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Reuters reports that state governments that are counting on a big influx of cash from Internet retailers that have started to collect sales taxes may be disappointed, at least in the short term.

While eight companies, including Toys R Us Inc. , Target Corp., and Wal-Mart Stores Inc., have agreed to start collecting sales taxes under an agreement with the states, the revenue is described as “puny” compared to state budget gaps that may total as high as $75 billion. California alone has a $35 billion budget shortfall, and the Texas budget gap is $10 billion.

Varying estimates put the total annual lost sales tax revenue at between $2.5 billion and $13 billion in 2001. Even at the high end of estimates, if every online retailer were collecting sales taxes, the numbers wouldn’t be sufficient to cover the states’ losses. And there remains support in the US Congress for maintaining or making permanent a ban on Internet sales taxes.
KC's View:
Boy, you just can’t count on anything anymore. Even when you add up Internet sales taxes, beer taxes, and tobacco settlement money and assorted other revenue generating schemes, the numbers don’t seem to work out for the states.