Buy a sweatshirt online from Tailgate Clothing, and the Ankeny-based company will charge state sales tax if you’re an Iowa resident. Buy a sweatshirt from L.L. Bean through its web site, however, and you won’t pay the sales tax because the retailer doesn’t have a presence in the state.

Efforts to level the playing field are now under way that within a few years could make online sales uniformly taxable across the country, potentially adding billions of dollars in tax revenues to states’ coffers.

The issue of taxing online purchases has taken on a new urgency for Iowa and other states facing consecutive years of budget cuts and scrambling for new viable revenue sources.

For fiscal year 2006, “we estimate we could be losing anywhere from $160 million to $260 million for the state of Iowa,” said Don Cooper, administrator of the Iowa Department of Revenue’s Compliance Division.

The likeliest way that online sales will become taxable for all online retailers is through an effort known as the Streamlined Sales Tax Project, which would revamp the system for all retailers but have its largest effect on online retailers. Iowa is among a majority of states that have passed the Uniform Sales and Use Tax Administration Act, which allows it to enter into agreements with other states to simplify the sales tax system.     Last year the Iowa Legislature passed a law, which becomes effective July 1, that meets the guidelines of the model legislation proposed under the Streamlined Sales Tax Project.

An issue still to be resolved is how retailers, particularly smaller businesses, would effectively track, collect and remit sales taxes for multiple states. The method under discussion by the states’ working group is for a system of independent companies called certified service providers that would perform this service, with payment coming from the states.

Compliance with the streamlined system, including collection of sales tax by remote online sellers, will remain voluntary unless Congress acts on it. Legislation has been introduced in both the U.S. Senate and House and states are pushing hard for it. However, it’s unclear whether progress will be made during an election year, according to Diane Hardt, who co-chairs the states’ working group for the Streamlined Sales Tax Project.

Cooper, though, said he believes the legislation will be given its due this year.

“Obviously the states are pushing pretty hard for them to pass this,” he said. “The thought is this is one way for (Congress) to help out state goverments without having to give them money.”

If the streamlined sales tax effort proceeds as planned, Cooper estimates Iowa could begin collecting about 30 percent of the total amount it’s now missing out on by fiscal year 06.

One study estimates the total dollar amount of uncollected taxes on online sales nationally will grow to $45 billion by 2006, with that amount expected to grow by nearly 50 percent within the next several years after that.

Jim Henter, president of the Iowa Retail Federation, said his membership sees a lot of advantages in a streamlined sales tax process.

“It has some simplified procedures that we think would be advantageous,” he said. “There’s a continual struggle as to what’s exempt from taxation and what’s not,” he said. For instance, under the streamlined system there will be uniform definitions among the states for retail items such as bottled water and candy, but it’s still up to each state whether a category is taxed or not.

Members of Software and Information Technology of Iowa, a statewide association of technology companies, are generally “lukewarm” about a streamlined system being imposed, said its president, Miriam Ubben.

“If it happens, it happens,” she said. “It’s been a window of opportunity to move sales forward, but it is inevitable. What our members would fight would be an access tax, which would really not be fair because the government did not create this industry.”

The state is putting together a rates and boundaries database for in-state retailers to know how to apply taxes from city to city.

Cooper said the next step in Iowa will be for the Department of Revenue to put together a training and education plan for retailers, “so that everyone knows what the process is come July 1.”

“We’re going through a process now to make sure it does what it’s supposed to be doing, so that in case we need to make any legislative changes this year,” he said. “I think if anything does need to be changed, I think it will be minor.”

NOT A BIGGIE

Having sales tax imposed on all online sales wouldn’t dampen any of Tailgate Clothing’s Web-based business, said Steve King, the company’s product manager in Ankeny. The company operates both a wholesale division that sells to retailers in New York, Las Angeles, Europe and Japan. It does about 5 percent of its business from online orders.

“Consumers [order online] out of convenience,” King said. “They don’t consciously think, ‘I’m going to place an order online to save a penny here or there.’ As a business, it has no effect on our margins or bottom line doing it one way or the other.”

Tricia Adams, owner of Drew’s Chocolates in Dexter and West Des Moines, also said customers for the most part don’t complain about paying sales tax. And keeping track of sales by state is something she already does anyway. “It’s no different to me than keeping track of the counties that have 5 percent or 6 percent sales tax,” said.

Additionally, that information is “valuable to send reminders and brochures both to the sender and the recipient,” she said. “That’s how you get a lot of added business.”