What a voluntary disclosure agreement does
- Limits the lookback, typically to about three or four years instead of every year you had nexus.
- Waives most penalties, so you generally pay the tax plus interest.
- Brings you into compliance going forward with registration and regular filing.
The catch: timing
Voluntary disclosure is generally only available before the state contacts you about the tax. Once you receive a nexus questionnaire or audit notice, the benefits are usually gone.
How the process works
- Review your sales by state against each state's nexus rules to measure exposure.
- Approach the state, often anonymously through a representative, to agree on terms.
- File the back returns and pay the tax and interest for the agreed period.
- Register and start collecting going forward.
Businesses with exposure in several states can use the Multistate Tax Commission's voluntary disclosure program to approach many participating states through one process.
Can you pass the cost to customers?
Usually not for past sales. That's why addressing exposure early, and registering as soon as you cross a threshold, saves money.
Frequently asked questions
What is a sales tax voluntary disclosure agreement?
An agreement with a state that lets a business pay past-due sales tax for a limited lookback period, generally with penalties waived, in exchange for coming forward voluntarily and registering.
How far back does a VDA go?
Typically about three or four years, depending on the state, instead of every year the business had nexus.
Can I stay anonymous?
Often yes, at the start. A representative can negotiate terms with the state before your identity is disclosed.
Is it too late if the state already contacted me?
Usually the voluntary disclosure benefits are no longer available, but representation can still help manage the audit and the assessment.