Overview of Multistate Voluntary Disclosure Process
Please view the links below for more information regarding the Multistate Voluntary Disclosure Program:
Purpose
The Multistate Voluntary Disclosure Program (“MVDP”) provides a way for a taxpayer with potential tax liability in multiple states (including the District of Columbia) to negotiate a settlement, using a uniform procedure coordinated through the National Nexus Program (“NNP”) staff of the Multistate Tax Commission (“Commission”).
General Terms
The Commission offers this service to encourage taxpayers to commence filing and paying taxes in states in which they may have substantial nexus, which is the connection between the taxpayer and the state arising from the taxpayer’s activities in that state, making the taxpayer subject to the state’s taxing authority.
A taxpayer with potential tax exposure in more than one state will find this service to be faster, more efficient, and less costly than approaching each state separately. There is no charge to the taxpayer for participation in the MVDP. A state’s sales/use tax and income/franchise tax (including the Hawaii GET and Washington B&O tax) are the tax types generally subject to a voluntary disclosure agreement (VDA). Prior contact between a state and the taxpayer concerning a tax type disqualifies the taxpayer from participation in voluntary disclosure for that tax type. “Contact” includes filing a tax return, paying tax, or receiving an inquiry from the state regarding the tax type. Procedures of Multistate Voluntary Disclosure , Subparagraph 5.2. Upon entering into a VDA with the state, the taxpayer is required to file returns, pay the tax due under the returns, and register with the state (if required) in return for waiver of penalty for the duration of the look-back period, as provided in the VDA. Interest is due on unpaid tax obligations incurred during the look-back period unless expressly waived by the state.
Lookback Period
The lookback period includes the prior complete tax filing periods for which a taxpayer applying for voluntary disclosure relief must generally file returns and pay the past-due tax liability plus interest in return for the state’s waiver of tax liability for periods prior to the lookback period and penalties. The lookback period also includes the current incomplete tax filing period, the return for which must be timely filed and tax paid when due. For more information on the lookback period, see “What is the lookback period, and how is it determined?” in “Frequently Asked Questions.” For a list of lookback periods for participating states, see "Lookback Periods for States Participating in National Nexus Program" and “Sales/Use Tax Lookback Periods for Taxpayers with Economic Nexus Only.”
Minimum Tax Liability for Voluntary Disclosure
NNP staff do not process voluntary disclosure applications when the good-faith estimate of tax due to a state for the lookback period is less than $500. Taxpayers with minimal tax liability should pay such liability upon filing an initial return directly with the state.
Confidentiality Protection
Confidentiality rules are addressed in Procedures of Multistate Voluntary Disclosure, Paragraphs 6 and 7. The Commission treats the applicant’s identity as confidential during the voluntary disclosure process. The Commission will disclose an applicant’s identity to a state only after the applicant has entered into a VDA with that state. Until such agreement is signed, an applicant is known to that state only by its voluntary disclosure Case Number assigned by NNP staff. The Commission does not disclose the VDA or any of its terms to any other state. An applicant need not disclose any information that would reveal its identity prior to execution of a VDA. Secure e-mail is available to send confidential taxpayer information.
Procedures
• NNP staff receives the application and prepares a draft VDA for review by the taxpayer.
2. The VDA
Participating States
The National Nexus Program serves only states that are members of the program. Please click here for a list of National Nexus Program Members.
Contact Information
A few states in the NNP require additional procedures. NNP staff can explain those more fully, if applicable. The Procedures of Multistate Voluntary Disclosure , govern the NNP staff and member states during the process. For further information, please contact:
Richard Cram Director, National Nexus Program Multistate Tax Commission 444 North Capitol Street, NW, Suite 425 Washington, DC 20001-1538 Telephone: 202-695-8140 Email: nexus@mtc.gov