AUGUSTA – Maine is losing as much as $100 million per year in sales taxes that aren’t being paid on products bought over the Internet or by mail order.

Legislation being considered in Congress this month could help Maine and other states collect the tax, but there are still many obstacles to overcome.

Legally, sales taxes are owed on anything purchased over the Internet by a Maine resident, but as a practical matter, only a small fraction of what is owed is collected. The tax on such goods bought out of state and brought back or shipped for use here is called a “use” tax. State income tax forms have a line for taxpayers to list these purchases voluntarily, but officials say that compliance is only as good as the state’s ability to enforce the law.

“We have been making an effort to collect the use tax for years,” Finance and Administration Commissioner Rebecca Wyke said recently. “You can only get so far with voluntary compliance.”

Wyke said the amount not being collected is significant, with federal estimates showing Maine losing between $30 million and $100 million a year. A study prepared by University of Tennessee researchers for the Institute for State Studies estimated Maine’s loss at $43 million in 2002. The study was done by conducting a nationwide survey of thousands of companies and individuals that buy items online.

“I don’t think anyone disagrees this is a growing problem,” said Rep. David Lemoine, D-Old Orchard Beach and co-chairman of the Legislature’s Taxation Committee. “The problem is how to get at that tax revenue we are not collecting.”

He is sponsoring legislation that would have Maine ratify an effort to put teeth into a collection mechanism. Under a plan drafted last year by representatives from 35 states, participating states would have only one tax rate for personal property or services effective at the end of 2005, with some exemptions.

Food and drugs would be exempt from the rate, as would electricity, natural gas, and the transfer of motor vehicles, planes, watercraft, and modular, manufactured or mobile homes. The system would take effect after 10 states enacted authorizing legislation.

“At its core, collecting taxes on Internet sales is an issue of basic fairness,” said the National Governors Association when they endorsed the approach. The NGA said it is not fair to “Main Street” retailers to be required to collect the tax when the same products they sell can be purchased over the Internet without a way to force those sellers to collect the tax.

What blocks states from trying to force collection is a 1992 ruling by the U.S. Supreme Court. The court ruled that the myriad sales tax systems in 7,500 state and local jurisdictions, with different tax rates and definitions of what can and can’t be taxed, was too complex to enforce. The court said a state could not force nationwide retailers to collect sales taxes on Internet or telephone sales unless those businesses had a physical presence in the state.

Many states and groups such as the NGA and the National Conference of State Legislatures are urging Congress to authorize states to adopt a “streamlined” approach to taxing goods to overcome the court’s ruling. Legislation allowing that approach was introduced earlier this month in both the House and Senate.

“What we are talking about is leveling the playing field,” Lemoine said.

But, state Sen. Richard Nass, R-Acton, the lead Republican on the Legislature’s Taxation Committee, said many members of his party would see the measure as a tax increase, which they are against.

“And I am concerned if this is constitutional under the state constitution,” he said.

Nass said the proposal sets up a multistate group that would settle disputes that may arise over how different states define certain items. For example, the definition of a “watercraft” and how it is taxed varies from state to state.

He said that making use of a dispute panel could violate the state constitution by giving up authority to set taxes to another entity. Maine’s constitution states that the Legislature “shall never, in any manner, suspend or surrender the power of taxation.”

Wyke said Gov. John Baldacci would support the measure only if it is constitutional. And, she said, the governor has stated it must be “revenue-neutral,” meaning another tax would have to be lowered in Maine to offset the additional tax revenue gained from the legislation.

“There are many ways to achieve neutrality,” she said, “but we have to have better numbers to work with than we have now.”

Nass acknowledged that the revenue-neutral approach would garner some GOP support, but he wants Maine to take a “go slow” approach to the problem.

“I don’t want us to be out front on this,” he said. “Let’s have some other states identify and deal with the problems first, then we can look at this.”

Wyke and Lemoine both suggested there are several taxes that could be reduced to achieve revenue neutrality. They also acknowledged that whatever tax decreases are proposed to accomplish that goal would be controversial.

Members of Maine’s congressional delegation are watching the federal legislation that supporters want passed this fall. Rep. Tom Allen supports continuing the current ban on such multistate efforts while he endorses the effort to develop a long-term solution. Sen. Olympia Snowe opposed similar legislation two years ago because it was proposed without public hearings. She is still reviewing the current proposal.

Spokesmen for the other two members of the delegation, Rep. Michael Michaud and Sen. Susan Collins, said both also are reviewing the legislation.