The legislation also attempts to collect taxes on Internet sales. Lawmakers fear that after Indiana raised its per-pack tax on cigarettes, from 15.5cents to 55cents, some buyers have turned to the Internet  where there are some 200 retailers to find cheaper smokes.
According to a survey last year by the federal General Accounting Office, most of those online retailers don't comply with the federal Jenkins Act, which requires that any person or company (other than a licensed distributor) selling or shipping cigarettes to a buyer in another state report the sale to that state's tax agency.
According to an analysis by Forrester Research Inc., Web-based tobacco sales could reach $5billion by 2005, costing states $1.4billion in tax revenue annually.
Lawmakers have not developed an estimate for the tax dollars Indiana may be losing to Internet sales. But John Keeler, a lobbyist for Philip Morris Inc., has told lawmakers the amount is significant enough to warrant legislation.
SB 504 requires Web-based cigarette retailers to either collect Indiana's 55-cent-per-pack excise tax or notify the buyer that the tax is due.
The bill also mirrors the Jenkins Act by requiring that the Web site provide the buyer's name and address and amount of purchase to the state so the Indiana Department of Revenue can send out a bill for the tax.
"Hopefully, we're going to be able to collect these taxes," Lanane said.
The GAO study found that several states have taken steps to collect such taxes but so far have been unsuccessful.
But some states are becoming more aggressive.
New York City which along with the state imposes excise and sales taxes totaling $3.33 per pack filed a lawsuit this year against several Web sites, including two based in Kentucky.
The suit is seeking $15million in damages three times the city's estimated losses in tax revenue.