If you’ve been selling into US states without collecting sales tax — and you’re now realising the exposure goes back years — a Voluntary Disclosure Agreement (VDA) is almost always the cheapest way out. It caps your lookback (typically 3-4 years instead of forever), waives penalties, and lets you approach the state anonymously so you can walk away if the terms are bad. The catch: VDAs must be filed before the state contacts you. Once you receive a nexus questionnaire or an audit letter, you’re out.
What Is a Sales Tax Voluntary Disclosure Agreement (VDA)?
A VDA is a contract between a delinquent taxpayer and a state Department of Revenue. You come forward voluntarily, agree to pay the back tax owed for a limited historical window, and the state agrees to waive penalties (and often reduce interest) and stop looking further back into your history. It is the single most powerful compliance tool in US sales tax — and the reason it exists is simple: states would rather collect three or four years of tax cleanly than chase you for eight years through an audit that costs them money.
Plain-English Definition
Think of a VDA as an amnesty you negotiate one-on-one, on your timing, with the state’s blessing. You (or your representative) approach the state, describe the exposure in general terms without identifying yourself, and the state responds with an offer: “Register with us, file returns for the last X years, pay the tax plus interest, and we’ll waive all penalties and won’t audit anything before that window.” You sign, comply, and move on.
Without a VDA, the alternative is one of three bad options:
1. Do nothing and hope. Statute of limitations doesn’t run on unfiled returns in most states — exposure grows indefinitely.
2. Quietly register forward and ignore the past. States can and do compare registration dates with historical Amazon or Shopify data. This triggers audits.
3. Get audited. Full penalties, full interest, full lookback (often 6-8 years for unregistered sellers), plus professional fees to defend.
What a VDA Actually Waives (and What It Doesn’t)
Here’s the honest breakdown:
| Item | VDA Treatment |
|---|---|
| Failure-to-file penalties | ✅ Almost always waived |
| Failure-to-pay penalties | ✅ Almost always waived |
| Negligence penalties | ✅ Usually waived |
| Fraud penalties | ❌ Never — VDAs require no willful evasion |
| Interest | ⚠️ Sometimes waived, sometimes reduced, sometimes charged in full |
| Tax that was collected from customers but not remitted | ❌ Not waived — this is trust-fund money and states will demand every dollar, often outside the lookback window |
| Lookback beyond the agreed window | ✅ Closed — state cannot assess earlier periods |
The trust-fund tax carve-out is the single most important thing to understand about VDAs, and it’s the section most competitor articles gloss over. We cover it in depth below.
VDA vs. Amnesty vs. Back-Registration vs. Doing Nothing
| Option | Lookback | Penalties | Anonymous Phase | Timing You Control? |
|---|---|---|---|---|
| VDA | Capped (3-4 years typical) | Waived | Yes (in most states) | Yes — you initiate |
| State amnesty program | Varies by program | Waived | No | No — state opens/closes window |
| Quiet back-registration | Full historical exposure | Full penalties on assessment | No | No — invites audit |
| Do nothing | Grows forever | Grows forever + audit | No | No |
| Audit / assessment | Full historical (6-8+ years) | Full — often 25-50% | No | No |
State amnesty programs (like the periodic MTC-sponsored amnesties or the occasional single-state windows) are useful when they’re open, but they’re rare and time-boxed. VDAs are always available and give you control over the process.
Who Should Consider a Sales Tax VDA in 2026?
If you have historical US sales tax exposure and you have NOT been contacted by any state DOR, you are the ideal VDA candidate. The moment you receive a nexus questionnaire, an audit notice, or even an informational letter referencing your Amazon or Shopify activity, VDA eligibility narrows sharply.
The 5 Trigger Scenarios
Scenario 1: You crossed economic nexus thresholds in prior years and never registered.
The most common scenario post-Wayfair. You hit a state’s dollar threshold two or three years ago, didn’t realise it, and are now sitting on multiple years of uncollected tax exposure. See our economic nexus thresholds by state guide for the current 2026 thresholds.
Scenario 2: You had physical nexus (inventory, employees, FBA stock) and didn’t know.
