Report: Integrators Should Ponder Buying Tax Collection Companies

By William Welsh, Staff Writer


NOV. 29 ? Efforts by the states to simplify their tax systems and collect revenue from Internet sales could spur major technology companies to acquire smaller vendors that specialize in tax collection technology, according to a November study by Forrester Research Inc.


Eroding tax bases and the fear of additional revenue losses from e-commerce are driving states to simplify their tax systems, according to the study "Making Net Sales Tax Pay."


One of the chief recommendations of the study is that large systems integrators and Big Five accounting firms should consider acquiring tax collection companies such as esalestax.com Inc. of Englewood, Colo., or Taxware International Inc. of Salem, Mass., before their prices go up.


"Getting involved in tax collection automation will make up for revenues their tax practices will miss out on once states ease compliance burdens on retailers, reducing sellers' need for accountants," write the authors.


The study estimates that online trade will explode in the next several years, rising to $207 billion for U.S. business-to-consumer e-commerce and $2.7 trillion for U.S. business-to-business e-commerce by 2004.


With this in mind, tax administrators from as many as 27 states are working with the Streamlined Sales Tax Project to create model legislation that would simplify existing tax codes.


Each of the states has issued an executive order or enacted legislation allowing participation in the project.