Navigating Sales Tax Registration, Backfiling, and VDAs
Sales taxes can be a minefield for businesses, especially when it comes to registration, backfiling, and Voluntary Disclosure Agreements (VDAs). This blog breaks down key considerations, helping you avoid costly mistakes and potential legal trouble.
Taxiom
5/13/20252 min read


Ever felt like you're playing catch-up with state tax rules? You’re not alone, and more importantly, you’re not doomed.
The truth is, a few proactive moves around sales tax compliance can mean the difference between peace of mind and a disaster. Here’s a quick guide to three essential tools every business needs to understand: Registrations, Backfilings, and Voluntary Disclosure Agreements (VDAs).
🟣 1. Registration: Raise Your Hand..... At the Right Time
Sales tax registration isn’t just a formality. It’s your way of saying: “Hey state, we’re here and playing by the rules.”
🕒 When should you register?
When you establish nexus, which might happen if you:
Have physical presence – for example, locations, contractors, or employees
Cross economic thresholds (like $100K in sales OR 100 transactions)
Sell through marketplaces, affiliates, or have click-through sales
⚠️ Heads up:
If you register before required to? You’ll have to start assessing and remitting as soon as you register, so be ready!
If register too late? Penalties and interest can snowball fast.
🟡 2. Backfiling: Clean Up What’s Behind You
Did you miss filings before registration or discover past mistakes? Backfiling (or also called amended returns) is how you fix that, but don’t make it a red flag by not being careful.
🔍 You might need to backfile if:
You recently registered and realized you had prior obligations
You’ve found errors in past filings such as under reporting sales or tax collected
💥 Be warned:
Filing late without a VDA? Expect full penalties.
Large backfilings? Make sure everything is spotless.
Accuracy is non-negotiable—review everything twice.
🔵 3. VDAs: Voluntary Now, or Mandatory (and Costly) Later
A Voluntary Disclosure Agreement (VDA) lets you come clean on past tax issues before the state catches you. Think of it as a peace offering with financial perks.
💸 Why it’s smart:
Caps your liability to a few years (usually 3–4)
Reduces or eliminates penalties
Helps you start fresh, with protection
📌 Use a VDA when:
It makes financial sense. For some businesses, they may not have enough in penalties to justify the time/cost of a VDA. Usually if you have a lot of dollars due OR are going to have to do backfilings for a lot of periods, a VDA may be a good option to explore.
You want to fix things quietly and strategically
The state hasn’t contacted you yet
You aren’t registered yet. Once registered with the state, you’ll likely lose the ability to do a standard Voluntary Disclosure.
❗ Once the state contacts you, it’s too late for a VDA. That’s why it’s called “voluntary.”
🚨 Common Pitfalls to Watch Out For
❌ Timing on registration – Signing up too early can trigger obligations you weren’t ready for. Signing up too late can mean penalties and fines. So make sure you know exactly where/when/why to register!
❌ Filing blind – Backfiling without clean records or expert review can do more harm than good.
❌ Missing the VDA window – Wait too long, and the state might find you first, eliminating your chance for reduced penalties.
✅ Final Takeaways
✔ Register when the state wants you to
✔ Backfile with care and precision
✔ Consider a VDA to reduce risk and costs
✔ Talk to an expert before making any moves
💥 Bottom line? Don’t wait for tax trouble to snowball. Your future self will thank you.
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