FBA sellers are the textbook case. Amazon decides where your units are stored, and you can end up with stock sitting in a fulfillment center in a state you have never dealt with. California is the clearest illustration. Under R&TC section 6203, a retailer that maintains, occupies or uses a warehouse or storage place in the state — directly or indirectly, permanently or temporarily — is a retailer engaged in business in California. CDTFA states that a seller located outside California that stores inventory in a California fulfillment center is considered to be engaged in business in California (see CDTFA fulfillment center guidance). Physical nexus doesn’t wait for a dollar threshold; it starts the day the first unit lands. Whether another state treats your stock the same way turns on that state’s own rules, so it is worth confirming with the state directly or talking to us about your situation.
Scenario 3: You collected sales tax from customers but never remitted it. URGENT.
This is trust-fund money. States treat this very differently from ordinary non-collection. It’s the fastest track to personal liability for owners/officers and, in serious cases, criminal exposure. If this is you, contact us before you do anything else.
Scenario 4: You received a nexus questionnaire or audit letter.
This usually — but not always — disqualifies you from VDA. Some states are lenient if you respond quickly and honestly; others treat any contact as game-over for anonymous VDA. This is a case-by-case judgment call.
Scenario 5: M&A due diligence uncovered exposure.
Buyers routinely require sellers to clean up historical sales tax via VDAs before closing. The exact position here depends on your own facts, so it is worth confirming with the state directly or talking to us about your situation.
The Non-US Seller Scenario (No EIN, No US Bank)
This one varies by seller and by state, and it is the kind of detail we check for clients as part of the service — get in touch and we will confirm where you stand. The typical pattern:
- UK, EU, Australian, Canadian, or South African e-commerce brand
- Selling via Amazon FBA for 2-4 years
- Never registered anywhere because “Amazon collects the tax”
- Amazon does collect it — but only from the day marketplace facilitator laws took effect in each state, and only on Amazon-facilitated sales, and only if the seller had no independent nexus
- Meanwhile the seller’s own Shopify store was also selling into those states, and FBA inventory was sitting in warehouses in 15+ states creating physical nexus for the pre-MF period
The exposure is often five figures per state, spread across ten to twenty states. VDAs are the only sensible tool. We cover the mechanics of executing a VDA without an EIN or US bank account further down.
When a VDA Is the WRONG Choice
- Rather than give you a figure that may not apply to you, we would check this against the state’s current guidance for your specific setup — ask us and we will tell you exactly where you stand. Professional fees may exceed the penalty saving. Simple back-registration and forward-filing (with a self-audit conducted quietly) may be more cost-effective.
- You’re already registered in that state. VDAs are for unregistered periods only. If you registered late but haven’t filed the pre-registration periods, that’s a different remedy path.
- You’re already under audit. Too late.
- The state has already contacted you specifically. Depends on the letter — see Scenario 4 above.
- You have no historical tax owed (e.g., all your products were exempt food). VDAs are not needed; you’d file a nexus disclosure or simply register forward.
If you’re not sure which category you fall into, book a free consultation and we’ll tell you honestly. We turn down VDA engagements where the math doesn’t work.
How a Sales Tax VDA Actually Works: The 7-Step Process
The mechanics are standardised across most states, though timing and paperwork differ. Here’s the process end-to-end.
Step 1: Nexus Study and Exposure Quantification
Before you approach any state, you need to know exactly where you have nexus, how far back it goes, and what the estimated tax liability is per state. This is the nexus study. Without this, you’re negotiating blind — and worse, you might approach a state where you don’t actually owe anything, or miss a state where you owe a lot.
The nexus study covers:
– Economic nexus dates per state (when you crossed the dollar/transaction threshold)
– Physical nexus dates per state (when FBA inventory first landed)
– Marketplace facilitator coverage per state (which sales were legally Amazon’s problem, not yours)
– Product taxability (was your product even taxable in that state? Honey and most groceries are exempt in most states, for example)
– Estimated tax owed per state, per year
Step 2: Anonymous Submission — The Critical Advantage
This is what software cannot do and where a human representative earns their fee. Most states — and the Multistate Tax Commission (MTC) Multistate VDA Program — allow the initial disclosure to be filed anonymously by a representative. The state knows someone has exposure of roughly $X in tax over roughly Y years; they don’t know who.
