Mississippi Axes AMS Tax Contract, Sues Company

Mississippi's State Tax Commission has abruptly canceled its contract with Fairfax, Va.-based American Management Systems Inc. for an automated tax revenue system and filed a law suit against the information technology consulting giant. The action comes just days before the agency was set to go live with a major component of the new system on May 3.

In its complaint, the state alleges that AMS failed to fulfill its contractual obligations to the state in developing and installing the State Tax Automated Revenue System (STARS) project, said Bobby Long, chief attorney for the Mississippi State Tax Commission. As a result, the complaint continues, the state suffered actual damages in the amount of $234 million.

However, the state wants more than $1 billion in punitive and other damages -- a figure that reportedly shocked AMS -- because the STARS contract is valued at $11.2 million, and $6 million already has been paid to AMS. In a statement, AMS said the state's action came as a complete surprise, given that both parties were so close to the scheduled date on which the system would go live. The company also said the complaint is without merit, adding that AMS will contest the suit if a resolution cannot be reached.

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