As the deployment of computerized systems for managing data proliferated during the 20-year period 1970-1990, tax agencies built such systems incrementally, storing tax information in many separate tax specific "silo" systems serving a single purpose. For example, separate systems may have been built to process personal income tax, sales tax, or employer withholding tax, with separate taxpayer registration, revenue accounting, collection, and audit functions in each.
The consequence was that information on an individual taxpayer or business was scattered throughout the systems, often requiring taxpayers to call numerous numbers or even agencies to get information and answers. Businesses may have been assigned different tax identification numbers for different taxes they pay. This makes accurate filing more cumbersome and time consuming, and can create a maze of complexity and confusion for taxpayers as well as agency staff. Furthermore, such tax administration systems can be so old and outdated that it can take thousands of hours to implement a new tax law.
Tax integration is a framework of people, processes and technology functionally organized to administer taxes. A well-designed integrated tax system can merge all information into one, efficient system organized by function. Such a system can be designed to ultimately work in tandem with technology to offer around-the-clock customer service and Internet filing, providing one-stop shopping.
In the last ten years, many of the nation's tax agencies have re-engineered various legacy internal tax processing systems, replacing them with one integrated tax system (ITS) that treats the taxpayer as a single entity and enables the elimination of redundant processes. A list of states with ITS programs and initiatives is attached. These integrated systems efforts are often combined with additional capabilities such as intelligent forms processing (OCR/ICR, 2-D barcoding), decision support technology, customer relationship management (CRM)tools, data warehousing, and electronic commerce readiness.
Click here to view the results of a 2003 survey of the states regarding their ITS efforts (download PDF).