Estimates of Sales Tax Loss Due to Internet Vary Widely

States and localities will lose between $300 million and $3.8 billion in tax revenue this year because of purchases over the Internet, the General Accounting Office said Monday.

The GAO, Congress’ investigative arm, said the wide disparity was due to the difficulty of documenting Internet sales.

Electronic retailers are not compelled to collect sales taxes from customers unless goods are being sent to a state where the retailer has a store or other physical presence. That makes much of the Internet a tax-free zone, although buyers are supposed to pay applicable taxes voluntarily.

James R. White, the GAO’s director of tax policy, said auditors used computer models and their own estimates because getting hard data was almost impossible.

The GAO said it reviewed studies already done for interest groups; consulted trade publications such as “eMarketeer”; and examined data from industry experts like Marketing Logistics Inc., Forrester Research Inc. and Jupiter Communications.

Auditors also collected state estimates of sales tax compliance. States rely on merchants to collect the money and relay it to their revenue departments.

Then the GAO experts constructed formulas, plugged in both rosy and gloomy scenarios and came up with a wide-ranging result.

The biggest losers, under the GAO’s estimates, are Texas, forfeiting between $26 million and $342 million this year; and California, $23 million to $533 million.