Voluntary Disclosure Program Archives

A second chance to get it right: Washington’s ESSB 5814 penalty relief program offers critical compliance window

by Mary Kay McCalla Martire and Elle Kaiser | Mar 20, 2026 | Interest and Penalties, Nationwide Importance, Sales Tax, Washington

If your business has been struggling to keep pace with Washington State’s sweeping expansion of retail sales tax under Engrossed Substitute Senate Bill (ESSB) 5814, you are not alone. And, more importantly, you may not be too late. The Washington Department of Revenue (DOR) announced a temporary penalty relief program specifically designed to help businesses that have not yet complied with their new tax obligations. For affected taxpayers, this program represents an opportunity to resolve outstanding liabilities without penalty exposure.

Background: ESSB 5814 and the expansion of taxable services

ESSB 5814 represents a significant expansion of Washington’s retail sales tax regime. The legislation expanded the statutory definition of “retail sale” to encompass several service transactions that were subject only to Washington’s business and occupation (B&O) tax under the “service and other” classification.

The categories of services newly subject to retail sales tax include:

Advertising services
Information technology consulting and technical support services
Custom software development and customization of prewritten software
Custom website development services
Investigation and security services, including monitoring and armored car services
Temporary staffing services
Certain live presentations and event-related services

As a result of the legislative change, providers of these services must now:

Collect and remit retail sales tax on taxable transactions.
Report the receipts under the retailing B&O tax classification rather than the service and other classification that historically applied. This change generally will help compliant taxpayers as the retailing B&O tax rate (0.471%) is lower than the services and other B&O tax rate (between 1.5% and 1.75%).

The law took effect October 1, 2025, but transitional rules applied to certain preexisting contracts through March 31, 2026. Given the quick implementation of ESSB 5814, the breadth of the change, and the number of industries affected, many taxpayers faced uncertainty regarding compliance. To address these transition challenges, the DOR has announced a temporary penalty relief program for taxpayers that failed to collect or remit the newly applicable taxes during the early stages of implementation. The program is also intended to encourage voluntary compliance with the new law.

Overview of the penalty relief program

To be eligible for relief, businesses must meet the following criteria:

Covered liabilities: The program covers uncollected retail sales tax and unpaid use tax for the new categories of taxable services created by ESSB 5814.
Covered reporting periods: Eligible reporting periods run from October 1, 2025, through December 31, 2026. For businesses with preexisting contracts that qualified for temporary sales tax relief, penalty relief begins when the contract no longer qualifies for such relief or on April 1, 2026 (whichever occurs first). Relief for businesses with preexisting contracts also ends on December 31, 2026.
Application process: Applications must be submitted via the DOR’s Voluntary Disclosure Application system. Once the DOR determines that a taxpayer qualifies, it will issue a Penalty Relief Agreement that the taxpayer must sign and return within 30 days. After execution, the DOR will work with the taxpayer to determine the appropriate tax liability and issue a formal assessment. (Note that Washington law requires [...]

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Delaware Starts Unclaimed Property “Compliance Reviews” (Different from Audits)

by Diann Smith, Eric D. Carstens and Stephen P. Kranz | Jan 16, 2019 | Delaware, Unclaimed Property

If the Delaware Office of Unclaimed Property believes that a person may have filed an “inaccurate, incomplete, or false report,” the State Escheator may authorize a “compliance review” under Del. Code Ann. tit. 12, § 1170(b). This is not a standard audit and as a result, the target is not entitled to the option of entering the state’s voluntary disclosure program rather than being subject to the audit. Nevertheless, the compliance review can result in a finding of liability.

Correspondence between the Unclaimed Property Professionals Organization and the Delaware State Escheator’s Office acknowledges that several holders have been selected for this review. According to the Escheator’s Office, if a holder has no report or a negative report, the state will typically request a copy of the holder’s unclaimed property policies and procedures that would support the lack of property due to the state. By statute, the state may review the filed reports and “all supporting documents related to such reports.” The scope of the concept of “supporting documents” is not clear.

Practice Note: Companies, particularly those domiciled in Delaware, not filing Delaware unclaimed property reports or filing reports showing no liability, should review their policies and procedures related to unclaimed property, including how voided checks and unidentified remittances are handled. Furthermore, recent audits have included an expanded Automated Clearing House (ACH) payment review request, so a company should also review its treatment of failed ACH payments. Such a review should take place in an environment that will protect the attorney-client privilege – so, including internal counsel and/or external counsel is critical. Such an internal review should: (a) verify that the holder is in compliance with its policies and procedures; and (b) provide any necessary policy or operational changes. Conducting such a review and maintaining attorney-client privilege for appropriate elements of the review is especially important given recent false claims act developments in the unclaimed property space.

Massachusetts Department of Revenue Introduces Pilot Voluntary Disclosure Program

by Richard C. Call and Scott M. Susko | Feb 8, 2016 | Audits, Income Tax, Local Tax, Massachusetts, Procedure, Sales Tax

The Massachusetts Department of Revenue (the Department) released a draft administrative procedure introducing a pilot Voluntary Disclosure Program (the Program) for the settlement of uncertain tax issues for business taxpayers on January 19. The Department introduced this Program in response to a suggestion made by Scott Susko, an author of this article, and another practitioner, both of whom serve as taxpayer professional representatives on the Department’s Advisory Council. We commend the Department for reacting to this suggestion in such a proactive manner.

The Program will provide “a process through which uncertain tax issues may be resolved on an expedited basis, generally within four months” (All quotations in this post are from the Department’s draft administrative procedure).

We think this Program will be particularly helpful to public companies in resolving issues related to their financial statement reserves.

The Program defines an “uncertain tax issue” as an issue “for which there is no clear statutory guidance or controlling case law, and which has not been addressed by the Department in a regulation, letter ruling, or other public written statement,” and “for which a taxpayer would be required to maintain a reserve in accordance with ASC 740: Accounting for Uncertainty in Income Taxes (formerly Fin 48).” The issue also “must not have been addressed as part of a prior audit of the taxpayer, a prior application for abatement or amended return filed by the taxpayer, or a prior ruling request made by the taxpayer.”

To qualify for the Program, “any potential tax liability attributable to the uncertain tax issue(s) must be $100,000 or more, exclusive of interest and penalties.” A taxpayer that is under audit or has received notice of an impending audit is not eligible for the Program. The Department has the “discretion to determine that the Program is not appropriate for specific cases.”

The Department “will consider settlement of an uncertain tax issue(s) where: (1) the taxpayer has presented its position on the issue(s) and the Department agrees that the tax treatment of the issue(s) is uncertain; and (2) the taxpayer has fully disclosed and documented the issue(s) and the facts associated with that issue(s).”

A taxpayer may initiate the process by submitting an anonymous letter to the Department, which will respond to the taxpayer within 30 days. If the Department accepts the taxpayer into the Program, the taxpayer may submit an application, including a settlement proposal and identifying the taxpayer, within 45 days of receiving the Department’s acceptance letter.

The Department will waive penalties related to the uncertain tax issue for a taxpayer that reaches an agreement with the Department pursuant to the Program, as well as for a taxpayer that does not reach an agreement with the Department “provided the taxpayer acted in good faith.”

The Department requested practitioner comments on the draft administrative procedure by February 1, and MWE submitted two technical comments.

Our first comment was that following the initial evaluation, the Department should issue to the taxpayer a one-page technical position explaining whether it does or [...]

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