Sales Tax Voluntary Disclosure Agreements (VDAs): A Guide for E-Commerce Sellers

What is a sales-tax VDA?

A VDA is generally a written agreement through which a taxpayer voluntarily discloses past tax obligations and agrees to register, file specified returns, and pay the tax due under negotiated or program rules. In return, a state may offer benefits such as penalty relief and a limited lookback period. The precise terms are state-specific and should never be assumed.

The Multistate Tax Commission’s voluntary disclosure program coordinates applications for participating states. Its published guidance explains that sales/use tax can be covered and that a taxpayer generally must file and pay tax for the agreed lookback period. Interest usually remains due unless the state expressly waives it.

Why businesses consider a VDA

• To address prior periods before a state initiates contact, when the taxpayer is eligible.
• To seek penalty relief that may otherwise be unavailable.
• To establish a defined filing period rather than leaving historical exposure unresolved.
• To create a structured path toward ongoing registration, collection, and filing.

Eligibility and timing matter

Many VDA programs require that the taxpayer has not already been contacted by the state about the tax type at issue. Prior returns, payments, notices, or other contact may affect eligibility under the applicable program. Do not assume a business qualifies simply because it has not received an audit notice.

If a state has already contacted the business, a VDA may not be available for that tax type, but other resolution options may exist. Carefully review the state’s rules before making a disclosure or sending information that could affect the available path.

How lookback periods and liabilities work

A lookback period defines the prior periods that must generally be reported and paid under the agreement. The length and calculation differ by state and sometimes by the type of tax or nexus facts. A VDA does not mean all past tax disappears: tax due for the covered period and applicable interest generally must be paid, and collected-but-unremitted tax can receive different treatment.

A responsible estimate should separate gross sales, taxable sales, exemptions, marketplace-facilitated transactions, tax already collected, returns, and potential interest. State-specific taxability analysis is important because not every sale is necessarily taxable.

A practical preparation checklist

• Identify each state and tax type with possible historical exposure.
• Determine the likely nexus start date and why nexus arose.
• Gather sales reports by state and channel, including marketplace records.
• Review product taxability, exemptions, refunds, and any tax already collected.
• Check whether the state or its program has already contacted the business.
• Compare available VDA routes and understand the required lookback, payment, filing, and registration obligations.
• After resolution, implement a process to file and pay future returns on time.

Bottom line

VDAs can be useful, but the best approach depends on the state, prior contact, exposure amount, and business records. Review the official program rules before approaching a state. Apex Sales Tax assists e-commerce businesses with exposure analysis, VDA coordination, back-filing, and ongoing compliance.

Sources and further reading

• Multistate Tax Commission, Multistate Voluntary Disclosure Program
• Multistate Tax Commission, VDA FAQ

Need help with US sales-tax compliance?

Apex Sales Tax helps e-commerce sellers assess nexus, register in states, manage returns, and evaluate historical exposure and VDA options.