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Tax agencies in the U.S. are under pressure to maximize their operations with their constrained budgets. While taxpayers welcome the benefits of electronic government (e-government) services, the true motivation may lie in improving the efficiency of providing government services. Tax agencies transitioning from traditional brick-andmortar operations to e-government services and systems need to reengineer their business processes, redefine individual roles within the agency and relationship with taxpayers, and redesign organization structures around the new electronic technologies implemented. This paper presents and discusses six critical issues involved with this transition based on a case study of a state tax agency. They include managing expectations, articulating strategy, reengineering business processes and organization structure, managing the technology infrastructure and resources, training, and recruiting.