A Pennsylvania voluntary disclosure agreement (VDA) is a way for an eligible business or individual to come forward to the Pennsylvania Department of Revenue about certain unpaid state taxes. If the Department accepts the taxpayer and the taxpayer completes the agreement’s filing and payment requirements, the program can limit the periods covered and waive penalties for most Department-administered taxes. Tax and interest remain payable.
For ecommerce and cross-border sellers, the issue may involve sales and use tax, inventory or other Pennsylvania business activity, or more than one tax type. Pennsylvania’s sales tax rules also have practical differences: most clothing is exempt, and local sales tax applies in Philadelphia and Allegheny County rather than statewide. Eligibility and the applicable lookback are determined for each tax type, so confirm your facts before contacting the Department or registering through myPATH.
What is Pennsylvania’s Voluntary Disclosure Program?
The Pennsylvania Department of Revenue’s Voluntary Disclosure Program gives eligible taxpayers who have recently become aware of an outstanding Pennsylvania tax obligation a way to disclose it and resolve it. The taxpayer agrees to provide the required information, file the required returns, and pay the tax and interest due. In return, the Department may limit the periods that must be reported and waive penalties when the agreement’s requirements are completed.
This is a state tax program administered by the Department, not a general amnesty and not a way to erase the underlying tax. The Department determines eligibility tax by tax. A business with a question about one tax type should not assume that its status for another tax type automatically decides the outcome.
Who is eligible to apply?
The program is intended for taxpayers who have recently become aware of an unpaid Pennsylvania tax obligation and have not already been brought into contact with the Department about that liability. The Department’s current eligibility information says a taxpayer generally will not qualify for a tax type if it is currently registered or was previously registered for that tax, the Department has contacted or investigated the taxpayer or tried to collect the tax, the taxpayer owes no tax for the applicable lookback, or the taxpayer has participated in the program before.
Eligibility is assessed separately for each tax. Being registered for, or having a compliance issue with, one tax does not necessarily prevent an application for a different tax. There are also specific restrictions for corporation tax liabilities of corporations registered with the Department of State or the Department of Revenue. Because the details of a seller’s registration, prior filings, contacts, and business activity matter, ask the Department to assess the particular tax before taking steps that could affect eligibility.
Which Pennsylvania taxes can you disclose?
The Department’s program covers many taxes it administers. Relevant examples for businesses include sales and use tax, employer withholding, personal income tax, and corporate net income tax. The Department’s published program information excludes certain taxes, including inheritance tax, realty transfer tax, and cigarette tax. The exact tax types accepted should be confirmed with the Voluntary Disclosure Office because eligibility is tax-specific.
For an online seller, sales and use tax is often the first issue to examine. Pennsylvania requires sellers in specified circumstances, including businesses maintaining inventory in the state and certain direct sellers, to register for a Sales, Use and Hotel Occupancy Tax License through myPATH. Marketplace sales also need review: the Department identifies circumstances where a marketplace facilitator does not collect or remit tax. A seller should distinguish its own collection and filing obligations from tax collected by a marketplace.
Pennsylvania sales tax details sellers should check
Pennsylvania exempts most clothing, but “most” does not mean every apparel-related item is exempt. The Department lists other major exemptions as well, while items such as certain accessories or formalwear may be taxable. Product classification matters, so review the actual products sold rather than treating an entire store category as taxable or exempt.
Pennsylvania is not a home-rule state for local sales tax administration. The Department identifies local sales taxes in Philadelphia and Allegheny County; local tax is not imposed statewide. A seller’s transaction review should therefore consider the destination and the applicable state and local treatment. The Department’s current local-tax rules and rates can change, so check its current sales tax pages when calculating liabilities rather than relying on an old rate table.
What is Pennsylvania’s VDA lookback period?
The Department’s current program information describes penalty relief for up to three years plus the current year when the taxpayer completes the required returns and payments. The Department’s tax update also describes a general VDA requirement to file for the current period and a prior three-year lookback. The precise periods depend on the tax type and the agreement, so treat this as a general description rather than a substitute for the terms offered in your case.
Do not assume that every tax follows the same period or that the VDA covers every year in which the business operated. The Department determines the applicable periods as part of the process. Ask for the proposed periods in writing and compare them with your sales, inventory, payroll, and other records before signing. If the Department’s current guidance or your circumstances leave the period unclear, confirm it directly with the Voluntary Disclosure Office.
Can you apply anonymously?
