California collects millions after launching its digital tax collection system

Published On: January 6, 2023

California’s tax authorities are reporting $327 million in additional revenue sales and use tax revenues following the development and completion of its new digital tax collection system.

In a report, the California Department of Tax and Fee Administration (CDTFA) said it finalized the development of its Centralized Revenue Opportunity System (CROS) in August 2021, wrapping up more than six years of work to modernize California’s online tax services. State officials said the CDTFA built CROS in response to the growing complexity of state tax laws and the need for a modern system to handle high volumes of transactions.

The CROS system offers taxpayers simpler and faster features that some might describes as long overdue. Taxes can be filed easily online. There is a single sign-on feature for all services and businesses can manage multiple tax and fee accounts in one place, with status updates in real time.

The system also helps CDTFA staff. The state said many old manual processes are automated now, reducing workloads and accelerating business operations. The CROS system also cuts down on paper-based tax processing (with e-filing) and offers analytics to spot tax return irregularities and track productivity.

All said, the state is banking on big returns from CROS for this year’s tax season and those ahead. Presently, CROS provides government services to more than one million state businesses through its 38 tax and fee programs.

“The CROS project was the most significant technology initiative the department has ever undertaken, and it … decreased the tax gap by increasing voluntary compliance, improving customer online services, and improving audit, collection, and return processing activities,” said Scott Capulong, the CDTFA’s chief information officer in the report. 

California’s tax gap—the difference between taxes owed and the taxes actually paid—has been a major challenge for the state for decades. According to the state, the total size of California’s tax gap has been estimated to be more than $24 billion annually. This money not only represents lost revenue but missed opportunities to fund essential programs and services.

Like other states, California’s tax gap is the result of underreported income or revenue, underpaying, or simply not filing taxes altogether. The CROS project was designed to help close the gap and increase voluntary compliance, allowing taxpayers to better understand their obligations, and at the same time give the CDTFA enhanced tools to audit tax filings for accuracy.

Before CROS was implemented, officials said California’s tax collection system was also highly outdated and inefficient. The old system relied on manual processes and paper forms, which were prone to errors and delays. Other problems with the legacy system included a lack of real-time data to check filing status, limited auditing tools, and an outdated user interface.

Once the state realized it needed to replace its aging system, the CDTFA said it began a lengthy process that started with setting project objectives and rolling out the new CROS platform in stages.

The top three objectives entailed increasing state tax revenues by $40 million to $190 million per year; second, improving customer service by expanding online services for return filing, payments, registration, requests for extensions and relief of penalties; and third, reengineering processes by 25 percent by reducing paper, streamlining manual program processes, automating processes, and crafting an effective case management system.

Keeping these ambitions in mind, CROS was developed into an interactive, online filing and payment system. Work began in 2016 and was quickly followed with the first release of a data warehouse in March 2017.

CROS began handling sales and use tax and fees for lumber, cigarette retailer licenses, tires, and electronic waste in May 2018. The state’s “special taxes” were added in August 2019. While all the remaining features and tax programs were completed in November 2020. The system was officially completed in August 2021.

As for results, the state said that out of the additional $327 million it earned from the system, $112 million was collected in the fiscal year 2019 to 2020, while $215 million was collected in 2020 to 2021.

About the Author: Jason Shueh

Jason Shueh is a journalist and content strategist based in the San Francisco Bay Area. His work focuses on the tech sector, digital innovation, smart city growth, and entrepreneurship. He can be reached at jason at