Arizona Department of Revenue details STARS tax modernization, delays luxury tax rollout to January 2026

The Arizona Department of Revenue on Tuesday told the House Ways and Means Committee it has moved forward with a multi-year tax system modernization called STARS but has delayed the first tax rollout and currently rates the program’s risk as red.

Department of Revenue Director Robert Woods told the committee the department contracted with GCOM in August 2023 to build a new platform the department calls STARS, and that the vendor has since rebranded as VoyaTech. Woods said the department pulled the liquor/luxury tax (LLT) forward from planning into implementation to surface problems early; LLT was originally planned to go live in November 2024 but “did not happen” and is now scheduled to accept returns in January 2026.

Woods said STARS is designed to provide a modern taxpayer portal, built-in analytics, and configurability so tax law changes do not require large developer interventions. “We will pay for working software,” Woods told the committee, explaining that the state withheld payment for LLT until working functionality was delivered under the contract’s payment model. He said the department has already used STARS analytics in a pilot collection campaign and has collected $18,000,000 — roughly double what the department estimated its traditional selection methods would have yielded.

Why it matters: The state’s tax administration affects compliance, county collection workload and revenue timing. Committee members pressed department officials on the program’s timeline, cost and operational risk, and on whether STARS will support third‑party rate lookups for transaction privilege tax (TPT) and other tax types.

Key facts and timeline - Contracting and vendor: Department contracted with GCOM in August 2023; the contractor is now operating as VoyaTech. - Early rollout: Liquor/luxury tax (LLT) was pulled forward from planning; LLT will accept returns in January 2026, the department said. - Sequence: Corporate taxes are planned after LLT; TPT (described in testimony as the most complex tax type) is scheduled as the third tax type to implement. - Budget and costs: The department reported an overall program budget figure discussed in testimony as "a hundred and $4,000,000," the vendor budget described as "roughly $555,000,000," and department program resources of about $37,000,000; the department also identified an approximately $10,000,000 project contingency. The testimony noted a separate independent verification and validation (IV&V) contract with Gartner. The department said vendor out‑year maintenance for the product was quoted at roughly $24,000,000 for the maintenance period discussed in testimony and that internal Department of Revenue staffing costs are being absorbed in current budgets. - Timeline to program completion: The department gave a program completion window with an optimistic date of mid‑2029 and a pessimistic date in early 2030.

Risk, governance and delivery approach Woods and Deputy Director Neeraj (Niraj) Deshpande described the current program-level risk as red, driven largely by the missed LLT milestone. The department said Gartner’s IV&V reports run in arrears but that trend indicators had moved some categories to “red trending neutral” by the end of the most recent reporting period. Woods and the vendor said they had shifted to agile delivery, running two‑week sprints, and that Woods and VoyaTech’s CEO review sprint progress weekly. The department also described leadership and staff changes at the vendor, a newly placed vendor program manager, and the decision to have a technically knowledgeable department employee join the vendor team to close a skills gap.

Operational impacts and staffing Deputy Director Neeraj Deshpande said between about 40 and 50 DOR resources touch the project at any given time, with about seven staff permanently assigned. Deshpande said the department treats the vendor product owners as partners and that many subject matter experts from DOR act as product owners. The department said existing staffing costs for the project are budgeted within current appropriations and that they do not expect a fiscal cliff for DOR staffing once the vendor maintenance period begins.

Questions from lawmakers Committee members asked about the red status, the accuracy of independent risk reporting, whether IV&V representatives were present, the details and duration of maintenance costs, and whether STARS will support third‑party tax rate lookup for TPT and related Internet sales. Deshpande confirmed the TPT/third‑party functionality requirements are accounted for in the TPT implementation plans.

What the department called early wins Woods highlighted analytics applied to collections as an early success: a pilot that used analytic scoring to select older, high‑collectability accounts generated $18,000,000 in receipts, which Woods said was roughly twice the expected return from the department’s prior selection methods.

Outstanding items The department continues to report program-level red risk while saying recent resource and delivery changes have improved velocity. Woods and the department asked the committee for continued oversight and said they would return to update the committee on status and milestones.

Ending: The committee closed the presentation with an invitation for the department to return for a further update; no formal action was taken on STARS during the session reported here.