Yes. The Department allows a taxpayer to provide initial information to the Voluntary Disclosure Office without disclosing its identity. The Department says identity is required when the taxpayer receives a Voluntary Disclosure Agreement. An anonymous inquiry can help establish whether the facts may fit the program before the business identifies itself.
Anonymity does not mean the taxpayer can omit material facts or remain unidentified throughout the process. The initial submission should accurately describe the tax types, when the obligation began, Pennsylvania activities and products or services, why returns or payments were missed, whether the Department has contacted the taxpayer, and an estimate of tax due if known. Follow the Department’s current instructions for opening a case and submitting information.
Can a VDA reduce penalties or interest?
A VDA can provide penalty relief. The Department states that penalties for most taxes it administers will be waived when the taxpayer completes the agreement’s requirements. The relief is conditional: the taxpayer must follow the agreement, file the required returns, and pay the tax and interest due. The Department’s current program page describes penalty waiver for most taxes, so confirm whether the specific tax and circumstances qualify.
Interest is different. A VDA does not generally eliminate interest: the taxpayer must pay interest on the unpaid tax as required by the agreement. The practical benefit is therefore a possible reduction in penalties and a limited reporting period, not forgiveness of the tax or a promise that interest will be waived. The Department’s written agreement controls the obligations in the individual case.
How to apply for a Pennsylvania VDA
Start by gathering the facts for each potentially affected tax: when the activity began, what the business did in Pennsylvania, what it sold or provided, whether it held inventory in the state, what was filed or paid, and whether the Department has contacted the business. Reconcile available transaction and accounting records so you can describe the issue and estimate the liability without guessing. Do not register or file delinquent returns before checking whether those steps could affect eligibility.
Submit the initial application using the Department’s Voluntary Disclosure Program page. The Department says its office will contact applicants after submission with case-opening instructions and, where applicable, a Business Activities Questionnaire (DEO-50). The taxpayer must also provide a letter of intent with the relevant tax types, start of the obligation, detailed Pennsylvania activities, explanation for prior noncompliance, confirmation about prior Department contact, and an estimated amount due if known. The initial information may be submitted anonymously.
If the Department issues an agreement, review its tax types, covered periods, filing and payment requirements, and other terms carefully. The Department says the agreement cannot be altered by the taxpayer; changing it can render it void. The taxpayer discloses its identity when the agreement is received, returns the signed agreement as instructed, and waits for the Department to confirm eligibility and execute it. Do not treat an application or unsigned draft as approval.
What happens after Pennsylvania approves your VDA?
After the signed agreement is returned, the Department confirms eligibility, executes the agreement, and provides instructions for filing and payment. Once enrolled, the Voluntary Disclosure Office handles registration and processing of returns and payments. This is distinct from ordinary ongoing compliance: after resolving the disclosed periods, the business must maintain the registrations, collection, filing, and payment obligations that apply to its continuing Pennsylvania activity.
For sales tax, the Department uses myPATH for online business tax registration and ongoing account activity. Follow the VDA office’s instructions for the disclosure filings and payments rather than assuming that the ordinary registration workflow alone completes the VDA. Keep copies of the executed agreement, submitted returns, payment confirmations, and supporting records. If the business continues to sell into Pennsylvania, review product taxability and local destination treatment as part of its regular compliance process.
Get help managing your Pennsylvania VDA
A VDA involves more than preparing a late return. A seller may need to determine which legal entity and tax types are involved, reconstruct historical sales and inventory activity, classify products, separate marketplace-collected tax from the seller’s own obligations, and prepare a defensible estimate. Errors in the initial description or a missed eligibility issue can complicate the process.
Sales Tax Compliance USA is a done-for-you service staffed by people, not filing software. We can help ecommerce and cross-border sellers organize their Pennsylvania activity, assess the sales tax questions, prepare information for the disclosure process, and manage the compliance work that follows. We cannot guarantee acceptance or a particular outcome. The Department makes the eligibility decision and the exact position depends on your circumstances; confirm it with the Pennsylvania Department of Revenue, or talk to us and we will check it for you.
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.