The anonymous phase lets you:
– Get the state’s proposed lookback in writing before you’re on the hook
– Walk away with zero exposure if the terms are unacceptable
– Compare offers across multiple states without any one state knowing you’re negotiating with another
Step 3: State Response and Terms Letter
The state (or MTC) responds with a written proposal:
– Proposed lookback period (usually 3-4 years)
– Whether interest will be charged, reduced, or waived
– Deadline for signing the agreement
– Deadline for filing back returns and paying tax after signing
At this point you decide whether to proceed. If the state is being unreasonable — e.g., trying to extend lookback beyond stated policy — you can renegotiate or walk.
Step 4: Identity Disclosure and Signed Agreement
You sign the agreement, which identifies you formally. The state now knows who you are, but the terms are locked. They can’t audit anything before the lookback window unless they find fraud or willful evasion.
Step 5: Preparing and Filing Prior-Period Returns
After executing a VDA, you must file the returns and pay the tax and interest according to the specific state’s agreement and instructions. For a 3-year quarterly-filer state, that’s 12 returns. For a 4-year monthly-filer state, that’s 48. This is why professional preparation matters.
Step 6: Payment of Tax and Interest
Full tax owed plus any interest not waived under the agreement, wired to the state. Foreign sellers without US bank accounts can pay via international wire; every state DOR accepts these, though the mechanics vary. See our guide to opening a US business bank account as a non-resident for context.
Step 7: Ongoing Compliance — Registration and Forward Filing
The VDA closes the past. Now the state expects you to register formally and file going forward, on time, every period. Missing forward-filing after a VDA re-creates the exact liability the VDA solved — and the state will not be sympathetic the second time.
Typical timeline: 4-9 months from initial submission to full closure. Foreign sellers add 4-8 weeks to obtain an EIN if they don’t already have one.
State-by-State VDA Lookback Periods and Program Details
Two decision points here: (1) use the MTC Multistate Voluntary Disclosure Program for a batch approach across many states, or (2) go direct to each state’s DOR VDA program for states with better terms or where MTC doesn’t apply.
The MTC Multistate Voluntary Disclosure Program
The Multistate Tax Commission runs a coordinated VDA program that lets you file a single anonymous application covering multiple participating states simultaneously. When you have exposure in 5–15 states, each state’s VDA generally requires its own application, negotiation, and agreement documents.
The MTC program is generally the right starting point for multi-state cleanup, especially for foreign sellers with FBA exposure across the Amazon warehouse network. Details on participating states, current lookback offers, and mechanics vary and are updated periodically — for a current review of whether MTC or direct-state is right for your specific footprint, contact us.
Direct-State VDA Programs (When to Go Direct)
Go direct instead of MTC when:
– The state isn’t in MTC or offers materially better terms directly
– You have exposure in only one or two states
– The state has state-specific relief (e.g., interest waiver) that MTC doesn’t broker
– You need speed — direct-state programs sometimes move faster than MTC
The big three states worth understanding directly:
California — CDTFA Voluntary Disclosure Program. CDTFA operates both an In-State Voluntary Disclosure Program and an Out-of-State Voluntary Disclosure Program, with a standard 3-year lookback, typical penalty waiver, and reduced interest for cooperative disclosure. Anonymous applications are permitted, and eligibility requires that the taxpayer has not been previously contacted by CDTFA. California is the highest-complexity VDA in the US because of district taxes, FBA-inventory nexus, and drop-shipping rules — professional handling essentially required.
New York — Voluntary Disclosure and Compliance Program (VDC). New York’s Voluntary Disclosure and Compliance program offers penalty waiver and a limited look-back for eligible non-registered taxpayers, but the look-back period is set case-by-case and anonymous submission mechanics depend on current NYDTF practice. If you have uncollected NY sales tax exposure and are considering VDC, contact us for a current review before making any submission. In New York, a marketplace seller generally is not responsible for collecting tax on marketplace-facilitated sales if it receives the marketplace provider’s certificate of collection or the provider has a qualifying publicly available agreement.
