said. "When they write a check for $25,000, and I tell them they have to pay tax on $30,000, they resist that."

Myles Vosberg, the state Tax Department's compliance director, said the tax is charged because the rebate does not reduce the vehicle's cost. Instead, the money goes to the dealer, he said.

The tax applies in other situations where a manufacturer offers a rebate or discount coupon for which the retailer is reimbursed, Vosberg said.

The bill is HB1245.