CA Governor Approves "VDA" for Companies who Received CDTFA letter By: Michael J. Fleming

The California Department of Tax and Fee Administration (CDTFA) received information from Amazon on 12/6/2018 detailing which third-party sellers had inventory in an Amazon warehouse in 2017. The CDTFA believes inventory in an Amazon warehouse creates nexus and they immediately began sending letters to third-party sellers explaining that they had a requirement to register to collect and remit tax. What was not so clear in the letter, as many sellers found out was that the seller needed to register as of the date their inventory first appeared in CA and that all back tax interest and possibly penalty was due. Since the first Amazon warehouse in CA opened in October of 2012, the exposure for many sellers was substantial.

A traditional voluntary disclosure agreement or VDA which limits the look back period to 36 months rather than the date of first inventory was not available to sellers because they had already been contacted by CA which made them ineligible. Alternative programs like the managed audit program which waived 50% of interest and usually the penalty or the 1032 program which waived penalty were available. However, neither of these programs limited the look back period which would reduce the amount of the back taxes. This has now changed.

Governor signs legislation approving VDA like program for sellers who received letter

The CA Governor signed legislation last week that provides VDA like relief to sellers who have received the CDTFA letter. Up until now options were limited, however this new legislation now allows sellers to participate in a program much like a VDA. While like a VDA it is not called a VDA but rather a Deficiency Determination Limitation for “Qualifying Retailers”.  What the program does is limit the look back period to 4/1/2016 and waives penalty, which is almost identical to a VDA.

Sellers have 90 days to act

In order to qualify for the new program a seller must register within the next 90 days, file back returns, and pay the amounts due or enter into a repayment agreement with the final payment being no later than 12/31/2021. This does not really give sellers much time to respond.

Qualifications for program

In addition to the 90 day requirement there are additional qualifications that must be met. They are:

  • A seller can not have registered prior to 12/1/2018;

  • Sales and use tax returns can not have been filed prior to receiving a letter from the CDTFA;

  • The seller only had nexus due to inventory in an Amazon warehouse. 

Not quite the message sellers were waiting for the Governor to deliver

Many sellers were waiting for and hoping that the Governor would listen to CA Treasurer Fiona MA and grant amnesty to sellers for back taxes. Unfortunately it is my belief that this latest legislation is a response from the Governor that there is no amnesty coming.   

While this is not the news that many were waiting to hear from the Governor, it is better than having to pay back taxes all the way back to 2012, when the CA warehouse opened. I believe it is the best news we will here.

CA may start turning sellers who don’t comply over to audit and then collections

My sources in CA tell me that CA plans on getting tough with sellers who have not complied with previous letters and who do not take advantage of this new program. Once the 90 day period is over the state will begin turning over sellers to audit where estimated audits will be done with assessments then being sent to collections. 


I believe that this is as good as it’s going to get for CA sellers who have received the letter from the CDTFA. Unless you plan on fighting the CDTFA in court, which will cost a lot of money and appears to currently have a low probability of success, I suggest it is time to start cooperating with the state. This 90 day period will be gone before you know it.

The information I have provided is based on my first look at the program. There is not much additional information currently available. As it becomes available we will do a follow up. If you need help with this or any other state tax issue please feel free to contact us at or visit our website at and use the contact button.

Michael Fleming