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California’s brand new $290 million system for collecting sales tax is off to a rocky start with a key filing deadline just days away.
A customer service center for the California Department of Tax and Fee Administration is swamped with complaints. Small business owners are leaving snarky comments online, and Gov. Jerry Brown’s administration is preparing to waive penalties for people who file their returns late because of technical errors.
“Are your web developers Russian?” Carmichael accountant Mara Alexander needled the department on Twitter when she reported the frustrating delay she experienced filing a return.
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The quickly approaching deadline on Tuesday for businesses to report their second quarter sales tax is the first significant test for the department’s Centralized Revenue Opportunity System (CROS), a program that’s designed to modernize tax collection and to make it easier for the state to allocate revenue to various agencies.
The state has been developing the program since 2010, when the Board of Equalization sought to better manage the 36 taxes and fees it collected at the time. The agency contended it would increase tax revenue by creating an easier-to-use system.
It hired contractor Fast Enterprises to build it in August 2016, and the California Department of Tax and Fee administration took over the project last year when the Legislature stripped the Board of Equalization of almost all of its powers.
Tax department Deputy Director Stacie Spector said the tax collection program launched on time and on budget in May. The department tried to notify users to expect changes with emails, mail, banner advertisements on its website and messages that people heard when they called the department.
Spector said the department is learning fast and responding to feedback. It anticipated that the change could be difficult for some of the roughly 1 million taxpayers who use the system, and it added customer service staff to work through some of those challenges.
So far, the tax department is hitting its revenue collection targets
“We’re incredibly happy with the performance. At the same time, we have a lot of work to do. We understand there are some issues and we’re facing them front and center,” she said.
Some tax attorneys and accountants were still surprised by what they found when they tried to use the new system over the past few weeks. They said the alerts they saw about the new program did not convey to them how different CROS would be from the department’s previous system.
“Nothing. No training. No education,” said Jesse McClellan, a Sacramento sales tax attorney and former Board of Equalization auditor.
People who have used the program describe it as difficult to navigate.
“The new website is like a choose your own adventure,” said Lonny Harris of Fair Oaks, whose company Ablegov sells software to government agencies. “How you answer gives you options on how to proceed, but some questions are very unclear. There are a lot of businesses that are doing pretty simple functions. Presenting them with a simple form will get them to pay accurately and timely. This more complex system, it’s not as easy.”
“It should not be as confusing as this,” Alexander, the Carmichael accountant, added.
Two professional accountants said it takes them 90 minutes to file a return in the new system, up from 30 minutes in the old program. Taxpayers complain that they have to manually enter information in the new program that used to be calculated automatically for them in the old program.
“A majority of my clients have complained that the new system is difficult and not as user-friendly,” said accountant Marc Brandeis.
The Legislature last year seemed to anticipate that taxpayers might have trouble with the new program. It unanimously passed a bill by Sen. Ted Gaines, R-El Dorado Hills, and Republican Board of Equalization member George Runner that would have allowed the state to waive late-filing penalties if the new system did not work smoothly.
Gov. Jerry Brown vetoed the bill, writing that the state already has “an existing mechanism to relieve taxpayers of unwarranted interest and penalties due to website disruption. Therefore, this bill is unnecessary.”
Spector said the department would use that power to waive penalties if a taxpayer files a complaint. The department plans to post a video on its website describing how someone could petition to have the department drop late penalties.
Gaines, who is running for a seat on the stripped-down Board of Equalization, said taxpayers would be better served by pre-emptively waiving penalties until the tax department sorts out its new system.
“Tell me why the taxpayer has to go through a bunch of paperwork because the bureaucracy is not working. It makes no sense. That’s why we proposed the bill, and the governor chose to veto it, which I think was a mistake. He was putting the government in front of our constituents,” he said.
McClellan, the tax attorney, has friends at the department from the years he worked there. His former colleagues tell him they’re frustrated, too, but hopeful the program will pay off over time by providing better services for the public and better tools for them.
“From the agency standpoint, I haven’t heard a good report about it,” he said. “Once the kinks get worked out, and once the gaps get filled for the issues they’re encountering, they feel it will get better.”