Discovering unpaid sales and use tax exposure can be overwhelming, especially for businesses that have operated across multiple states without realizing compliance obligations existed. In many cases, voluntary disclosure agreements provide a structured way to resolve past liability while reducing penalties and limiting lookback periods.
This example walks through how a hypothetical business might evaluate voluntary disclosure and cleanup options after identifying sales tax exposure.
The Scenario
Consider a business that has been selling taxable products and services nationwide for several years. The company recently identified sales tax nexus in multiple states and estimated unpaid tax exposure related to historical sales.
Leadership is now faced with deciding how to address this exposure without triggering unnecessary audits, penalties, or operational disruption.
Why Voluntary Disclosure Is Considered
Voluntary disclosure agreements allow businesses to proactively come forward and resolve past tax obligations under defined terms. These programs are often designed to encourage compliance by limiting penalties and restricting how far back tax authorities can look.
In this scenario, voluntary disclosure becomes a potential option because the business has not yet been contacted by tax authorities and wants to resolve exposure in a controlled manner.
How Cleanup Options Are Evaluated
Evaluating cleanup options begins with understanding the scope of exposure by state. Businesses typically rely on prior nexus identification, exposure estimation, and taxability validation to ensure decisions are based on accurate information.
TaxMap’s Sales Tax Nexus Map identifies where obligations exist.
The Sales Tax Exposure Calculator estimates unpaid tax, penalties, and interest.
The Taxability Engine confirms which transactions were taxable in each jurisdiction.
Once these inputs are established, remediation options can be evaluated using a voluntary disclosure and cleanup planning tool.
Learn more about identifying nexus
Learn how exposure is estimated
Learn how taxability is validated
Learn how remediation is planned using the VDP Planner
The Outcome
After evaluating voluntary disclosure options, the business gains clarity on which states offer favorable programs, potential lookback periods, and estimated settlement ranges.
This analysis allows leadership to prioritize states with the greatest risk and determine whether voluntary disclosure or alternative compliance strategies make sense. Importantly, decisions are made before contacting tax authorities, reducing uncertainty and risk.
Moving Forward with Confidence
Once remediation options are evaluated, businesses can choose to proceed with voluntary disclosure, register and file on a go-forward basis, or engage professional advisors with a clear understanding of the situation.
This structured approach allows businesses to control the cleanup process rather than reacting to enforcement actions or audits.
How This Completes the TaxMap Workflow
This example demonstrates how voluntary disclosure planning fits into the broader sales and use tax workflow. Identifying nexus, estimating exposure, validating taxability, and planning remediation are all interconnected steps that work best when approached methodically.
An overview of all sales and use tax analysis and planning tools can be found on the TaxMap Tools page
Plan sales tax cleanup before contacting tax authorities.
Use TaxMap to evaluate voluntary disclosure options and choose the right compliance path with clarity and control.
