Past performance is a good indicator of the future. So as we watch systematic failures with the Affordable Care Act enrollment system, Healthcare.gov, continue to play out across states, we should be asking: why wouldn’t the same chaos ensue with a state enforced Internet sales tax system?
Under the Marketplace Fairness Act (MFA), all 46 taxing states will have jurisdiction to enforce their own tax collection and enforcement policies on Internet and remote retailers. Just as in the case of Healthcare.gov, this system would be executed through a complex web of private and public platforms. The stakes for failure might be even higher for a failed MFA tax systems rollout. Dozens of state auditors are going to be less understanding about mistakes caused by faulty software than those trying to stand up the new healthcare system.
For sure there’s plenty of blame being tossed around about why the enrollment system – which cost nearly $600 million to create – isn’t properly working. In ongoing Congressional hearings, contractors and web developers blame the government and each other but not themselves for major deficiencies like the software buckling on the first day of the website launch.
Healthcare.gov isn’t the only example of botched web platforms created by government contracted tech firms. Other current examples include the taxpayer-funded updates to the Massachusetts, Florida, and California unemployment systems. In Massachusetts, one unemployed person filing for benefits instead received a tax bill for $45,399 – a failure by many margins. (http://www.theguardian.com/commentisfree/2013/oct/21/obamacare-website-glitches-cgi-private-contractors)
Right now, software providers like Avalara and others are salivating over the prospect of becoming favored government contractors that are required to navigate the complex process of collecting and remitting online sales tax to each state. So too are the well-known big government contractors like Deloitte, CGI and others who might want a bite at the apple in creating tax collection web platforms for states under MFA.
But, if past is prologue, Internet sales tax web systems through MFA will likely suffer the same fate as Healthcare.gov and we should remain wary of anyone who says such a system will be simple or easy to operate.