Highway Use Fee - Registration is now open for certain carriers to register for the new Connecticut Highway Use Fee - Click here for more information.

IMPORTANT INFORMATION - the following tax types are now available in myconneCT: Individual Income Tax, Attorney Occupational Tax, Unified Gift and Estate Tax, Controlling Interest Transfer Tax, and Alcoholic Beverage Tax. - Click here for the latest information.

Resolving State Tax Liabilities:  Multistate Voluntary Disclosures

Many businesses believe that states can assert their taxing jurisdiction over companies only when they open a store or office in a state. This is not true. In the area of use tax collection a business can avoid nexus with a state if it stays within the "safe harbor for vendors ‘whose only connections with customers in the [taxing] State is by common carrier or the United States mail.’" Quill Corp. v. North Dakota, 504 U.S. 298, 315 (1992). However, many businesses do more than ship their products by common carrier, creating state tax liabilities for themselves through their use of in-state permanent or temporary employees, traveling salesmen, independent contractors (full-time or part-time), inventory, leased property, or other property. If your client is found to have a sales or use tax collection duty, many states will hold your client primarily liable for the sales or use tax.

Income and franchise tax nexus standards also surprise the unwary business. In the income tax area a business can be required to file a state income tax return if its employees or representatives do anything beyond the solicitation of sales. For example, if a business provides any services, sells intangibles, or owns property in the state it might be required to file an income tax return in that state. See Interstate Commerce Tax Act 15 U.S.C. § 381-384 (1959), Public Law 86-272. Moreover, if your client has never filed a tax return in a state that state might be able to assess taxes indefinitely to the date nexus was first established with the state (e.g. 30 years), not the normal three years back that most states use when dealing with taxpayers that are registered and filing in the state.

The Multistate Tax Commission's (MTC) National Nexus Program offers a solution. The National Nexus Program operates an innovative voluntary disclosure program that allows companies to resolve potential tax liabilities simultaneously with multiple states. Through this program companies may approach a large number of states anonymously to propose settlement of potential state sales/use tax or income/franchise tax liabilities arising from past activities within those states. Taxpayers benefit by resolving potential state tax disputes before the state issues prior-year assessments of taxes, interest, and penalties. Tax professionals benefit by being allowed to focus on substantive tax issues rather than trying to determine who in the state to contact, what kind of disclosure program is available in the state, what terms are available in the state, and other procedural problems. Multistate resolution saves time and money as MTC staff performs most of the work - at no cost to the taxpayer.


A company representative initiates the process by contacting the Nexus Program anonymously, by letter, and requesting a voluntary disclosure. The Nexus Program staff will need the following information:

  • a brief description of the company's business, including the number of years the company has been in business;
  • the nature and extent of the company's operations in the relevant states, including whether the company owns or leases property, engages employees, or has other potential nexus-creating activities in those states;
  • a statement as to whether the company has been contacted by any of the states, and if so, the nature of the contacts;
  • the terms proposed by the company; and,
  • a schedule showing the estimated amount of taxes due, by tax type and year, for each state that the company wants contacted.

All voluntary disclosure negotiations are handled on a confidential and anonymous basis. Company representatives are asked not to reveal the name of the company or any information that could readily identify the company to Nexus Program staff until the agreements are finalized.

Once Nexus Program staff has evaluated the facts and circumstances of the company's contacts in the states with which it is seeking a voluntary disclosure, the staff will advise the company representative of terms generally acceptable to the states. Offers to settle state tax liabilities on a prospective basis may be recommended if the facts warrant such treatment (e.g. "grey" nexus areas). Nexus staff will work with the representative to formulate an offer that will be acceptable to the states — a majority of Nexus Program member states expect three years of back taxes and interest, but they will waive penalties and tax obligations for all tax periods prior to the look-back period. Once terms are agreed upon, Nexus Program staff will forward a voluntary disclosure agreement (i.e. contract) to the states specified by the company representative. Disclosure agreements recommended to states by Nexus Program staff are accepted in most cases. The entire voluntary disclosure process typically takes one hundred and twenty days but can take longer for more complicated cases.


The National Nexus Program and its member states adhere to the following policies for all voluntary disclosures:

  • A company that volunteers to disclose its liabilities will remain anonymous throughout the negotiation and disclosure process until the final stage when registration forms and signed agreements are sent to the states through the Nexus Program office.
  • Nexus Program member states and the Multistate Tax Commission have adopted a strict policy that they will not reveal the identity of the taxpayer to any state that does not accept the disclosure offer.
  • Nexus Program staff will forward any voluntary disclosure offer to the states as requested by the company's representative, if in the staff's opinion the offer is likely to be accepted by a majority of the states to which it is offered.
  • Nexus Program staff will not process offers to non-member states.
  • The Nexus Program will not process a disclosure offer for a state that has previously contacted the company (something beyond a routine mass mailed letter) or has selected the company for audit, other investigation, or review. Contact by one member state will preclude disclosure only with the contacting state and does not prevent a disclosure from occurring with other member states.
  • If a company has already sent written notice to the Nexus Program staff of its intent to offer a voluntary disclosure to a member state and that member state contacts the company at a later date to conduct an audit of the company, Nexus Program staff will request the member state to temporarily stop the audit until the voluntary disclosure negotiations are complete.


Voluntary disclosures are processed only for Nexus Program Member States. The following 39 States are members of the MTC National Nexus Program as of May 1999.

Alabama Kentucky North Carolina
Alaska Louisiana North Dakota
Arizona Maine Ohio
Arkansas Maryland Oklahoma
California Massachusetts Oregon
Colorado Michigan Rhode Island
Connecticut Minnesota South Carolina
District of Columbia Missouri South Dakota
Florida Montana Texas
Hawaii Nebraska Utah
Idaho New Hampshire Washington
Iowa New Jersey West Virginia
Kansas New Mexico Wisconsin

The Nexus Program makes available to the public upon request the sales and use tax registration forms for all 46 state sales tax jurisdictions.

If you have questions about the voluntary disclosure program or would like to initiate a disclosure contact Director, National Nexus Program, Multistate Tax Commission, 444 North Capitol Street, N.W., Suite 425, Washington, D.C. 20001, (202) 508-3869. Also, you may contact the Nexus Program by emailing information to nexus@mtc.gov.