Voluntary Disclosure Agreement
Hiding won’t help. Let’s fix your taxes
Late registration, late remittance, or unpaid tax follow e-commerce businesses far more often than traditional retailers. Our Voluntary Disclosure Agreement (VDA) services can significantly reduce penalties, interest and look-back periods when past sales tax obligations were not met. Let’s settle it on your terms, before a state settles it on theirs.
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When do you need a VDA?
A voluntary disclosure agreement makes sense when you have past sales tax exposure that a state has not yet caught. Common situations:
- You crossed a state’s nexus threshold but never registered. Sales kept growing, the obligation was missed, and the back liability is now stacking up.
- You collected sales tax but did not remit it. This is the highest-risk case, because uncollected-but-collected tax can carry criminal exposure. A VDA is the safest way to resolve it.
- You have exposure across several states at once. Multi-state back liability is exactly what VDAs are built to clean up efficiently.
- You are preparing for a sale, acquisition or funding round. Buyers and investors run tax due diligence; unresolved sales tax exposure can delay or reprice a deal. A VDA clears it before it becomes their finding.
If a state has already contacted you about a specific period, a VDA may no longer be available for it, which is why timing matters.
The basics
Sales tax nexus, in plain terms
You owe US sales tax in a state once you have “nexus” there. Two kinds matter:
- Physical nexus: an office, employees, or inventory in the state (including stock held in a third-party fulfilment warehouse).
- Economic nexus: enough sales into the state to cross its threshold, even with no physical presence. Since the 2018 South Dakota v. Wayfair decision, most states set this at a level such as 100,000 USD in sales or 200 transactions per year, though the exact figures vary by state.
The catch: each state sets its own rules, and remote sellers often cross these thresholds without realising it. That is how historical exposure builds up, and it is exactly what a VDA is designed to resolve.
How the VDA process works
1. Assessment and strategy
We review where you have nexus, quantify the historical exposure, and identify which states to prioritise based on liability size and audit risk.
2. Application
We approach the state, in most cases anonymously through us as your representative, so your identity is protected while terms are negotiated. You stay unnamed until an agreement is in place.
3. Tax negotiation
We negotiate a limited look-back period, penalty waivers and, where a state allows, reduced interest, then handle the back filing and remittance.
Many U.S. states offer VDAs for sales and use tax, and depending on the state and circumstances this can save 10% to 30% of the total tax liability.
Look-back periods, penalties and interest
The core financial benefit of a VDA is limiting how far back a state can assess you:
Limited look-back
VDAs typically cap the assessment at the most recent 3 to 4 years, instead of the unlimited look-back a state can apply once it finds you through an audit.
Penalty relief
Most states waive penalties on the disclosed tax under a VDA, and some reduce them further.
Interest
Back tax and interest are still owed, but interest is generally limited to the look-back period rather than compounding across your full history.
Compared with an audit (unlimited look-back, full penalties, interest across every year), a VDA is almost always the cheaper and calmer path.
The real risk of waiting
States are getting better at finding non-compliant sellers, and they do not wait for you to come forward. They identify exposure through:
- Marketplace and 1099-K data reported by platforms and payment processors.
- Information-sharing agreements between states.
- Targeted audit campaigns in specific industries.
The moment a state contacts you first, the VDA window for that period usually closes, leaving a full audit with unlimited look-back and full penalties. If you have meaningful multi-state exposure, treating a VDA as urgent (not optional) is the single best way to control the outcome.
Multi-state exposure and the MTC program
If you are exposed in many states at once, you do not have to negotiate each one separately from scratch. Many states participate in the Multistate Tax Commission (MTC) Voluntary Disclosure Program, which lets you disclose to multiple states through a single coordinated application. We manage the whole thing, prioritising states by exposure and risk so the cleanup is efficient rather than overwhelming.
Why 1stopVAT for VDA
Cross-border and US sales-tax expertise
We specialise in the exact situation remote and e-commerce sellers land in, and we have negotiated VDAs with tax authorities in the US and beyond.
Anonymous, represented disclosure
We approach states on your behalf so your identity stays protected until terms are agreed.
Certified experts
A team of 40+ specialists, certified members of IVA, AITC and the VAT Forum, serving 800+ clients across cross-border compliance.
One partner for multi-state cleanup
We prioritise and coordinate exposure across states, including through the MTC program, so you are not juggling separate filings.
Once the past is settled, we can also take over ongoing sales tax compliance and filing or act as your sales tax consulting partner.
VDA questions, answered
Most VDAs include confidentiality provisions that protect the business information you disclose. In addition, the disclosure itself is usually made anonymously through your representative until terms are agreed.
In many cases a VDA protects against criminal prosecution for the non-compliance it resolves. This is especially important where sales tax was collected from customers but not remitted, which is the highest-risk scenario.
It depends on the complexity of the exposure and how quickly both sides respond. A single-state VDA can move relatively fast; multi-state cleanups take longer. We manage the timeline and keep it moving.
It is critical to disclose all known issues during the process. If new problems come to light afterwards, they may fall outside the agreement and need to be handled separately, so a thorough upfront assessment matters.
Yes. As a firm specialised in cross-border and multi-state compliance, we regularly run VDAs across multiple jurisdictions in parallel, including through the MTC program where states participate.
This is one of the most common VDA scenarios. Rather than waiting for the state to find you, we can approach it through its VDA program to limit the look-back period and reduce or waive penalties, then bring you into compliance going forward.
Security
Data privacy and compliance
Your data stays safe with us. We use top security to protect your information, so you can focus on what matters.