If you`re a business owner in California, you`re probably familiar with the state`s sales tax requirements. You must collect sales tax from customers and remit it to the state on a regular basis. However, what if you`ve made a mistake and failed to collect or remit the correct amount of sales tax? This is where the California Sales Tax Voluntary Disclosure Agreement (VDA) comes in.

A VDA is a program offered by the California Department of Tax and Fee Administration (CDTFA) that allows businesses to come forward and voluntarily report any previous sales tax errors they may have made. By doing so, they can avoid penalties and interest that would typically be imposed if the CDTFA discovered the error during an audit.

It`s important to note that a VDA can only be used for sales tax errors. If a business has made errors in other areas, such as income tax or withholding tax, they will need to submit a separate disclosure for each type of tax.

To qualify for the VDA program, a business must meet the following criteria:

– The business must not currently be under audit or investigation by the CDTFA for the tax at issue.

– The business must not have been contacted by the CDTFA for the tax at issue.

– The business must not have collected or remitted sales tax for the tax period(s) at issue.

– The business must agree to report and pay all taxes owed, including interest and penalties.

If a business meets these criteria and submits a complete and accurate disclosure, they can avoid penalties and interest that would typically be imposed if the CDTFA discovered the error during an audit. However, the business will still need to pay all taxes owed.

It`s important to note that submitting a VDA does not guarantee that the CDTFA will accept it. The CDTFA will review the disclosure and determine if it meets the VDA program`s requirements. If the disclosure is accepted, the business will be required to sign a VDA agreement and pay all taxes owed.

In summary, the California Sales Tax Voluntary Disclosure Agreement is a program that allows businesses to voluntarily report any sales tax errors they may have made and avoid penalties and interest that would typically be imposed if the errors were discovered during an audit. If you believe your business may have made a sales tax error, it`s worth considering the VDA program as a way to avoid additional costs and penalties.

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