Florida — Self-Disclosure Program. FDOR’s Self-Disclosure Program offers a standard 3-year lookback with penalty waiver for previously-unregistered sellers who voluntarily come forward before contact by the department.
Not sure how this applies to your business? We handle US sales tax registration, filing and remittance for ecommerce sellers as a fully managed service, for one fee. Book a free consultation and we will review your own position with you.
Texas Comptroller VDA. Texas offers a well-established VDA program with a defined lookback, penalty waiver, and interest treatment that varies by facts. Texas is aggressive on physical-presence nexus enforcement, and pre-Wayfair FBA exposure in Texas warehouses is a common driver of VDA engagements.
Washington State DOR. Washington’s program is one of the more taxpayer-friendly in the country, with straightforward mechanics and reasonable staff.
State Snapshot Table
The table below summarises typical program parameters for the highest-frequency states. Specifics change — verify with current DOR guidance or contact us for a state-by-state review before submitting.
| State | Typical Lookback | Anonymous Phase | Penalties Waived | Interest Treatment | Program Name |
|---|---|---|---|---|---|
| California | 3 years | Yes | Yes | Reduced (typical) | CDTFA VDA |
| Texas | 4 years | Yes | Yes | Typically charged | Comptroller VDA |
| New York | 3 years | Yes | Yes | Typically charged | VDC Program |
| Florida | 3 years | Yes | Yes | Typically charged | Self-Disclosure |
| Washington | 4 years | Yes | Yes | Varies | Voluntary Disclosure |
| Illinois | 4 years | Yes (via MTC) | Yes | Reduced | Direct + MTC |
| Pennsylvania | 3-5 years | Yes | Yes | Typically charged | Voluntary Disclosure |
| Massachusetts | 3 years | Yes | Yes | Typically charged | MassDOR VDA |
| Colorado | 3 years | Yes | Yes | Varies | Voluntary Disclosure |
| Georgia | 3 years | Yes | Yes | Typically charged | Voluntary Disclosure |
These numbers are directional. Every VDA is negotiated on the facts, and states periodically update their programs. Never rely on a table alone before submitting an application.
The Trust-Fund Tax Trap: Collected but Not Remitted
This section is the most important paragraph in the entire guide. If you charged customers sales tax and did not remit it to the state, that tax is not your money. It is money held in trust for the state, and the rules that apply to it are fundamentally different from ordinary unpaid tax.
Why This Changes Everything
Ordinary uncollected sales tax — the situation where you had nexus, didn’t register, didn’t collect, and now owe the state money out of your own pocket — is a civil matter. Penalties are civil, exposure is corporate (in most cases), and VDAs handle it cleanly.
Collected-but-unremitted sales tax is different in every dimension:
– Personal liability. Owners, officers, and “responsible persons” can be held personally liable for the unremitted amount. Corporate protection doesn’t apply. Under New York Tax Law §1133(a), every person required to collect sales tax is personally liable for the tax imposed, collected, or required to be collected — not merely for tax that was actually collected and not remitted (NYDTF advisory opinion). California R&TC §6829 does not make every owner, officer, or member automatically personally liable for unpaid sales tax; liability attaches only to a responsible person who had control or a duty to file/pay, willfully failed to pay, where the business has terminated, dissolved, or been abandoned, and the CDTFA establishes the statutory conditions in subdivision (c) (CDTFA law guide).
– Criminal exposure. Willful failure to remit collected tax is a criminal offense in most states, with felony treatment above certain thresholds.
– VDA lookback usually doesn’t apply. States will almost always demand every dollar of collected tax, regardless of how far back it goes, even under a VDA.
– Interest usually not waived. States are much less flexible on interest for trust-fund amounts.
