What steps should be taken once a VDA is completed?

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Once a Voluntary Disclosure Agreement (VDA) is completed, there are several critical steps to ensure your business remains compliant and that you properly close out the process. Below is a step-by-step guide to the VDA process, focusing on what happens after a VDA is approved, often referred to as the vda completion process.

1. Execute the Signed Agreement

Once the VDA terms are agreed upon, you will receive the formal document from the state (or via multistate channels). It’s essential to:

• Sign and return the VDA by the deadline (some states give you within 30 days, as in Washington’s program).
• Confirm the state signs the agreement and returns a fully executed copy to you. For example, under the Multistate Voluntary Disclosure Program (MVDP), the process is coordinated through the Multistate Tax Commission (MTC).

2. Register and File Missing Sales Tax Returns / Spreadsheets

After signing the agreement:

1. Sales Tax Registration – If you were not already registered, most states require you to register immediately (or shortly after) to collect and remit going forward. The VDA often includes this requirement.
2. Back-period Reporting – You’ll need to file the prior sales/use tax returns or submit spreadsheets covering the look-back period specified in the VDA. In many states (or under the MVDP) that look-back is limited, and interest must be paid.
   1. For example, South Carolina accepts a spreadsheet for sales tax liability, including monthly taxable sales by jurisdiction.
   1. Some states allow a self-audit rather than formal returns; Virginia’s program notes that a spreadsheet may suffice for sales/use tax.

3. Pay Tax, Interest, and Any Reduced Penalties

Once you file your back returns or spreadsheets:

• Pay the tax due plus interest, which is typically statutory and not waived.
• Pay any penalty amount agreed in your VDA (often reduced or waived depending on the state). For example, under Washington’s updated program, penalties may be significantly reduced (up to certain percentages).
• After you pay, the state will issue an invoice, which you must pay by the due date to avoid additional interest. Washington’s process, for instance, requires full payment by the invoice date.

4. Confirm Ongoing Compliance

Post-VDA, the commitment to compliance is critical:

• Continue meeting your filing obligations by submitting all required sales tax returns on time.
• Keep up with post-VDA compliance-type obligations (i.e., regular reporting, remitting tax).
• Maintain proper records (sales, exempt sales, resale certificates) in case of future audits.

5. Monitor and Adjust Based on State Rules

Because states differ, you should:

• Review the look-back periods: Under the MVDP, each state sets its own “look-back” period, which determines how many years of past liabilities must be reported.
• Watch for recent changes: Legislation may evolve. For instance, Washington recently revised its VDA program to limit the look-back to four prior years plus the current year and to waive up to 39 percent of certain penalties.
• Check terms in your VDA carefully – some states require you to make your books and records available for verification.

6. Evaluate Other States & Multistate Exposure

If your business operates in more than one state or anticipates future expansion, consider:

• Using the Multistate Voluntary Disclosure Program, which allows you to negotiate VDAs in multiple participating states in one coordinated process.
• Understanding that once your VDA is signed under the MVDP, you will need to register and file in each participating state, but in return you often receive penalty waiver and protection from assessment prior to the look-back period.
• Comparing Voluntary Disclosure vs. Managed Audit: A VDA is proactive and gives you a capped look-back and penalty relief, whereas a managed audit involves the tax authority reviewing your books going forward, sometimes with fewer guarantees.

7. Document the Entire Process Internally

From a business and governance perspective:

• Document your self-audit conclusions, your voluntary disclosure application, and negotiation communications.
• Record the amounts paid, the payments schedule, and the invoice(s) received.
• Maintain a compliance calendar for future tax filings, registration renewals, and records retention.

8. Stay Informed & Reassess Periodically

Even after your VDA:

• Regularly revisit your nexus and sales tax obligations, especially as your business grows or changes.
• Reassess tax risk – new nexus can arise, and tax reporting steps may need adjustment.
• Consult with tax professionals  to ensure that your post-VDA compliance remains solid and that you’re prepared for any future tax exposure.

Why These Steps Matter (and How They Help)

By diligently following the VDA completion process, you protect the benefits afforded by the Voluntary Disclosure Program, namely, limited back-tax liability, penalty relief, and audit protection. Staying current with sales tax registration, reporting, and payment ensures you honor your commitment under the VDA and reduces your risk of losing those negotiated benefits. Moreover, it maintains your standing with tax authorities and positions your company for smoother, more compliant multi-state operations in the future.

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