If your company has been doing business in Connecticut without registering for the required taxes, you could be facing significant liabilities. Sales tax, corporate business tax, and employer payroll tax obligations can accumulate quickly, and penalties may make the cost much higher.
The Connecticut Voluntary Disclosure Program (VDP), also known as a Voluntary Disclosure Agreement (VDA), provides businesses with an opportunity to come forward before the Connecticut Department of Revenue Services (DRS) makes contact. By using this program, businesses can reduce the look-back period, eliminate certain penalties, and get compliant without the unpredictability of a full audit.
Why the Connecticut Voluntary Disclosure Program Matters for Businesses
Connecticut is a hub for finance, insurance, healthcare, and advanced manufacturing. The state’s tax authorities actively monitor unregistered businesses using data from the IRS, other states, and third-party platforms.
If your company has a nexus in Connecticut but has not registered or filed, the DRS can assess liabilities going back many years. Once the DRS contacts you about potential tax obligations, you lose eligibility for the VDP. Acting early allows you to control the terms of your compliance and reduce the cost.
Taxes Covered Under Connecticut’s VDP
The Connecticut Voluntary Disclosure Program can apply to:
- Sales and use tax.
- Corporation business tax.
- Withholding tax for businesses with Connecticut employees.
- Other state-administered taxes (e.g., admissions and dues tax, room occupancy tax).
Many businesses choose to include all outstanding liabilities in one disclosure to prevent future audits.
Connecticut VDP at a Glance
| Feature | Details |
| Administered By | Connecticut Department of Revenue Services |
| Eligible Taxes | Sales and use, corporation business, withholding, certain excise taxes |
| Typical Look-Back | 3 years (may vary by tax type) |
| Penalty Relief | 100% waiver of penalties |
| Interest Relief | Generally not waived |
| Anonymity | Yes, through a representative |
| Deadline After Agreement | Usually 60 to 90 days to file and pay |
Eligibility Requirements for Businesses
To qualify for the Connecticut VDP, your business must:
- Not be registered for the tax type you are disclosing, or be registered but have unfiled past returns.
- Not have been contacted by the DRS about the liability.
- Be ready to file and pay all required amounts within the agreed period after acceptance.
If you have already received a nexus questionnaire, audit notice, or other inquiry, you will need to work with the DRS through its regular audit or settlement channels.
Common Nexus Triggers in Connecticut
Economic Nexus – Sales and Use Tax
Remote sellers must register and collect Connecticut sales tax if they exceed:
- $100,000 in gross receipts from Connecticut sales and 200 separate retail transactions into Connecticut during the prior 12 months.
Physical Presence Nexus
- Office, warehouse, or other place of business in Connecticut.
- Employees or contractors performing work in the state.
- Inventory stored in Connecticut fulfillment centers.
Corporation Business Tax Nexus
- Earning income from Connecticut sources.
- Owning or leasing property in Connecticut.
- Having agents or sales representatives operating in the state.
Benefits of Entering the Connecticut VDP
- Penalty elimination: Late filing, failure-to-register, and negligence penalties are waived.
- Limited look-back: Most cases are capped at three years of back returns instead of the full statutory reach.
- Predictability: The terms of the disclosure are agreed upon before filing begins.
- Anonymity option: You can apply through a representative to protect your identity until eligibility is confirmed.
Step-by-Step Connecticut VDP Process
| Step | Actions | Timeline | Responsibility |
| 1. Internal Review | Confirm nexus, calculate estimated liabilities | Days 1–5 | Internal team / SALT counsel |
| 2. Anonymous Application | Submit request via representative | Days 6–10 | SALT counsel |
| 3. DRS Review | Verify eligibility, issue agreement terms | Days 11–20 | DRS |
| 4. Registration | Obtain tax account numbers | Days 21–25 | Operations |
| 5. Filing & Payment | File all returns, remit tax and interest | Days 26–60 | Accounting / Commenda |
| 6. Closing | Receive signed agreement and compliance confirmation | Days 61–90 | SALT counsel |
Connecticut vs. Other State Voluntary Disclosure Programs
| State | Sales Tax Look-Back | Penalty Relief | Interest Relief | Anonymity |
| Connecticut | 3 years | 100% | No | Yes |
| Florida | 3 years | 100% | No | Yes |
| Georgia | 3 years | 100% | No | Yes |
| Texas | 4 years | 100% | No | Yes |
Connecticut offers a competitive look-back period and full penalty relief, although like most states, it does not generally waive interest.
Preparing for the Connecticut VDP
Before applying, businesses should:
- Gather complete data: Sales, payroll, and property records for the look-back period.
- Bundle all tax types: Address multiple liabilities at once to avoid future audits.
- Plan for payment: Be ready to remit all tax and interest due within 60 to 90 days.
- Leverage automation: Use systems like Commenda Global Sales Tax to pull transactional data from platforms such as Shopify, Amazon, and NetSuite for faster preparation.
Maintaining Compliance After the VDP
Once the VDP process is completed:
- Monitor nexus thresholds annually.
- Keep registrations up to date.
- File and pay taxes on time to avoid future penalties.
- Maintain accurate records for at least seven years.
When Businesses Should Use the Connecticut VDP
The program is a strong option for businesses that:
- Have unregistered taxable sales or payroll in Connecticut.
- Recently crossed the economic nexus threshold.
- Found past liabilities during due diligence for investment or acquisition.
- Want to resolve issues before the DRS contacts them.
How Commenda Supports Businesses in the Connecticut VDP Process
Commenda helps companies manage Connecticut VDP filings by:
- Running multi-state nexus reviews to identify Connecticut exposure.
- Preparing and submitting anonymous applications with legal partners.
- Integrating sales and payroll data from multiple channels.
- Producing DRS-compliant returns in a fraction of the usual time.
- Tracking all deadlines to ensure penalty relief is preserved.
With Commenda, your business can move from initial assessment to signed closing agreement efficiently and with reduced risk.
Book a Demo to see how we can help you complete your Connecticut voluntary disclosure quickly and accurately.
FAQs on Connecticut’s Voluntary Disclosure Program for Businesses
1. Can interest be waived under Connecticut’s VDP?
No. The DRS waives penalties but interest must be paid.
2. What is the standard look-back period?
Typically three years for most taxes, although some cases may vary.
3. Can multiple tax types be disclosed at once?
Yes. This is recommended to prevent future audits.
4. What if my business has already been contacted by the DRS?
You will not be eligible for the VDP and must work through the audit process.
5. Are remote sellers eligible?
Yes. Remote sellers with economic nexus are common participants.
6. How long does the process take?
Usually 60 to 90 days from anonymous application to signed agreement.
