Settle Unpaid Sales Tax With a Voluntary Disclosure Agreement

An agreement with a tax authority in which a business that has an unreported liability comes forward before the authority finds it. In exchange, the authority normally limits how far back it will look, waives or substantially reduces penalties, and closes the earlier periods for good. Most states still charge interest under a VDA. Some, such as Texas, waive it except on tax that was collected but not remitted. Terms vary by jurisdiction.

A voluntary disclosure program is a standing program that a state tax authority runs so businesses can come forward about tax they never reported or paid. A voluntary disclosure agreement (VDA) is the agreement that program produces for your business. In return for coming forward before the state contacts you, you normally get a limited lookback period and penalty relief. Each state names and runs its own: the New York State Department of Taxation and Finance has the Voluntary Disclosure and Compliance Program, the Texas Comptroller of Public Accounts and the Illinois Department of Revenue each have a Voluntary Disclosure Program, and the Florida Department of Revenue has a voluntary disclosure program. Lookbacks differ: Illinois and Texas review four years, Florida three.

Usually not for that tax type in that jurisdiction. Voluntary disclosure means voluntary — once an authority has opened contact, most programs treat the disclosure as no longer voluntary and the concessions come off the table. This is why a nexus questionnaire or an information request is the moment to move, not the moment to wait.

Usually not in that state, and this is the most commonly misunderstood point in the whole area. Most programs require that you are not already registered for that tax there — registering is what makes you known to the authority, so a standard disclosure is generally off the table once you have. That does not mean nothing can be done. Depending on the state, the route becomes amended or back-dated returns with a penalty-abatement request, a negotiated settlement, or a managed audit — and the earlier periods are still open until they are addressed. Crucially, registering in one state has no effect on your eligibility in the others, where the standard route is usually still available. Sequencing matters, which is why the review covers every jurisdiction before anything is filed anywhere.

In most US states an unregistered business has no statute of limitations running in its favor — the authority can reach back indefinitely. A voluntary disclosure typically caps that at a defined lookback period. That cap is the single largest number in the whole exercise, and it is what the negotiation is really about.

Here is an illustration, not a typical case. Say an online retailer has shipped to Texas customers for six years and its Texas sales passed $500,000 over twelve months, the point at which Texas expects a remote seller to register. It never did, and the Comptroller has never contacted it. It asks to start a VDA, and it does not have to give its name at the first contact. Texas limits its review to reports due four years back from the date of first contact, and waives statutory penalties and interest. Had the retailer charged customers Texas tax and kept it, there would be no lookback limit and interest would still be due. Your own position depends on your sales and your state.

In most programs penalties are waived or substantially reduced as a condition of coming forward. Most states still charge interest under a VDA. Some, such as Texas, waive it except on tax that was collected but not remitted. Whether penalty relief is automatic or negotiated depends on the jurisdiction.

No. Exposure is assessed jurisdiction by jurisdiction, and disclosure is a separate decision each time. Some jurisdictions are worth disclosing immediately, some are worth registering prospectively without a disclosure, and some are worth neither. Part of the work is telling you which is which.

It runs in phases — assessment, anonymous approach, agreed terms, back filings, payment, then closure. The negotiation is usually the fastest phase; reconstructing several years of transaction data is usually the slowest.

Enough transaction data to quantify exposure by jurisdiction and period, your registration history, and any correspondence already received. If the data is incomplete we tell you what a reasonable reconstruction looks like before anything is filed.

Yes. Equivalent voluntary disclosure and regularization routes exist across VAT and GST regimes in 70+ countries, under different names and with different concessions. The mechanics are the same: come forward before the authority arrives, and the terms improve.

Registration goes live, returns start filing on schedule, and the closed periods stop being a liability you carry into diligence. Everything from the disclosure — calculations, filings, correspondence, the executed agreement — stays in TaxDo Vault as the evidence chain.

All 50 US states against their own economic nexus thresholds, plus every non-US market you sell into against its VAT or GST registration rules. For each one: whether a threshold was crossed and roughly when, what has accrued since, and a recommendation — disclose, register going forward, or leave it alone. You end with a written position per jurisdiction and a scoped engagement for the ones you choose to close.

No. The review is a standalone piece of work and it stands on its own — plenty of businesses commission it to establish a defensible position for a board, an auditor or a buyer, and act on none of it immediately. There is no compliance subscription attached and no multi-year contract required to have a one-time cleanup done afterwards.

It still needs disclosing, but expect different terms. Tax you charged was money held on the authority’s behalf, and most programs treat that far more strictly than tax that was never collected — typically a longer lookback covering every period in which it was collected, and limited or no penalty relief. Where non-payment was deliberate there can be criminal exposure as well. This is the first thing we establish, because it changes the strategy entirely.