How VDAs Handle Collected Tax Differently
A well-constructed VDA for a taxpayer with collected-but-unremitted tax will:
- Separate the collected amount from the uncollected amount in the disclosure
- Pay the collected amount in full (no lookback reduction)
- Negotiate normal lookback and penalty waiver on the uncollected amount
- Get the state’s written commitment that no criminal referral will be made
This is not a DIY exercise. The negotiation on the “no criminal referral” commitment alone is worth having professional representation.
The takeaway: if you have collected sales tax you haven’t remitted, act now. The longer you wait, the higher the chance the state finds you first — at which point the VDA option evaporates and the personal/criminal exposure crystallises.
VDAs for Non-US Sellers: The Special Case
Foreign sellers face three extra hurdles that domestic sellers don’t: no EIN, no US bank account, and no US address for tax notices. Every one of these is solvable, but they add weeks to the timeline and require careful handling.
The EIN and ITIN Hurdle
Every state DOR requires an EIN before it can process back returns and assign a filer account. Foreign entities without an EIN must obtain one via IRS Form SS-4. Foreign entities whose responsible party lacks an ITIN or SSN cannot use the online EIN application and must apply by phone or by submitting Form SS-4 by fax or mail; per IRS guidance, fax applications are generally processed in about 4 business days, mail in roughly 4 weeks, and phone applications can result in immediate issuance (IRS Instructions for Form SS-4). Online EIN application requires an SSN or ITIN for the responsible party, which most foreign founders don’t have.
Our full walk-through is in how to get an EIN as a foreign entity. For VDA purposes, the EIN application is the critical-path item — nothing else can move until it’s issued.
Executing a Power of Attorney Without a US Address
Each state tax authority has its own power-of-attorney requirements; for example, California uses Form CDTFA-392 and New York uses Form POA-1. These forms are designed for US taxpayers, but foreign taxpayers can complete them — the fields for US address can typically be replaced with the foreign business address, and the signature block accepts foreign signatures. State DORs are used to this; the friction is procedural, not substantive.
No US Bank Account? Wire Transfer Works
Every state DOR accepts international wire transfers for tax payments. The mechanics require:
– Bank routing information from the state (each DOR publishes wire instructions on request)
– Reference number tied to your assigned account
– Confirmation of receipt (allow 3-5 business days)
For ongoing forward-filing compliance, though, you’ll want a US ACH-capable business bank account — most state DORs require ACH debit for e-filing, which international banks can’t provide. See our guide on opening a US business bank account as a non-resident.
The Typical Foreign FBA Seller VDA Pattern
- UK-based Amazon FBA seller, £2M annual revenue
- FBA inventory in 12-15 US warehouse states over 3 years
- Never registered in any US state
- Amazon collected MF tax from the effective date of each state’s MF law forward
- Pre-MF FBA exposure: physical nexus in warehouse states, uncollected tax on all Amazon sales during that pre-MF window
- VDA cleanup: 4-6 months, single engagement, done
If this matches your situation, this is exactly what our service is built for.
VDA Cost vs. Audit Exposure: The Break-Even Math
The economics of VDAs are usually straightforward. Here’s the model.
What Penalties Look Like Without a VDA
Under audit, unregistered sellers typically face:
– Failure-to-file penalty: 5-25% of tax due, per state, per period
– Failure-to-pay penalty: 5-25% additional
– Interest: typically 3-12% annually, compounded, from original due date
– Fraud penalty (rare but possible): 50-100% of tax due
– Extended lookback: many states have no statute of limitations on unfiled returns — exposure can go back to the day you first had nexus
For a state like California, penalties are formalised: Under California R&TC §6591, there is a 10% late-payment penalty and a separate 10% failure-to-file penalty, but subdivision (c) caps the combined penalties under that section at 10% of the tax due (exclusive of prepayments), not 20%; §6597 does not impose a 25% fraud penalty (CDTFA law guide). On top of that, statutory interest accrues from the original due date.
