Collected and unremitted sales tax

Overview

As a seller, you have a legal obligation to collect applicable sales tax from your customers and remit it to the appropriate tax agencies. If you have collected sales tax from your customers but have not yet registered or remitted those amounts to the relevant tax agencies, it is important to understand the options available to your business. Failing to remit collected sales tax may result in significant legal and financial penalties, and in some situations, personal liability for responsible persons at your company.

If your business has collected sales tax that has not been remitted, there are several paths you may want to consider. Each comes with different trade-offs, and your best course of action will depend on the specific facts of your situation.

• Pursue a Voluntary Disclosure Agreement (VDA) — If your business qualifies, a Voluntary Disclosure Agreement may offer a path to getting compliant with reduced penalties. Note that states typically disregard VDA lookback periods when collected sales tax is involved — they will generally require you to remit the full amount collected, regardless of how far back it goes.
• Refund customers for sales tax collected — Another option is to refund your customers for the sales tax amounts collected on historical transactions. This removes the collected tax from your books and may reduce your ongoing exposure, though it does not eliminate the need to address the underlying compliance situation.
• Register and remit directly to the states — You may also choose to register for a sales tax account in the relevant jurisdictions and remit the collected amounts directly to the state. Keep in mind that taking this step may affect your ability to pursue other options, such as a VDA, so it is worth weighing carefully before proceeding. See Get compliant in a jurisdiction.