Sales Tax Voluntary Disclosure Agreement: How VDAs Work in 2026

A sales tax voluntary disclosure agreement (VDA) is a written deal in which a business that owes back sales or use tax comes forward before the state finds it, pays the tax (and usually interest) for a limited lookback period, and in return gets penalties waived and older periods released. Most states run a program, and the key condition is the same everywhere: the state must not have contacted you about that tax first.

The terms differ by state. Texas limits its review to about four years and usually waives interest as well as penalties, Florida looks back three years, California limits use tax assessments to three years instead of eight, and New York waives penalties while still charging interest. This guide explains how a sales tax voluntary disclosure agreement works, who qualifies, how the Multistate Tax Commission's joint program fits in, and what four large states offer, as of October 2026.

What a Sales Tax Voluntary Disclosure Agreement Covers

A VDA is a contract between a business and a state revenue agency. The business agrees to register, file returns for an agreed set of past periods, pay the tax due for those periods, and stay compliant afterward. The state agrees to stop looking further back than the agreed lookback period and to waive some or all penalties for the periods covered.

Most businesses meet this tool after they discover sales tax nexus they did not know about. A remote seller that crossed a state's economic nexus threshold and kept selling without collecting tax is the classic case. Inventory held in a third-party warehouse can also create nexus unnoticed. If you are still working out where you have an obligation, start with our guide to economic nexus thresholds by state, since a VDA only makes sense in states where you actually owe tax.

The same programs usually cover use tax a business owes on its own purchases, and many cover income or franchise tax too. This page focuses on sales and use tax.

Why the Lookback Period Matters

The lookback period is the main financial benefit. A business that never filed a return in a state often faces no statute of limitations at all. Texas, for example, says its normal statute of limitations is four years, but that tax may be assessed for any period if a return was not filed. In California, the statutory period for use tax that a VDA shortens is eight years.

A VDA replaces that open-ended exposure with a fixed window. Periods before the window are released. Inside the window, you file returns and pay the tax. Interest treatment varies by state, and penalties are usually waived for the covered periods.

One limit applies almost everywhere. If you collected sales tax from customers and kept it, states treat that money differently. Texas says there is no limit on the lookback for taxes collected and not remitted, and Florida charges a 5% penalty in that situation unless you show reasonable cause.

Eligibility: The "Not Previously Contacted" Rule

The single most important eligibility test is that the state has not already reached out to you about the tax. Each program words it slightly differently.

• Texas requires that the business "has not been previously contacted by the Comptroller, either verbally or in writing, concerning a liability or estimated liability" and has not received an audit or examination notice.
• Florida requires that the taxpayer has "not been previously contacted by the Department concerning the liability."
• California's Out-of-State Voluntary Disclosure Program requires that you are located outside California, have not previously registered, have not been contacted by the CDTFA about your California activities, and the failure to file or pay was due to reasonable cause, with no negligence or intent to evade.
• New York is framed differently. Applicants must not be under audit for the tax type and years they disclose, must not have received a bill for those taxes, and must not be under criminal investigation by a New York State agency.

Contact can be broader than a letter. Under the Multistate Tax Commission's rules, "contact" includes filing a tax return, paying tax, or receiving an inquiry from the state about that tax type. That is why registering in a state before you apply can disqualify you. Florida tells applicants directly not to register online if they are applying for voluntary disclosure. If a nexus questionnaire or audit letter has already arrived, the VDA route is usually closed for that state, and our guide on how to handle a sales tax audit covers the next steps.

Businesses that already hold a permit and simply stopped filing are in a different position, because the state knows they exist. For that situation, see our guide to catching up on unfiled sales tax returns, which compares back filing with disclosure.

State Sales Tax Voluntary Disclosure Agreement Programs Compared

The table summarizes what each official program page says as of October 2026. Always confirm the current terms with the state before you rely on them.

Texas

The Texas Comptroller's Voluntary Disclosure Program says "Statutory penalties and interest will be waived, except interest on taxes collected and not remitted," and that the office "will limit its review to reports due four years from the date the business initially contacts us." A representative starts the process in writing with the Business Activity Research Team (BART), and it is not necessary to name the company at first. Once both sides sign, the tax data and payment are due within 60 days, as specified in the agreement. For the wider Texas rules on rates and registration, see our Texas sales and use tax guide.

Florida

The Florida Department of Revenue "looks at three years preceding the postmark date of the voluntary disclosure request." When the tax and interest have been paid, all penalties are waived unless tax was collected and not remitted, in which case a 5% penalty applies unless reasonable cause is shown. You apply by written request that includes a statement that the Department has not contacted you about the liability. If you need a sales tax registration, Florida asks for a paper Form DR-1 with the request instead of an online registration.

California

The CDTFA's Publication 178 describes two programs: an In-State program for California businesses that owe use tax on out-of-state purchases, and an Out-of-State program for remote sellers that should have reported use tax on sales to California consumers. Both limit the time the CDTFA can assess use tax to the prior three years, where the statutory period would otherwise be eight years. Both allow the CDTFA to waive late filing and late payment penalties, and both let applicants describe their circumstances anonymously and get a written opinion on whether the CDTFA will approve the request. Under the Out-of-State program, you register through CDTFA Online Services and submit Form CDTFA-38 within 30 days of registering.

