What is a sales tax voluntary Disclosure Agreement (VDA)?
A sales tax voluntary disclosure agreement (VDA) is a program offered by many state governments that allow businesses to come forward and disclose unpaid sales taxes to the state. The agreement is voluntary, meaning that the company must initiate the process and agree to the terms of the VDA to participate. In exchange for the disclosure, the state will typically offer reduced penalties and interest on unpaid taxes and may even provide amnesty from criminal prosecution.
When should a company apply for a VDA?
A business should consider applying for a sales tax voluntary disclosure agreement (VDA) if it has yet to begin collecting and remitting sales taxes to the state as required by law. This could be because the business did not realize it was required to collect the taxes or knowingly did not collect and remit the taxes. Applying for a VDA allows the business to come forward voluntarily and disclose unpaid taxes, potentially avoiding penalties, interest, and even criminal prosecution.
A business should apply for a VDA as soon as possible, as the longer it waits, the greater the potential penalties and interest may be. Additionally, waiting too long may jeopardize the chances of qualifying for the VDA program, as the state may have already initiated an investigation into the business. It is also worth noting that not all states have VDA program, and some have different rules, so it is recommended to consult with a tax professional to understand the specifics of the state you are operating in, and if it is the right move for your business.
How long does it take to process a VDA?
The length of time it takes to process a sales tax voluntary disclosure agreement (VDA) can vary depending on the state where the business is located and the case’s specific circumstances. Some states may have a set process for handling VDAs that can be completed relatively quickly, while others may take longer to review and approve the agreement.
In general, it can take several weeks to several months for a VDA to be processed. The process often includes the business submitting the necessary paperwork and documentation, the state reviewing the information and determining if the business qualifies for the VDA program, and then negotiating the terms of the agreement. Once the agreement is reached, the business will need to pay unpaid taxes, penalties, and interest.
It’s important to note that the process of VDA is not always straightforward and can be complex. Some states have specific rules and conditions that need to be met to qualify for a VDA. Consult with a tax professional to ensure the process goes smoothly and understand your case’s specific timing.
PM Business Advisors has assisted dozens of clients with processing Voluntary Disclosure Agreements and has saved clients hundreds of thousands of dollars in penalties and interest through timely and accurate Voluntary Disclosure Agreements. Please get in touch with us if you have any concerns regarding unpaid taxes and are considering filing for a VDA.