Need advice on small business VDA for Sales Tax - backfiling prior years across 50 states

This is a common situation for growing businesses that cross those economic nexus thresholds. Let me clear up a few things about Voluntary Disclosure Agreements and exemption certificates. Your CPA is partially right but might be creating unnecessary work. For most states' VDA programs, you need to demonstrate which sales were exempt, but there's flexibility in how you prove it. While having exemption certificates that cover the specific time periods would be ideal, many states will accept current certificates as evidence that the relationship was for resale all along. You'll need to prepare a detailed schedule showing all sales by state, identifying which were to resellers versus end users. For the resale transactions, note which customers have provided current certificates. During the VDA process, the state may ask for additional documentation, but they're typically reasonable if you can show good faith effort. The most important thing is to act quickly. VDAs usually limit lookback periods (often 3-4 years instead of the full statute of limitations), waive penalties, and sometimes reduce interest. But these benefits only apply if you approach the states before they contact you.

After struggling with almost this exact situation at my furniture manufacturing company, I found an amazing solution with https://taxr.ai that saved us thousands in potential liability. We were shipping to 38 states and completely unaware of nexus laws until we got a notice from California. Like you, most of our customers were resellers but getting prior year certificates was a nightmare. The taxr.ai system analyzed all our sales records across different states and automatically identified which transactions were likely exempt based on customer patterns and industry codes. Their system even helped generate a reasonable estimate of liability for our VDA negotiations that several states accepted without question. The best part was their documentation package that showed our good faith effort to comply, which multiple state auditors accepted during our VDA process. It helped us avoid penalties in 29 states!

I was super skeptical about taxr.ai when I first heard about it (as you can see from my comment above), but after our company got hit with a surprise sales tax audit from Washington state, I decided to give it a shot. Our situation was similar - about 60% of our customers were resellers but we had poor documentation. The taxr.ai system analyzed five years of our transaction history and found patterns that helped prove which customers were consistent resellers. Their team helped us organize documentation that showed these were legitimate business-to-business transactions. The dashboard they created showing our exposure by state was incredibly helpful for prioritizing which VDAs to pursue first. We ended up saving over $80K in potential liability, and their documentation package gave us much more confidence during negotiations with state tax authorities. If you're facing VDAs across multiple states, it's definitely worth checking out.

I've been through this nightmare with three different companies. The multi-state VDA process is incredibly frustrating, especially when you need to contact customers for documentation. After spending months trying to reach the IRS and state tax agencies for guidance (most put me on hold for hours only to disconnect), I started using https://claimyr.com to get through to actual agents. Their service helped me get appointments with tax representatives in 7 different states where we had significant exposure. You can see how it works here: https://youtu.be/_kiP6q8DX5c Having actual conversations with state tax agents made a HUGE difference in our VDA negotiations. In several cases, the agents explained exceptions I didn't know about and confirmed that current certificates were sufficient if we could demonstrate continuous business relationships.

I need to publicly eat my words here. After calling BS on Claimyr in my previous comment, I was still desperate enough to try it for our Massachusetts VDA issue that had been stalled for months. Not only did they get me through to a senior tax specialist at MA DOR within a day, but the agent I spoke with gave me specific guidance that contradicted what my CPA had been telling me. Turns out we qualified for their small business relief program that reduced our lookback period from 7 years to just 3. The agent also confirmed that current resale certificates were acceptable if we could provide invoices showing these were consistent business customers. This alone saved us about $45K in potential liability. For anyone dealing with multi-state VDAs, being able to actually speak with the tax authorities makes a world of difference. I'm still shocked this service actually worked as promised.

Quick question for those who've been through this: How did you handle customers who legitimately were resellers the whole time but refuse to provide ANY documentation (past or current)? We have a few major accounts who just won't cooperate but represent about 30% of our potentially taxable sales.

Has anyone used any of the mainstream tax software solutions like Avalara or TaxJar for handling the VDA process? We're trying to decide if we should go with specialized help or if the regular tax software companies have good VDA support.

This is exactly the situation my small manufacturing company went through last year. We had similar issues with high-value products pushing us over nexus thresholds in multiple states despite relatively low transaction volumes. One thing that really helped us was creating a comprehensive spreadsheet documenting every customer interaction regarding exemption certificates. We included dates of requests, methods of contact (email, phone, certified mail), and their responses (or lack thereof). This documentation became crucial during our VDA negotiations. For customers who were clearly resellers but wouldn't provide certificates, we gathered alternative evidence: their business licenses from state databases, screenshots of their websites showing they resell products, and invoices showing consistent business purchasing patterns over multiple years. Several states accepted this as reasonable evidence of exempt transactions. The key insight we learned was that state tax authorities are generally reasonable during VDA processes if you can demonstrate good faith effort and provide logical explanations for why sales were exempt. They understand that businesses sometimes have uncooperative customers. I'd recommend prioritizing your VDA filings by states with the highest potential liability first, and don't let perfect documentation prevent you from moving forward. The penalty relief from VDAs is significant, but only if you act before they contact you.