By Nathan Leaf
Enquirer Columbus Bureau

COLUMBUS - Ohio officials would like all those shoppers who bought Christmas presents online this year to claim their purchases on their income tax returns next spring.

Because online retailers aren't required to collect state sales tax, the state relies on the honesty of taxpayers to report Internet purchases on their income tax returns.

So how many people follow the law and pay sales taxes on their Internet purchases?

Not many.

This year alone, state officials expect to lose nearly $600 million in unreported sales taxes for items bought online or through catalogs.

"Obviously, it's not a completely effective way to collect the tax," said Department of Taxation spokesman Gary Gudmundson.

Since 2000, shoppers have been required by law to report their online purchases, as well as items bought over the phone from a catalog or other out-of-state store. But since that time, just $3.3 million has been collected.

Mr. Gudmundson said the tax, which covers Internet and catalog sales, is nothing new but was included on the income tax form to curb growing losses in sales tax revenues. The job now is to educate people about their responsibilities to report what they buy.

"Our belief is that people aren't paying (the tax) because they don't know about it," he said.

A 2001 survey by the Department of Taxation in 2001 found that 77 percent of Ohioans didn't know they were supposed to be paying state sales tax for purchases made on the Web.

Still, Mr. Gudmundson said that doesn't excuse taxpayers from paying. "It is a more difficult tax to enforce but it can be done," he said.

Neal Osten, a spokesman for the National Conference of State Legislatures, said state governments are losing more and more tax dollars each year.

Mr. Osten said states lost more than $13 billion in tax revenue nationwide in 2001 because of online sales. That figure is expected to climb to $45 billion in 2006, with Ohio projected to lose $1.5 billion.

The difficulty in collecting state sales tax for online purchases stems from a 1992 U.S. Supreme Court decision that says Internet retailers can't be expected to collect sales tax because individual states' tax codes are too different and complex.

Ohio and 34 other states agreed in August to participate in model legislation to streamline state tax codes and make it easier for retailers to collect sales tax.

Louis Mastria, spokesman for the Direct Marketing Association, says he opposes the proposed legislation. Retailers, Mr. Mastria said, shouldn't become unpaid tax collectors.

National Retail Federation Spokesman J. Craig Shearman disagrees. He supports efforts to simplify tax codes, saying it will level the playing field for all businesses. Shoppers shouldn't have to pay more just because they shop at local stores instead of online, he said.