Sales tax voluntary disclosure agreements (VDAs): how they work

Under the Multistate Tax Commission's description of the Multistate Voluntary Disclosure Program, the taxpayer must file returns, pay the tax due and register with the state. In exchange, the state waives penalties for the lookback period and waives tax for periods before it. Interest is still due for the lookback period unless the state expressly waives it.

That trade matters most for businesses that never charged customers sales tax: without a VDA, a state can generally assess every open period since nexus began, with penalties.

The lookback is the set of prior complete filing periods you must cover, plus the current period, which must be filed and paid on time. Each state sets its own; the MTC publishes charts of general lookback periods and of sales/use tax lookbacks for economic-nexus-only sellers. Some states' programs are more generous to sellers whose only connection is economic nexus.

The MTC's National Nexus Program coordinates disclosures to multiple member states using one uniform procedure, which is helpful if you have exposure in several states. It serves only member states, and staff won't process an application when the estimated tax for a state's lookback is under $500 — those you pay directly. States outside the program, and many inside it, also run their own VDA programs through the state tax agency; check the agency's page linked from our state sales tax guides.

Most programs exclude businesses already contacted by the state about that tax — through an audit notice, nexus questionnaire or billing — and businesses that collected tax from customers but didn't send it in. That second situation is treated more seriously; see collected sales tax not remitted. If you're already under audit, the route is usually the audit and appeal process instead.

Gather sales by state and period, identify which sales were taxable versus exempt (collect resale or exemption certificates now), estimate tax for each state's lookback, and decide whether to apply anonymously through a representative where the state allows it. Then take the free business tax relief assessment.