The CDTFA also warns that entering a Secretary of State number during sales tax registration can disqualify you from the separate Franchise Tax Board income tax program.

New York

New York's Voluntary Disclosure and Compliance Program covers all taxes administered by the Tax Department, including sales tax. If the Department approves the application and you arrange to pay the tax and interest, it agrees not to impose penalties and not to prosecute for the disclosed periods. The program page tells applicants not to file returns before they receive an acceptance letter and agreement. Applicants explain why they think they qualify for a limited look-back, which means the window is set case by case in the agreement.

The MTC Multistate Voluntary Disclosure Program

A business with exposure in several states can apply through the Multistate Voluntary Disclosure Program, which is run by the Multistate Tax Commission's National Nexus Program staff. It covers sales and use tax and income or franchise tax, and it serves only states that are members of the National Nexus Program. Not every state participates, so a multistate cleanup often mixes MTC applications with direct state applications such as Texas or California.

The process runs in this order:

1. You or your representative submit one online application listing the states, your activities in each, and a best estimate of tax due per state and year. The program does not process an application when the estimated tax due to a state for the lookback period is under $500.
2. NNP staff prepare a draft VDA, which you approve before it goes to the states.
3. Each state signs the draft or sends a counter-offer.
4. After a state signs, you sign and return the agreement with the back returns, payment and any registration.

The Commission treats your identity as confidential, and until a state signs, that state knows you only by a case number. In exchange for filing and paying tax and interest for the lookback period, the state waives penalties for that period and releases liability for earlier periods. The Commission also publishes lookback charts by state. A separate chart covers the states that adopted economic nexus most recently (only Missouri, from 1 January 2023, on the current chart): for a seller with economic nexus only and no physical presence there, the lookback would begin no earlier than that date.

Worked Example: Two States, Six Years of Exposure

Consider an out-of-state online retailer that has been doing business in Texas and California for six years without registering, and that never charged sales tax to customers in either state. Neither state has contacted it. A nexus review estimates uncollected tax of $25,000 a year in Texas and $18,000 a year in California.

Without a VDA, all six years stay open in both states, plus penalties and interest. Under the Texas VDA, statutory penalties and interest are waived on the $100,000 because the retailer never collected tax from customers. In California, the CDTFA can waive late filing and late payment penalties, and the retailer should budget for interest on the $54,000 because the program page does not say interest is waived. The real Texas window is counted in reports due, so the final figure depends on filing frequency and the date of first contact. The arithmetic is illustrative only.

How to Prepare a Sales Tax Voluntary Disclosure Agreement Application

A sensible order of work is:

1. Confirm nexus and the start date in each state. Map sales by state and year against each state's threshold, and record when physical presence such as inventory began. Software and marketplace sellers have extra wrinkles, covered in our guide to economic nexus for SaaS and marketplace sellers.
2. Estimate the tax by state and period. Separate taxable from exempt sales, apply the right local rates, and remove sales made through marketplace facilitators that already collected tax. Rules shift each year, so check our roundup of sales tax changes for 2026.
3. Choose the route per state. Decide which states go through the MTC program and which need a direct application.
4. Hold off on registering where registration counts as contact, until the state confirms it will accept the disclosure.
5. Build the go-forward process. Texas, for example, requires the business to report and pay correctly going forward from the ending date of the agreement, and New York requires an agreement to pay all future taxes, so set up registration, collection and a filing calendar before the first return is due. A sales tax compliance checklist for small businesses is a useful starting point.

CPA firms handling several clients with multistate exposure usually run this as a repeatable process. Our article on the multi-state sales tax workflow for CPA firms covers the reconciliation side, and firms short on staff can review sales tax outsourcing for CPA firms for the ongoing filings.

Frequently Asked Questions

What is a sales tax voluntary disclosure agreement? It is a written agreement in which a business that owes back sales or use tax comes forward to a state before being contacted. The business registers, files returns and pays tax for a limited lookback period, and the state waives some or all penalties and releases older periods.

How far back does a sales tax VDA go? It depends on the state. Florida looks at three years before the postmark of the request, California limits use tax assessments to three years, and Texas limits its review to reports due four years from the date the business first contacts the Comptroller. Under the MTC program, each participating state sets its own lookback.

Are penalties and interest waived under a VDA? Penalties are usually waived for the covered periods. Interest is usually still due: Florida, New York and the MTC program all expect interest unless a state expressly waives it. Texas is an exception, since it waives interest except on tax that was collected and not remitted.

Can I apply for a VDA anonymously? In many programs, yes. Texas does not require the company to be named at the first contact, California offers an anonymous written opinion, and the MTC keeps your identity confidential until a state signs the agreement.

Can I still use a VDA if the state has already contacted me? Usually not. Texas, Florida and California all require that the state has not previously contacted you about the liability, and the MTC treats filing a return, paying tax or receiving a state inquiry as contact. New York's test focuses on whether you are under audit or have received a bill.

Next Step

Madras Accountancy supports US CPA firms and their business clients with sales tax work, including nexus reviews, exposure estimates for voluntary disclosure, back returns and ongoing multistate filings. To talk through a client's situation, contact our team.