For New York, TB-ST-805 provides a 10% penalty for the first month plus 1% for each additional month or part of a month, capped at 30%, for returns filed no more than 60 days late, while separate rules apply to returns more than 60 days late and to timely filed returns whose tax remains unpaid. A $50 minimum applies to the late-filing penalty, and different minimum rules apply once a return is more than 60 days late. Interest is charged in addition to any penalty, accruing from the return due date until the tax is paid, at rates the Department sets quarterly. Fraudulent failure to pay or remit is treated far more harshly again. See the NYDTF sales and use tax penalties bulletin for the full schedule. Across 36 monthly returns, that adds up fast.
Typical VDA Professional Fees
Our fixed-fee VDA service typically runs $2,500-$5,000 per state, all-in, covering:
– Nexus study for that state
– Exposure quantification
– Anonymous submission
– Negotiation of terms
– Preparation of all back returns
– Payment mechanics coordination
– Registration for forward filing
No hourly billing, no surprise line items.
A Real Break-Even Example
Setup: foreign seller, 8 states of FBA exposure, ~$180K total estimated tax.
| Approach | Estimated Cost |
|---|---|
| Do nothing → audited in 2 states | $180K tax + ~30% blended penalties ($54K) + interest (~$25K) + audit defence fees + remaining 6 states still exposed = $260K+ per two states |
| Quiet back-registration | $180K tax + likely audit trigger in 2-3 states + full penalties = $250K+ |
| VDA in all 8 states | $180K tax + minimal interest (some states waive) + 8 × $3,500 service fee ($28K) = ~$210K, penalties waived, closed forever |
The saving from a VDA versus getting audited on this fact pattern is typically $50K-$100K, not counting the operational cost of defending audits in multiple states simultaneously.
VDA math almost always wins when total exposure exceeds ~$20K across the footprint.
Common VDA Mistakes That Blow Up the Deal
Every one of these has happened to sellers who tried to DIY the process. All of them are avoidable.
Contacting the State Directly Before the VDA
The most common mistake: emailing a state’s general tax help desk to “ask a question” about historical filings. Any reference to prior-period non-compliance from a named taxpayer starts an internal record — and can disqualify the anonymous VDA phase in many states.
Fix: never contact a state DOR about historical exposure in your own name. All initial contact goes through a representative, anonymously.
Filing Zero Returns to “Get Registered”
Some sellers try to back-register and file zero returns for prior periods, hoping to sneak in under the radar. States compare registration dates against marketplace and payment-processor data. Filing zeros when actual sales occurred is either fraud or ordinary non-compliance depending on intent — neither ends well.
Fix: register only after the VDA agreement is signed, or as part of the VDA closure.
Missing the Post-VDA Compliance Window
VDAs impose strict deadlines (typically 60-90 days) after signing to file all back returns and pay. Missing the deadline can void the agreement — putting you right back to full penalty and full lookback exposure.
Fix: don’t sign the VDA until you have the data ready to file within the window. Our engagements bake the timeline in from day one.
Ignoring Forward-Filing After VDA Closure
The VDA closes the past. If you don’t register and file going forward, the state now knows exactly who you are, exactly what your sales look like, and exactly where to look. Ongoing non-compliance after a VDA is treated much more harshly than the original disclosure.
Fix: forward-filing is part of every VDA engagement we run. There is no version of this that ends with “and then you handle the ongoing filings yourself.”
Done-For-You VDA Service: How We Handle It
You don’t want to learn multistate sales tax, or spend six months negotiating with state DORs, or figure out how to obtain an EIN from a fax machine in New Zealand. That’s not a good use of a founder’s time.
Our Fixed-Fee Engagement
- One flat fee per state. No hourly billing. No scope creep.
- All-inclusive. Nexus study, exposure quantification, anonymous submission, negotiation, back-return preparation, payment coordination, forward-filing registration.
- Foreign-seller specialised. EIN application, POA execution without a US address, international wire coordination — all handled.
- Single point of contact. You get a US-qualified tax practitioner (CA(SA), tax practitioner) coordinating everything.
