You never collected sales tax. What now?
First work out where you had nexus and how much you may owe, before registering anywhere. Many states offer voluntary disclosure agreements that can limit how far back you pay and waive penalties. Registering first can end your eligibility, so check your options before you apply for a permit.
Updated November 2026 · By Pankil Kumar, Managing Partner
Quick facts
- First step. Work out which states, which years and how much
- Main option. A voluntary disclosure agreement with the state
- Don't. Registering first can rule out a VDA
Why does this happen so often?
Most businesses don't dodge sales tax on purpose. They grew online, a remote employee moved, or a warehouse started holding stock. Since the Wayfair decision in 2018, plenty of small sellers have crossed lines they didn't know about. States are aware of that, and many have programs for it.
What is a voluntary disclosure agreement?
A voluntary disclosure agreement, or VDA, is a deal with a state. You come forward, pay what you owe for a set look-back period, and in return the state typically waives penalties and limits how far back it goes. Terms vary, but the look-back is often around three or four years. Without one, there's generally no time limit if you never filed.
Eligibility usually depends on the state not having contacted you first, and you generally can't already be registered. That's why the order matters.
What should you do, in order?
- Stop and don't register yet.
- Pull sales by state, by year, going back to when you may have crossed the line.
- Check taxability, since exempt products or customers reduce exposure.
- Estimate the tax, plus interest, for each state.
- Decide state by state, between a VDA, registering going forward, or nothing where there's no real exposure.
- Start collecting properly, once each state is sorted.
Can you collect the tax from customers now?
Generally it's not practical. You usually can't go back to retail customers, so past tax comes from your margin. Exempt B2B customers can sometimes give certificates after the fact, which is worth asking for.
What if a state contacts you first?
Don't ignore the letter. Respond by the date given, and get help. You probably won't qualify for a VDA in that state, but you may still have choices. Our sales tax service can size your exposure and handle the filings going forward. For legal questions about your specific situation, talk to a tax attorney.
Sources
General information, not tax advice for your situation.
Selling in more than one state?
We check where you owe and file the returns.
See our sales tax serviceHow far back can a state go for unpaid sales tax?
If you never filed, there may be no limit. A voluntary disclosure agreement usually limits it to a few years.
Will I go to jail for not collecting sales tax?
Honest mistakes are usually a civil matter. Keeping tax you collected from customers is treated much more seriously.
Can I do a voluntary disclosure on my own?
You can, but many businesses use an adviser, because some states allow anonymous approaches through a representative.
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