If you missed the amnesty program that was running from February 1, 2021, through to May 1, 2021, there's still a chance to get your Nevada sales tax in good order under the Nevada state's Treasurer's Office Voluntary Disclosure Program. Following the passing of the Wayfair ruling, many business owners were caught unaware of their sales tax collecting duties. This unearthed multiple cases of back taxes not previously collected or remitted. In response, many states, including Nevada, have rolled out the VDA to ensure taxpayers voluntarily fulfill their sales tax obligations. Thus, minimizing non-compliance consequences.
What Is a Voluntary Disclosure Program?
A voluntary disclosure is a contract between your company and the state in which you agree to pay to show compliance with your prior Nevada state sales tax obligations in exchange for penalty abatement. This also applies to other taxes, such as the Modified Business Tax and Commerce Tax. In Nevada, apply for the program for a different type of tax even if registered under another.
If you have an accumulation of unpaid taxes and interests, the program helps you avoid the painstaking audit process and large penalties. Simply, the state wants you to voluntarily come forward with disclosing and paying what you owe in back taxes. In exchange, they award you with waived penalties and interests and minimize the period under assessment.
Pros and Cons of Voluntary Disclosure Programs
- Limited look-back period: Under the VDA, the state lacks the authority to collect any tax liabilities you may have accumulated before the look-back period. Nevada's look-back period is 8 years, meaning any unremitted sales taxes beyond the 8 years will be pardoned. Although, in most states, the standard is three to four years.
- Opportunity to streamline the sales tax backlog: With the state willing to limit the look-back period and reduce penalties, you're in a better position to correct any significant sales tax errors committed. Moving forward after corrective measures, your business will run in tandem with the state's sales tax requirements and deadlines.
- They offer penalty abatement: States also offer concessions in the form of minimizing or forgiving any penalties or interests accumulated on the uncollected sales taxes.
- Have eligibility requirements: You have to qualify first for the program before participating. Further, states have varying VDA agreements and rules, which can be strenuous for a business running in multiple states. In general, an individual operating under multiple state agreements can apply for VDA provided there was no earlier contact from the state where they're applying.
- Require complete disclosure: Failure to provide all the relevant information on the business will breach the contract. This is the number one step to qualifying for Nevada VDA or risk making the agreement null and void.
- Exposure to potential audit: Keep in mind not completing the in-depth VDA process may be an invitation for a state audit. Before agreeing to a VDA contract, fully familiarize yourself with the state's VDA requirements and procedures. Then, have the necessary records of information reviewed.
How to Qualify for the Nevada Voluntary Disclosure Program
When a business or individual applies and is accepted for the NV voluntary disclosure program, they have 90 days to file all prior tax returns and pay the required taxes. If an individual maintains the 90-day timeline, they should expect the entire process to last up to 6 months. To qualify, you must meet the following requirements:
- File the voluntary disclosure before an audit is initiated
- File the voluntary disclosure before the Department initiates an investigation on the business
- The business can still qualify if they are registered for one type of tax and need to disclose another
- Provide the information for the disclosure within 90 days of application acceptance
- Truthfully disclose the delinquent taxes
In addition, it's necessary to pay attention to the following VDA guidelines before applying:
- The Nevada Revised Statute 360.355 permits a look-back period of 8 years, which is the statute of limitations for sales tax assessment from the last day of the month following the tax period. It can also set the look-back period for three years, as with most states. So, the state will hold you liable for any sales back taxes owed within the 3-8 years of operation, forgiving any prior periods.
- The Nevada state authorizes the VDA program under the Nevada Administrative Codes (NAC) 360.440, 360.444, 360.446, and 360.448 over failure to file tax returns. The Nevada Tax Commission gives the final approval for the waiver of penalties and interests. The two key events that can trigger an assessment of penalties and interests on the entire tax liability amount include a) lack of good faith in compliance with the NAC 360.444 and b) the tax liability being deemed as not voluntarily disclosed as per the NAC 360.444.
Do You Need Help to Apply for Nevada Sales Tax VDA?
If you want to protect your businesses from costly tax consequences, then the VDA way is the right solution. At Sales Tax Helper, we will promptly take action to ensure you don't miss out on the grace period and waiver of penalties and interest provided by the Nevada Voluntary disclosure program. You don't have to worry about overlooking all the required steps for eligibility so you can get a favorable assessment. Give us a call or provide your details here.