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Knoxville – A University of Tennessee economist says the state is missing out on millions of dollars in tax revenue, as Tennessee-s economy starts the fiscal year $218 million in the red.

According to the state finance commission, revenue collections for July, the last month in the old fiscal year, were down by $40 million from the same time a year ago.

UT economist Bill Fox says Tennessee is affected by its inability to collect sales taxes on Internet purchases.

“Our estimate is that by the year 2003, state and local governments in Tennessee combined will lose about $300 million in revenues on an annual basis,” Fox said. “This will represent around five percent of sales tax collections.”

Fox says Internet retailers based in other states are able to avoid collecting Tennessee sales taxes, which is a problem that the U.S. Congress will have to consider.

“It is not in the hands of the Tennessee legislature to correct this problem,” Fox said. “All it takes is an action of Congress to allow states to collect sales taxes from Internet retailers.”

“It would be very appropriate for Congress to act and allow states to collect it,” Fox said.

In a study conducted by Fox a few years ago, Tennessee was second on the list of states that would benefit the most from collecting taxes on Internet sales. Fox said Texas was first on the list.