Government's role is to provide its services in the most efficient and effective ways possible. This includes making it easy and convenient for all taxpayers to file in whatever manner they find most convenient, assured, and economical, including the Internet.
Internet-based data submission directly to the state most commonly occurs by transmission of an FTP (File Transfer Protocol) data file or completion of a Web form submitted via a secure Internet channel to a state computer server. This traffic is commonly encrypted for security, with a PIN or Personal Identification Number (along with the other data submitted) serving to assure the state of the identity of the filer. Where payment options also are provided to the filer, it generally means that the capability for a taxpayer to file a return and make a payment can be accomplished in one transaction, by the inclusion of banking information or authorization, or via credit card.
The other, partial Web channel that taxpayers may employ to deliver tax return and payments to the revenue agencies is through state-approved commercial vendors. The reason that it is "partial" is that the final transmission of taxpayer data is via a private link, either a government-controlled network or direct modem-to-modem, and not via the public Internet.
Pursuant to state specifications, these organizations create the capability for taxpayers (either on-line or off-line) to produce an electronic return, and then accept transmission of the data for forwarding to the state. Fees charged may be for software, for preparation, for transmission to the state, or a combination. The state may even build a Web link to commercial company Web pages.
Volumes of electronic returns submitted over the Internet are still very small compared to other existing EC tax filing channels, but the numbers are growing.
See Trends in State Electronic Commerce Projects on this web site for indicative information on states' web filing programs, and our state web file map for links to states' individual income tax web file programs.