A Voluntary Disclosure Agreement (VDA) is a formal arrangement between a business and a state’s taxing authority that allows the business to proactively disclose past sales tax liabilities and come into compliance—often with reduced penalties and a limited lookback period.

Rather than waiting for an audit, businesses can initiate a VDA to:

• Avoid penalties and sometimes reduce or eliminate interest
• Limit the lookback period (typically 3–4 years instead of going back indefinitely)
• Remain anonymous during initial negotiations in many states
• Establish good faith with tax authorities and reduce audit risk

This proactive approach is often far less costly and stressful than being audited and is a smart move for businesses expanding across state lines.