Even without federal laws, state can do more to collect online sales taxes.

LITTLE ROCK - Arkansas is losing as much as $113 million each year in sales tax revenue from Internet purchases and other sales, according to new research by Arkansas Advocates for Children and Families.

Although Arkansans are required to pay sales taxes on Internet and catalogue sales, few consumers pay these taxes because retailers are not forced to collect them at the point of sale. The lost revenue is significant as the state struggles to keep up with other declining revenue that supports public services, the report found. In addition, Arkansas-based and other local retailers are at a price disadvantage as shoppers search out the lowest prices online.

"This is a problem that is only going to get bigger as more and more commerce moves to the web," said Rich Huddleston, AACF Executive Director. "To create a level playing field for our Main Street businesses and support the public services that draw new jobs to Arkansas, the state needs to use every tool available to collect these taxes."

The report, "Add to Cart: How Arkansas Can Support Vital Services By Fully Taxing Internet Purchases" outlines several ways the state can collect lost Internet sales taxes, including:

• Requiring out-of-state retailers to charge Arkansas sales tax when other businesses perform "market enhancing activities" here on their behalf, such as warranty services.
• Requiring sellers to remind consumers about their sales tax obligations.
• Requiring firms getting government contracts to collect sales taxes.
• Encouraging taxpayers to "self-remit" sales and use taxes.
• Taxing the downloading of software, music and other digital products.

Arkansas sales taxes range from 6 percent to 10 percent depending on local laws. Even though consumers owe these taxes on all products, out-of-state retailers aren't required to collect them unless they have a physical presence in the state. With consumers increasingly seeking out the best deals online, locally owned businesses are at a disadvantage to online retailers that don't add the same tax to their prices.

During the 2011 Arkansas General Assembly, legislators passed an "Amazon Law." It requires the Internet retailer Amazon.com to collect local sales taxes since it partners with Arkansas-based "affiliates." Amazon terminated affiliate programs in Arkansas and others states to avoid collecting the taxes and is fighting similar laws in other states.

Finally, Arkansas is one of 23 states that have aligned their laws with the Streamlined Sales and Use Tax Agreement. If Congress were to pass legislation such as the Main Street Fairness Act, all states already part of the agreement would have the power to tax Internet and other remote sales.