If you sell into California, hire California talent, or hold inventory in the state, unfiled taxes can balloon overnight. Before penalties pile on, the California Voluntary Disclosure Program (VDP) lets you fix mistakes, often for three to six years of back filings instead of eight-plus. Below is a tactical playbook covering every flavor of disclosure (sales & use tax, franchise/income tax, unclaimed property) and how to navigate them without blowing up your closing schedule or Series B diligence.
This guide shows how fast you can clear the slate with automation. If your finance stack still runs on CSVs, see how Commenda Global Sales Tax plugs directly into Shopify, Stripe, NetSuite and Amazon to prepare California VDP filings in minutes.
California Voluntary Disclosure Program, What It Covers
California operates three year-round programs:
| Program & Key Keyword | Overseen By | Typical Look-Back | Penalty Relief |
| California Voluntary Disclosure Program , Sales & Use Tax (often searched as california sales tax voluntary disclosure agreements) | CDTFA | 3 years | 100 % |
| California Voluntary Disclosure Program , Franchise/Income Tax (aka voluntary disclosure program California for income) | FTB | 6 years | 100 % |
| California Unclaimed Property Voluntary Disclosure Program | SCO | Dormancy periods up to 10 yrs | 12 % interest waived |
All three require that you apply before the agency sends an audit notice or nexus questionnaire.
Am I Eligible for California’s Voluntary Disclosure?
Think of eligibility like a three-gate turnstile:
- No Prior Registration
Never held a seller’s permit, FTB ID, or SCO holder number for the liability you’re disclosing. - No Prior Contact
Received no audit letters, phone calls, or email inquiries from CDTFA, FTB, or SCO. - Ability to Comply Quickly
Can file returns and pay tax/interest within 60–90 days of approval.
Clear all three gates? You’re in. Miss even one and the VDP door slams shut, leaving you to negotiate during an audit.
Voluntary Compliance for Out-of-State Retailers (Sales-&-Use Focus)
Why this matters: California’s $500 K economic-nexus threshold kicks in fast for Shopify and Amazon sellers. Once you pass it, sales tax liabilities accrue daily, even if marketplaces remit a piece for you. The “Voluntary Compliance for Out-of-State Retailers” track:
- Caps exposure at three filing years
- Waives negligence and late-file penalties (25 %+)
- Lets you stay anonymous until CDTFA pre-approves your eligibility
Pro tip: Connect marketplaces directly to Commenda to catch hidden district-tax exposure; manual ZIP-to-rate mapping misses it 30 % of the time.
When Does California Tax an Out-of-State Business?
Under Cal. Rev. & Tax. Code § 23101 the state can impose income or corporate tax once you hit any of these 2025 thresholds:
| Trigger | 2025 Threshold* | Common Examples |
| Gross CA Receipts | $700 K+ | SaaS subscriptions, Amazon FBA sales |
| CA Payroll | $87 K+ | Remote engineers, fractional CFOs |
| CA Property | $61 K+ | Inventory in 3PL, leased servers |
*Indexed annually; check FTB site for current numbers.
Operations Likely to Trigger California Taxes
- Marketplace sellers with FBA inventory in Fresno, Rialto, or Tracy
- SaaS platforms charging monthly CA subscribers
- Professional-services firms sending consultants onsite
- Manufacturers placing consigned inventory at CA contract manufacturers
- Crypto or fintech apps paying California-based contractors
Additional Tax Obligations Often Bundled into a VDP
Besides headline sales or franchise tax, you may need to disclose:
- District sales taxes (rates up to 10.25 %)
- Consumer use tax on tax-free equipment imports
- Environmental fees (battery, e-waste)
- Unclaimed property for stale vendor checks, gift-card breakage, wallet balances
- Payroll taxes if you mis-classified remote workers as contractors
Bundling them prevents “whack-a-mole” audits later.
