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State Tax Entity Finishes Online System Modernization

The state department in question underwent a name change during the course of the project, which was in the works for nearly half a decade.

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A key state tax entity has wrapped up an IT modernization project that has been in the works for nearly five years.

The California Department of Tax and Fee Administration (CDTFA) signed a “final state acceptance” letter on Aug. 16 for the Centralized Revenue Opportunity System (CROS), a single solution that replaced a series of legacy tax collection systems, some of which dated to the 1990s. In a news release, CDTFA said the “innovative, on-demand system creates a responsive online filing and payment system for California business owners,” expanding customer-facing online services and improving taxpayer access to records with real-time account information.

“We’re harnessing state-of-the-art technology to help taxpayers file their returns, manage their accounts, and make payments. For the business owner completing her return at night at her kitchen table, we want to make it convenient,” CDTFA Director Nick Maduros said in a statement. Among the takeaways:

  • While the project formally began in October 2016 — when CDTFA was still known as the State Board of Equalization (BOE) — its origins were several years earlier with the release of a project proposal in 2013 and approval of an $85 million contract for the project in August 2016. It rolled out in three releases. The first, on May 7, 2018, covered sales and use taxes, tire fees, electronic waste recycling and cigarette fees, among others. The second, on Aug. 12, 2019, covered alcoholic beverage taxes, cigarette and tobacco products taxes, fuel taxes and oil spill response fees and others. The third and final release, on Nov. 9, covered cannabis taxes, lead-acid battery fees, natural gas surcharges and others. By March 2019, CDTFA’s estimate of total project cost had risen to $281 million, but the entity told Techwire Monday via email that its total costs including CDTFA staffing and payments to vendors came in at $279 million.
  • “Final state acceptance” marks a “formal passing,” CDTFA said, of CROS to it from the primary contractor, FAST Enterprises. All rollouts are done, and CDTFA will manage maintenance and operations going forward — though FAST will continue to assist with “maintenance activities and technical knowledge transfer” to team members. CDTFA also worked with Grant Thornton for Independent Verification and Validation services, International Network Consulting for data cleansing, and SupportFocus Inc. for data conversion support, it said.
  • Previous tax administration systems “included a legacy mainframe tax application, a Unix-based case management system, and a separate online services application,” CDTFA said. By way of contrast, the new CROS supplies an “integrated platform that allows system configuration without writing custom code to meet most business requirements.” Availability has also expanded; legacy online services were available only to retail sales businesses, whereas CROS makes all online services available for every tax program it administers. The system, CDTFA said, enables it to “increase operational efficiencies” and helped it respond more quickly during the COVID-19 pandemic to Executive Orders providing relief to impacted businesses.
  • Completion of the existing system doesn’t mean CDTFA is finished with refinements. The entity is “in discussions with Amazon Web Services,” it told Techwire, and plans to migrate the CROS application to AWS. In February, CDTFA CIO Scott Capulong mentioned future initiatives in the system involving the use of AI and data analytics. The entity said work is underway on a “data analytics initiative to improve the timeliness of evaluating tax returns,” adding: ”By leveraging multiple sources of data and artificial intelligence technologies, we may identify tax return errors early and increase voluntary compliance.”
Theo Douglas is Assistant Managing Editor of Industry Insider — California.