Pennsylvania sales tax distinctions that can affect an ecommerce seller’s transaction review
| Transaction or issue | Pennsylvania treatment to check |
|---|---|
| Ordinary clothing | Most clothing is exempt; verify whether the specific item falls within an exemption or a taxable category. |
| Accessories and formalwear | Do not assume these are exempt with ordinary apparel; the item’s classification can change the result. |
| Taxable sale delivered in Philadelphia | Check the state sales tax and the Philadelphia local sales tax treatment for the destination. |
| Taxable sale delivered in Allegheny County | Check the state sales tax and the Allegheny County local sales tax treatment for the destination. |
| Taxable sale delivered elsewhere in Pennsylvania | Pennsylvania does not impose local sales tax statewide; check the state tax and any applicable product or transaction rules. |
| Marketplace transaction | Determine whether the marketplace facilitator collected and remitted tax; the seller’s obligations depend on the facts and applicable rules. |
Frequently asked questions
What is Pennsylvania’s Voluntary Disclosure Program?
It is a Pennsylvania Department of Revenue program through which eligible taxpayers can disclose certain unpaid state tax obligations and resolve them under an agreement. The taxpayer must complete the required filings and payments; the program may limit the periods covered and waive penalties when its terms are met, but tax and interest remain due.
Who is eligible for a Pennsylvania voluntary disclosure agreement?
The program is generally for taxpayers who recently became aware of an unpaid Pennsylvania tax obligation and have not already been contacted, investigated, or pursued by the Department for that liability. Current or prior registration for the tax, prior participation, and whether tax is owed during the lookback can affect eligibility. The Department evaluates eligibility separately by tax type, so confirm your specific facts before applying.
What are the benefits of a Pennsylvania VDA?
A VDA may limit the periods for which returns and payments are required and waive penalties for most Department-administered taxes after the taxpayer completes the agreement. It also provides a defined process for resolving the disclosed liability. It does not erase the underlying tax, and interest generally remains payable.
What is Pennsylvania’s VDA lookback period?
The Department’s current program information describes penalty relief for up to three years plus the current year, and its tax update describes a general prior-three-year lookback plus the current period. The applicable periods depend on the tax type and the agreement, so obtain and review the Department’s proposed periods for your case rather than assuming a fixed period applies to every liability.
Can a taxpayer apply anonymously?
Yes. The Department permits the initial information to be submitted to the Voluntary Disclosure Office without identifying the taxpayer. The taxpayer must disclose its identity when it receives the VDA, and the initial submission still needs an accurate description of the activities, tax types, and potential liability.
What taxes can be disclosed through the program?
The program covers many taxes administered by the Department, including sales and use tax, employer withholding, personal income tax, and corporate net income tax. The Department identifies inheritance tax, realty transfer tax, and cigarette tax among the exclusions. Confirm the treatment of the specific tax with the Voluntary Disclosure Office.
How do you apply for a Pennsylvania voluntary disclosure agreement?
Submit the initial application through the Pennsylvania Department of Revenue’s Voluntary Disclosure Program page and follow the office’s case-opening instructions. Be prepared to describe the tax types, start of the activity, Pennsylvania business activities, reason for prior noncompliance, prior Department contact, and estimated tax due if known; the office may request a Business Activities Questionnaire. Review any agreement carefully and follow its instructions for identity disclosure, signature, returns, and payment.
Does Pennsylvania waive penalties or interest under a VDA?
The Department says penalties for most taxes it administers will be waived when the taxpayer completes the VDA requirements. Interest is not generally waived and remains payable along with the tax. The agreement and the Department’s decision for the specific tax control.
How we handle this for you
The mechanics in Pennsylvania are manageable on their own; the cost is the time it takes every single filing period, in every state you are registered in. We are a managed service: our team registers you with the Pennsylvania Department of Revenue, prepares and files your returns, and keeps you compliant period after period. You get one point of contact and one invoice — you do not get another dashboard to learn.
See our sales tax compliance services, check where you have obligations with the nexus calculator, or talk to us about Pennsylvania.
Official sources
- https://www.pa.gov/services/revenue/apply-for-the-voluntary-disclosure-program
- https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/sales-use-and-hotel-occupancy-tax
- https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/sales-use-and-hotel-occupancy-tax/local-sales-tax
- https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/tax-obligations-for-online-retailers
- https://hub.business.pa.gov/Home/HelpCenterDetail/ClothingStoresandBoutiques
Reviewed by Paul le Roux, CA(SA). Sales Tax Compliance USA handles US sales tax registration, filing and remittance for cross-border and domestic ecommerce sellers as a fully managed service.
This page is general information for educational purposes and does not constitute legal or tax advice. Sales tax rules change and depend on your specific facts. Consult a qualified tax professional about your own position.