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5 Essential Things to Know About Colorado VDAs

Updated: Feb 2, 2023


Getting through a voluntary disclosure agreement (VDA) program is difficult even in the best of times. There are at least 51 different programs, each with its own processes and requirements.

For the states I work in frequently, I can usually muddle my way through using muscle memory. However, if I’m not familiar with a state’s VDA program, finding a detailed description of a state’s voluntary disclosure program or any related reference guides is difficult.

Researching each state’s program is time-consuming for flat-fee projects. I would much rather be using my time for hourly projects rather than research yet another VDA program.

With this in mind, TaxStream is starting a new blog series that highlights 5 essential things to know about every state’s VDA program. The goal is to provide much-needed clarity around VDAs which will hopefully help make your life a little bit easier. At the end of each article, we’ll provide a full VDA guide PDF related to the featured state.

We will start with Colorado to kick off this series. Below are 5 things we think you should know about VDAs in Colorado.


Application Colorado does not have a traditional application. In most states, an application is either a letter that the applicant drafts including specific information, or a paper/online form the applicant must submit to the state. In Colorado, it’s a hybrid. Colorado requires its applicants to submit a written application formatted in a certain way with certain information. Colorado provides this information on its website here.


Local Jurisdictions – Sales Tax Application In most states, a taxpayer will submit one sales tax return for both the state and local sales tax. However, in Colorado, only some of the local jurisdictions take advantage of this joint approach. Applicants must research and review each locality to decide whether a local voluntary disclosure application is necessary. These jurisdictions require taxpayers to file separate sales tax returns and remit the localities portion directly to that locality. While this is complicated enough, those localities normally require a separate voluntary disclosure application.


Loss and Carry Over Amounts – Income Tax No loss carry-forward can be realized in any year before the first year filed pursuant to the lookback period will be allowed for any filing period covered by the Voluntary Disclosure Agreement or periods after the lookback period.


Lookback Period While Colorado states that the lookback period for sales and use tax is 3 years and income tax is 4 years, Colorado holds the right to extend the lookback period on a case-by-case basis. This extension is based on the nature of the taxpayer’s activities and the size of the past years’ potential tax liability. For other tax types, we recommend suggesting a lookback period, and the state can modify based on the applicant’s facts and circumstances.


Penalties Colorado does not automatically waive penalties. If the tax is collected but not remitted to the state prior to the application, the penalties will not be waived but the penalty rate may be reduced. The waiver of the full or partial penalties depends on three factors:

  1. The nature of the taxpayer’s activities in the state

  2. The size of the past years’ potentially tax liability

  3. An explanation for the failure to file is stated in Exhibit A of the application.


Bonus Information Colorado allows voluntary disclosure applications to be anonymous. Meaning, if the applicant is not accepted, then the state does not know who the applicant is and will not use that information to audit that applicant.


Voluntary Disclosure Guide If you’d like more guidance on Voluntary Disclosures in Colorado, we’re providing a free Colorado Voluntary Disclosure Guide to help you through the process of filing your VDAs in Colorado. Just enter your email address below and we will send the document right to your inbox. If you’re interested in other ways to save time on your SALT projects, TaxStream provides a comprehensive web-based solution that helps you painlessly gather your client’s information for their VDAs, registrations, nexus studies, and taxability studies. Visit us at www.usetaxstream.com to learn more or, contact us at contact@usetaxstream.com.



About the author Kristina Cassone has worked in state and local taxes for 5 years. She currently owns her own consulting firm, Cassone Consulting LLC, and is a co-founder of TaxStream LLC. She has a J.D. from the University of Montana and an LL.M in Taxation from Boston University.

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