First Chicago/Mercantile Services, one of two financial agents slated to process electronic tax payments for the federal government, has licensed client/server hardware from Hewlett-Packard Co. and software from Informix Software Inc.
Terms were not disclosed. First Chicago/Mercantile Services is a joint venture of First Chicago Corp. and St. Louis-based Mercantile Bancorp.
NationsBank Corp., the other banking company chosen by the Treasury Department last October, is working on a system based on mainframe computers.
NationsBank will take over the Taxlink system, the prototype for the Electronic Federal Tax Payment System. NationsBank is improving the system with First Maryland Bancorp, Baltimore; First Data Corp., Hackensack, N.J.; and Decision Systems Technology, Greenvale, N.C.
The projects are part of the development of the Electronic Federal Tax Payment System, which is expected to handle electronic tax payments from more than 90% of U.S. businesses within five years. The payments will be worth a combined $1 trillion per year.
First Chicago/Mercantile officials chose the "scalable" client/server platform after a three-month review of various systems and configurations.
Mainframes have more capacity and are considered ideal for transaction- intensive functions. But First Chicago/Mercantile officials said the client/server platform was easier to modify than a mainframe one.
That's an important consideration, said Lawrence Buettner, the general manager of the joint venture, because the government's requirements may change over the next seven years.
"We want to ensure that we are building this solution on a technology base that uses the most current and reliable software," said Mr. Buettner, a senior vice president at First Chicago. "The relational data base and the Windows types of presentations give us a great deal of flexibility to modify the system."
Phil White, chairman and chief executive of Informix, a Menlo Park, Calif., marketer of parallel data base systems, said there was a general trend in the banking industry's payment processing to migrate over to the client/server world.
Congress mandated electronic collection of corporate taxes to help offset an anticipated reduction in duties under the North American Free Trade Agreement.
The first phase of the mandate, which requires corporations with tax bills in excess of $78 million to pay electronically, has already taken effect. Some 800 companies are affected.
Each year this tax threshold will drop until it reaches $20,000 in 1999. At that point, more than 90% of U.S. corporations will have to pay electronically.
First Chicago expects its joint venture's portion of the tax payment business to yield about $400 million in revenues over the next seven years.
The Electronic Federal Tax Payment System will be in a pilot program in October and is expected to be up and running by the end of next March, according to government officials.
