Voluntary Disclosure Agreements
Does Your Business Need to Collect & Remit Sales Tax?
If your business engages in e-commerce in one or more states, you may have established an economic nexus that requires you to register with the state to collect and remit sales and use tax. Your business, however, might have conducted transactions in a state for a long time already. In this case, you may wish to file a Sales Tax Voluntary Disclosure Agreement to properly report taxable income.
If you aren’t sure how to do this, don’t worry. Sales Tax Helper assists business owners of all kinds with a variety of legal matters pertaining to sales tax. We can help you prepare and submit a Voluntary Disclosure Agreement to ensure your company complies with state laws governing sales and use tax, which can help you avoid fees and even criminal charges for failing to report taxable income.
If you’re ready to get started, contact Sales Tax Helper for assistance with your Voluntary Disclosure Agreement.
What Is an Economic Nexus?
An economic nexus refers to an out-of-state company’s economic connection to another state and the point at which its online sales volume requires it to collect and file sales and use tax.
As a result of a 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, states could establish a certain threshold in revenue or transactions a business can make before it must collect and remit sales and use tax. This is the standard historically (and previously only) used to assess and collect corporate income tax.
Previously, retailers were only required to collect and remit sales and use tax when they had a physical presence (brick-and-mortar stores, logistical centers, storage facilities, etc.) in the state where online transactions also took place.
Ensure Compliance with the IRS
Each state may have its own rules, but a Voluntary Disclosure Agreement can be an effective way to ensure compliance with the IRS.
Importantly, the information you provide for your Voluntary Disclosure Agreement can’t be used against you. Many business owners may have avoided the sales tax voluntary disclosure program for fear of repercussions for disclosing a failure to report taxes in the past. By law, however, you receive a penalty waiver as long as you comply with the terms of your Voluntary Disclosure Agreement.
How Sales Tax Helper Can Assist You
Sales Tax Helper can assist business owners by helping them establish Voluntary Disclosure Agreements, backdating their registration, or applying for tax amnesty in states where they had nexus.
Signing a Voluntary Disclosure Agreement
Should you opt for a Voluntary Disclosure Agreement, we can help you work with states to pay back previous sales tax obligations. Due to a limited lookback period (about 3-4 years), you may only be liable for a few years of sales back tax. You might find this highly beneficial if you’ve had a nexus in a state for many years.
A Voluntary Disclosure Agreement also waives penalties that states could otherwise levy against your company for failing to collect and remit sales tax. Again, this can benefit your company a great deal if it has operated with a nexus in a state for many years.
Upon completion of the Voluntary Disclosure Agreement Process, we can help your company ensure compliance with each state’s sales tax laws going forward.
An Alternative: Backdating Your Registration
An alternative option to signing a Voluntary Disclosure Agreement is backdating your registration with a given state. This essentially means you’re registering for a sales tax permit at the time your company reached nexus.
Although backdating registration can be a cheaper alternative and be up to three times quicker, it doesn’t protect a company from penalties as a Voluntary Disclosure Agreement can. In other words, your company could be on the hook for its sales back taxes and any penalties the state assesses against it.
Before proceeding with this option, consult with our team at Sales Tax Helper. We can help you understand your situation better and the options that might work best for you.
Tax Amnesty May Be Available
Some states offer tax amnesty programs to unregistered taxpayers. These limited programs allow such taxpayers to voluntarily register without incurring penalties for failing to collect and remit previously due sales taxes.
This alternative isn’t as inclusive as a Voluntary Disclosure Agreement, so your business could become liable for back taxes other than sales and use taxes. Also, tax amnesty programs can compel companies to waive possible claims for tax refunds or their right to protest an audit assessment.
Get Help with Sales Tax Matters If You’re Unregistered
Sales Tax Helper can offer the support and services your company needs if you’re considering a Voluntary Disclosure Agreement. When you work with us, we can advise you of your options and everything you need to know to make the right decisions for your business.
For more information about our services, contact Sales Tax Helper online now.