Benefits of Entering a California Voluntary Disclosure
Income or Corporate Taxes
- Six-year cap replaces unlimited audit reach
- “Doing-business” penalties erased
- Offshore income can be cleansed concurrently
Sales & Use Taxes
- Three-year cap versus eight in audit
- Full abatement of late-file, negligence and negligence-plus interest penalties
- Officers shielded from personal liability once paid
Unclaimed Property
- Entire 12 % statutory interest waived
- SCO removes you from high-risk audit pool
Step-by-Step Procedure to Secure Relief
| Phase | Days | Key Actions | Owner |
| 1 , Prepare | 1–7 | Nexus test, rough liability calc | Controller / Commenda |
| 2 , Anonymous Application | 8–14 | Submit CDTFA-38 / FTB 4935 / SCO VCP form | SALT counsel |
| 3 , Agency Approval | 15–25 | Receive acceptance + deadline schedule | SALT counsel |
| 4 , Registration | 26–40 | Obtain seller’s permit / entity ID | Ops |
| 5 , Data & Returns | 41–70 | Pull transaction data via APIs, create XML/NAUPA-II | Accounting / Commenda |
| 6 , Payment & Remittance | 71–80 | Pay tax, interest; upload unclaimed-property file | Treasury |
| 7 , Closing Letter | 90–120 | Archive PDF in data room | CFO |
Miss a deadline and the VDP terminates, so a compliance calendar is non-negotiable.
Voluntary Disclosure vs. Amnesty Programs
- VDP: Available 24/7, exact rules published, predictable.
- Amnesty: Legislative wildcard; may never appear or may exclude your liability.
Waiting for amnesty is like waiting for the lottery, bad odds, big downside.
Which Companies California Actively Targets
- E-commerce brands showing $1 M+ California sales on 1099-K data
- SaaS firms with high recurring CA subscription revenue
- Manufacturers flagged by warehouse manifests shared with CDTFA
- Retailers with large unclaimed gift-card balances
- Startups flagged by venture-capital audits in other states
If you fit any profile, apply before a notice hits your inbox.
10. Getting It Done, Attorneys + Automation
A State & Local Tax (SALT) attorney keeps you anonymous and negotiates extensions, while Commenda:
- Connects to every sales channel and ERP
- Auto-reconciles sales, refunds and shipping charges
- Builds CDTFA-compliant XML returns and SCO NAUPA-II files
- Sends Slack & email reminders for every deadline
- Generates an immutable audit trail for investors
Start your VDP the same week and finish before quarter-close.
Ready to Close Your California VDP?
Manual spreadsheets and calendar entries leave you one coffee spill away from a blown deadline. Commenda Global Sales Tax automates data pulls, calculations and filing generation, while your SALT counsel keeps you anonymous and negotiates the fine print.
Next Step: Book a Demo and see how Commenda can close your California voluntary disclosure in weeks, then watch nexus across all 50 states, before the next audit notice lands.
This guide is educational, not legal advice. Consult your tax professional for advice specific to your situation.
FAQs
1. We crossed $500 K in CA sales last year but marketplaces remit for us, do we still need the VDP?
Yes. Marketplaces only cover tax they collect. You still owe tax on your direct sales plus interest on past periods.
2. Can we include unclaimed property in the same application?
You’ll file separate forms, but running both disclosures in parallel saves duplicate data prep and legal fees.
3. We once held a CA resale certificate in 2018, are we disqualified?
Unfortunately, prior registration bars you from the CDTFA VDP. Consider negotiating a managed audit instead.
4. How long until we get a closing letter?
Most filers receive one within 90–120 days, provided payments clear on time.
5. Can interest ever be waived on sales or income tax?
No. California statutes only allow broad interest waiver on unclaimed property through the SCO VCP.
6. Will California share VDP data with other states?
Not automatically, but once you register, other states can discover filings through public IDs and seller’s-permit databases.
7. We acquired a company with hidden CA exposure, can we still file a VDP?
Yes, if neither entity was contacted by the agency before closing and the target never registered.
8. What happens if we under-report during the VDP?
Under-reporting voids penalty relief and can trigger fraud penalties. Reconcile every channel carefully, automation helps.