No. The same selling activity that creates a sales tax obligation frequently creates income tax, franchise tax, gross receipts or withholding obligations in the same jurisdiction. Disclosing one and leaving the others open points the authority straight at them, so exposure is reviewed across every tax the activity touches and disclosed together where that produces the better position. Outside the US the equivalent review covers VAT and GST registration obligations.

Often, yes. A coordinated multistate route lets one confidential application cover many states under a uniform procedure, with your identity withheld from each until you sign with that state. It is usually faster and cheaper than approaching each separately. It is not automatically better — some states offer stronger terms bilaterally, and some of your exposure may not qualify. Part of the review is deciding which states belong in which route.

It is the normal starting position, not an obstacle. Exports from platforms you have since replaced, formats that changed part-way through a year, marketplace sales mixed in with direct, gaps where a system was migrated — we take the data as it exists, normalize it and reconcile it into something a disclosure can be built on. “Come back when the data is clean” is where most of these engagements stall, and it is the most common reason a business knows it should disclose and never starts.

Yes, and it is one of the largest single reductions available. Sales to resellers, manufacturers and exempt organizations were never taxable, so those transactions come out of the base before anything is declared. We review the certificates you hold, validate them against the periods being disclosed, and flag where a missing or expired certificate can still be collected from the customer before the filing goes in. A disclosure that ignores certificates over-declares the liability, and no authority will correct that in your favor.

At the rates that applied in each period, not today’s. We hold historical state and local rate data across US jurisdictions going back years, so a four-year disclosure crossing hundreds of state, county, city and district rate changes is computed per transaction rather than estimated. The calculation runs on the same indirect tax engine that prices live transactions across 150+ jurisdictions, so the workings are auditable when an authority asks how a figure was reached.

Nothing runs over email. Historical sales data, registrations and certificates are uploaded into your own TaxDo Vault, encrypted in transit and at rest. Every question, calculation, approval and exchange with the authority is discussed in encrypted messaging attached to the case, visible only to the people you authorize, with every view and download logged. After the disclosure closes it all stays in your account — you keep it, and you can revoke our access at any time without anything moving.

We do it, on the same platform. Registration in every jurisdiction disclosed, real-time tax calculation so each transaction is taxed correctly to the delivery address rather than a ZIP-code approximation, returns filed on time in every jurisdiction you now hold, and every notice that follows read and answered. A disclosure that is not followed by accurate calculation and on-time filing rebuilds the same liability from the day it closes.

In most US states there effectively is not one. The limitation clock normally starts when a return is filed, so an unregistered business that never filed has nothing running in its favor — an authority can assess tax, penalty and interest from your first taxable sale in that state, whether that was five years ago or fifteen. A voluntary disclosure is the mechanism that replaces “every period you ever traded” with a defined lookback.

Broadly, if you have an obligation in a jurisdiction, are not already registered there for that tax, and the authority has not yet contacted you about it, the standard route is normally open. Collecting tax from customers without remitting it, or already being registered, changes the position — and eligibility is assessed jurisdiction by jurisdiction, so being disqualified in one state says nothing about the others. The nexus review establishes where you stand in each.

Because the approach is anonymous, a rejection costs you nothing but time — you have not been identified and nothing has been triggered. From there the options are a negotiated settlement on different terms, an amended-return route with a penalty-abatement request, a managed audit where the state offers one, or waiting for an amnesty window. The other jurisdictions in your review are unaffected and usually proceed as planned.

Yes, and it is a structural difference from an advisory firm. Registration and return filing continue in every US state and in 70+ countries on the same platform, with technical integration into your storefront, marketplace, billing system or ERP so each future transaction is taxed live to the delivery address. An advisory practice is generally limited to its own jurisdiction and has no platform to integrate — you are told what to do, then left to do it.

We do, as a dedicated service on the same platform. Registration generates correspondence — filing frequency changes, information requests, assessments, penalty notices — each on its own statutory clock. Every one is captured, classified, read by a specialist, explained in plain terms and answered before its deadline, with the whole exchange retained in your Vault. An advisory practice has no notice service and no platform to run one: letters arrive at your office and you forward them, hoping somebody reads them in time.

With a managed certificate platform rather than a folder. Certificates are requested from customers automatically, validated against the rules of the state the sale is taxed in, stored against the transactions they cover, and renewed before they expire — with exempt sales excluded from tax at the point of sale rather than corrected later. Expired and invalid certificates are the most common finding in a sales tax audit, because a folder does not tell anyone that a certificate lapsed eighteen months ago. An advisory firm has no platform to run this.