Jacob Roper, spokesman for Controller John Chiang, said the contract with SAP Public Services was ended Friday.
He says the state will return to the old system immediately for the 1,300 employees who were testing the new one because the error rate "is incredible."
The state is trying to get reimbursed for the $50 million it paid has SAP.
SAP is the second contractor removed from the project, which was approved by lawmakers in 2005. Taxpayers have spent $254 million on it so far.
SAP spokesman Andy Kendzie tells the Los Angeles Times (http://lat.ms/WzbEkN ) that the company satisfied all its contractual obligations.