What’s Included
- Comprehensive nexus study across all 45 sales-tax states
- Determination of VDA vs back-registration vs no-action per state
- MTC vs direct-state decision framework
- Anonymous submission and terms negotiation
- Back-return preparation and filing
- Payment mechanics (including international wires)
- Forward-registration and ongoing filing setup
- Trust-fund tax handling where applicable
Getting Started
If you suspect you have multistate sales tax exposure — especially if you’re a foreign seller with FBA inventory, or you’ve been operating US-facing e-commerce for more than 18 months without registering anywhere — book a free consultation. We’ll do a preliminary nexus assessment, tell you honestly whether a VDA makes sense, and if not, tell you what does.
Learn more about our full service, or if you want to understand where you stand first, start with our economic nexus thresholds guide and FBA nexus guide.
Frequently Asked Questions
How long does a sales tax voluntary disclosure agreement take?
Typically 4-9 months from initial anonymous submission to full closure, including back-return preparation and payment. Foreign sellers add 4-8 weeks if an EIN needs to be obtained.
Can I submit a VDA anonymously?
Yes, in most states and via the MTC Multistate VDA Program. Your representative submits initially without identifying you; identity is disclosed only after the state’s terms letter is received and you decide to proceed.
Does a VDA waive all penalties and interest?
Penalties: almost always waived. Interest: varies by state — some waive, some reduce, some charge in full. Tax owed on collected-but-unremitted amounts is never waived and interest on that portion is typically charged in full.
What is the typical lookback period for a sales tax VDA?
Three to four years is the norm across most states. Some states have shorter lookbacks; a few extend to five years. The lookback caps how far back the state can assess — periods before the lookback window are closed.
Can I do a VDA if I already collected sales tax from customers?
Yes, but with important caveats. Collected-but-unremitted tax must generally be paid in full regardless of lookback, and creates personal liability and potential criminal exposure. This is a scenario where professional handling is essential — negotiating a no-criminal-referral commitment from the state is worth having representation.
Does the MTC Multistate Voluntary Disclosure Program cover all states?
No. The MTC program covers a majority of US states but not all — several states either don’t participate or offer materially better terms via their direct programs. The right choice depends on your specific state footprint; contact us for a current review.
Can a foreign seller with no EIN file a VDA?
Not directly — every state DOR requires an EIN before processing returns. Foreign entities must first apply for an EIN via IRS Form SS-4 (typically 4-6 weeks by fax). Once the EIN is issued, the VDA proceeds normally. We handle the EIN application as part of foreign-seller VDA engagements.
What happens if I receive a nexus questionnaire — can I still do a VDA?
It depends on the state and the specifics of the letter. Some states allow VDAs after receipt of a general nexus questionnaire; others treat any contact as disqualifying. If you’ve received any correspondence from a state DOR about your business, do not respond before consulting a tax practitioner — contact us urgently.
Is a VDA better than just registering and filing forward?
When historical exposure exists, yes — usually significantly. Quiet back-registration invites audits because states compare registration dates against marketplace data. VDA closes the past cleanly and eliminates that audit risk. If historical exposure is minimal (under ~$5K-$10K per state), simple forward-registration may be more cost-effective.
How much does a sales tax VDA cost?
Our done-for-you VDA service is typically $2,500-$5,000 per state, all-inclusive. Back tax owed to the state is separate and depends on your actual historical sales. Total cost is usually 40-60% lower than the audit alternative.
What is trust-fund sales tax and why does it matter for a VDA?
Trust-fund sales tax is tax you actually collected from customers but did not remit to the state. It’s held in legal trust for the state — meaning owners and officers can be personally liable and, in serious cases, criminally liable. VDAs handle this differently from ordinary unpaid tax: the collected amount is generally paid in full regardless of lookback, and the negotiation focuses on penalty waiver and no-criminal-referral commitments.
Can I do a VDA myself without hiring a professional?
Technically yes, especially for a single-state VDA on straightforward facts. Realistically no, for anything involving multiple states, foreign sellers, trust-fund tax, or complex nexus histories. The anonymous negotiation phase — which is where the value is created — is impossible to execute effectively without knowing each state’s actual practices, unwritten rules, and current staff dispositions. This is why software vendors don’t offer VDA services: their tools can’t do it.
Last verified: 2026-07-01
This article is for informational purposes only and does not constitute tax advice. Consult a licensed tax professional before acting on any of this content.
