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States Move To Tax Internet Sales

Faced with the loss of billions of dollars in telephony taxes because of the ban on Internet-access taxes, some states are now moving to collect sales tax on goods purchased over the Internet.

The nation's two largest states--California and New York--have added lines to their state income-tax forms this year requiring taxpayers to declare sales taxes owed on out-of-state purchases.

The tax figure is not a trifling amount: The National Governors Association estimates $35 billion will be lost this year from Web purchases on which no taxes were paid. At the same time, Senator Lamar Alexander--who is worried that states will lose $20 billion a year in telephony and ISP taxes--is leading a battle to institute Web-access taxes.

Taxpayers have always owed the sales taxes, but very few of them realize it. "That's always a problem, making people aware of this liability," California Equalization Board spokesman Vic Anderson told the Associated Press. "It's one of the most misunderstood taxes out there."

In New York, Assemblyman Ronald Tocci has introduced a bill to remove the item from the state's tax forms, saying it's impossible for taxpayers to keep track of sales taxes on out-of-state purchases. Tocci said the provision threatened to make tax evaders out of law-abiding taxpayers and policemen out of tax preparers.

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