EOne Acquires Taxware; American Express Unveils ASP Product

The evolving world of online payment solutions took two steps forward Wednesday, as American Express debuted a hosted procurement solution for midmarket customers, and First Data Corp.'s eOne Global division acquired Taxware International Inc. for $32 million in cash and a minority equity investment in govONE Solutions. Taxware computes sales, transaction, and value-added taxes anywhere in the world in real time and provides payment processing and form preparation. The Taxware system will be integrated into First Data's govONE Solutions product offerings, as well as its SurePay online payment solutions.

Clearly, govONE is hoping that its application service provider model for handling state tax collections will remove the "burden" in collecting taxes from out-of-state businesses and make it feasible to charge taxes on Internet, catalog, and telephone sales. New CEO Jim Fox--who took the helm just 90 minutes before the press conference announcing the Taxware acquisition Wednesday morning--specifically cited Internet tax collection as "another place where we'll serve online merchants." Taxware has been heading the Streamlined Sales Tax Project, aimed at making Internet taxation a feasible option for state governments by offering an ASP model to collect the revenue. The project this month will begin a pilot test, collecting sales taxes for four states: Kansas, Michigan, North Carolina, and Wisconsin.

The Supreme Court ruled in 1992 that because state taxes are so varied and complicated, asking out-of-state businesses to collect them would "unduly burden interstate commerce." In 1998, Congress passed the Internet Tax Freedom Act, which set a moratorium on Internet taxation that will expire in October; insiders expect that date to be extended.

EOne Global's inability to offer international tax computation has cost it business, and the new services will make it competitive with Cybersource, says Avivah Litan, Gartner VP of financial services. "Much of the expansion in E-commerce sales is coming from click-and-mortar companies branching out into international sales, where tax and VAT calculations are critical." But she says that Internet taxation likely "is still a ways off, given the still-undefined policies of the Bush administration."

American Express Wednesday unveiled its own ASP product--a fully hosted, Web-based system for the procurement of indirect goods and services. MarketMile includes product sourcing, payment, tracking and data analysis, and integrates with back-end financial systems. Though it trails Visa and MasterCard in the consumer market, American Express has a huge lead in the corporate-card arena, with about 70% market share. The plug-in service offers catalog and pricing information for more than 750,000 stock keeping units, including office products, computer hardware and software, and maintenance, repair, and operations materials. Suppliers already onboard include Boise Cascade Office Products, CDW Computer Centers, Compaq Computer, CompUSA, Corporate Express, IKON Office Solutions, Jannus Group, MicroWarehouse, Motion Industries, Newark Electronics, Office Depot, and Software Spectrum.

The American Express program will bring more detailed Level 3 expense data to corporate charges--something buyers have long been pushing for--allowing for better reconciliation and the integration of the data directly into legacy accounting systems. That will help American Express hold on to its lead over Visa and MasterCard in the corporate market, Gartner's Litan says, because both those associations must not only pass along Level 3 data, but also get their bank issuers to follow suit.