Publication 178, Voluntary Disclosure Program
September 2020
Overview
Generally, use tax applies when a person or business in California purchases tangible personal property (merchandise) from a retailer outside of this state that will be used, consumed, given away, or stored in this state and the retailer does not collect California use tax on their sales. For further information, please see publication 110, California Use Tax Basics.
If you owe California use tax as a purchaser of tangible personal property for use in this state, or if you are an out-of-state business that should be collecting use tax on sales of tangible personal property from California consumers, you are encouraged to apply for participation in the appropriate voluntary disclosure program.
What is Voluntary Disclosure?
The California Department of Tax and Fee Administration (CDTFA) administers two distinct voluntary disclosure programs for reporting use tax. The In-State Voluntary Disclosure Program (Revenue and Taxation Code section 6487.06) is available to an in-state purchaser with the purpose of reporting use tax on purchases of tangible personal property from a retailer outside of this state. The Out-of-State Voluntary Disclosure Program (Revenue and Taxation Code section 6487.05) is available to an out-of-state business with the purpose of reporting use tax on sales to consumers in California. Both programs provide the following benefits for participants:
- Limits the time the CDTFA can assess use tax to the prior three years. Otherwise, the applicable statutory period is eight years.
- Allows the CDTFA to waive late filing and late payment penalties.
- Allows applicants to anonymously describe their circumstances and obtain a written opinion on whether the CDTFA will approve their voluntary disclosure request.
Potential Disqualification for the Franchise Tax Board (FTB) Voluntary Disclosure Program
The CDTFA online registration has an optional field for applicants to disclose their Secretary of State (SOS) number during the completion of the online registration process. If you intend to apply for the voluntary disclosure program with the FTB, please note that establishing your SOS number prior to applying for the FTB program will disqualify you from participating in the voluntary disclosure program with the FTB. For more information regarding the FTB Voluntary Disclosure Program, please visit www.ftb.ca.gov.
See below for more information regarding the CDTFA In-State and Out-of-State Voluntary Disclosure Programs.
For more information
Additional information, including copies of referenced publications and law sections and the location of our CDTFA offices, are available on our website or from our Customer Service Center at 1-800-400-7115 (CRS:711).
Please note: This publication summarizes the law and applicable regulations in effect when the publication was written, as noted above. However, changes in the law or in regulations may have occurred since that time. If there is a conflict between the text in this publication and the law, decisions will be based on the current law and not on this publication.
In-State Voluntary Disclosure Program
The In-State Voluntary Disclosure Program is available to an in-state purchaser with the purpose of reporting use tax on purchases from a retailer outside this state.
Who Qualifies
To qualify for the In-State Voluntary Disclosure Program, you must meet all of the following conditions:
- You reside or are located within California, and have not previously registered with us;
- You have not previously filed an Individual Use Tax Return with us;
- You have not reported an amount for use tax on your Individual Income Tax Return filed with the Franchise Tax Board;
- You are not engaged in business in this state as a retailer as defined in Revenue and Taxation Code section 6015 (please see publication 107, Do You Need a California Seller's Permit?, for more information);
- You have not been contacted by us for failure to report the use tax as imposed by Revenue and Taxation Code section 6202;
- Your failure to pay the tax or file a return was due to reasonable cause and not as a result of negligence, intentional disregard of the law, or by an intent to evade the tax;
- Your purchase is not of a vehicle, vessel, or aircraft; and
- You voluntarily come forward to us.
How to Apply
To apply for participation in the In-State Voluntary Disclosure Program:
- Register on www.cdtfa.ca.gov by selecting Register. On the Taxpayer Online Services Portal webpage, scroll down and click on Register a New Business Activity or Location or register at any of our office locations, and
- Complete and submit our form CDTFA-38-I, Application for In-State Voluntary Disclosure, within thirty (30) days of registration to the nearest CDTFA office.
It will take approximately two weeks after we have received the application for you to be notified of your status in the program. If you receive an acceptance letter, you will be asked to electronically file your tax return(s). You may file and pay your tax return online by accessing online services either by using your Limited Access Code or by using your username and password. A Limited Access Code is assigned to you when your registration is approved. For access to full online services account features, such as making changes to your account or filing a return online, you are required to create a username and password.
To register for a username and password, go to www.cdtfa.ca.gov. Click on Login, the Taxpayer Online Services Portal webpage will appear, then scroll down and click View Accounts. Create a username and password by clicking on Sign Up Now (listed under Create a Username).
During the username and password registration, you will be prompted to request a security code. The security code will be mailed to you at the mailing address provided within seven to ten (7-10) business days. Once you receive your security code you will return to the CDTFA website and complete the steps above to access your account. If you have not received your security code by the time your return or payment is due, you can use your Limited Access Code to file your return and pay the amount due.
Payment may be made online at the time of filing or a check can be mailed with your account number and the period being paid in the memo line. A printable voucher is available for prepayments made by check, using the Limited Access Functions.
To request a written opinion on whether the CDTFA would approve a voluntary disclosure request, see the instructions on the tab How to Request a Written Opinion.
How to Seek Relief from Penalty
To seek relief of penalty, a written request which sets forth the facts regarding why the late filing or late payment occurred must be made and signed under penalty of perjury.
The CDTFA-38-I application contains a section where you may request relief from penalty.
Out-of-State Voluntary Disclosure Program
The Out-of-State Voluntary Disclosure Program is available for an out-of-state business with the purpose of reporting use tax on sales to consumers in California.
Who Qualifies
To qualify for the Out-of-State Voluntary Disclosure Program, you must meet all of the following conditions:
- You are located outside California and have not previously registered with us;
- You are engaged in business in California as defined by Revenue and Taxation Code section 6203;
- You have not been previously contacted by us regarding your activities in California;
- Your failure to pay the tax or file a return was due to reasonable cause and not as a result of negligence, intentional disregard of the law, or by an intent to evade the tax; and
- You register voluntarily with us.
How to Apply
To apply for participation in the Out-of-State Voluntary Disclosure Program:
- Register on www.cdtfa.ca.gov by selecting Register. On the Taxpayer Online Services Portal webpage, scroll down and click on Register a New Business Activity or Location or register at any of our office locations, and
- Complete and submit our form CDTFA-38, Application for Out-of-State Voluntary Disclosure, within thirty (30) days.
After registration, the completed application for the Out-of-State Voluntary Disclosure Program should be sent to the following address:
Out-of-State Office
California Department of Tax and Fee Administration
3321 Power Inn Road, Suite 130
Sacramento, CA 95826-3893
It will take approximately two weeks after we have received the application for you to be notified of your status in the program. If you receive an acceptance letter, you will be asked to electronically file your tax return(s). You may file and pay your tax return online by accessing online services either by using your Limited Access Code or by using your username and password. A Limited Access Code is assigned to you when your registration is approved. For access to full online services account features, such as making changes to your account or filing a return online, you are required to create a username and password.
To register for a username and password, go to www.cdtfa.ca.gov. Click on Login, the Taxpayer Online Services Portal webpage will appear, then scroll down and click View Accounts. Create a username and password by clicking on Sign Up Now (listed under Create a Username).
During the username and password registration, you will be prompted to request a security code. The security code will be mailed to you to the mailing address provided within seven to ten (7-10) business days. Once you receive your security code you will return to the CDTFA website and complete the steps above to access your account. If you have not received your security code by the time your return or payment is due, you can use your Limited Access Code to file your return and pay the amount due.
Payment may be made online at the time of filing or a check can be mailed with your account number and the period being paid in the memo line. A printable voucher is available for prepayments made by check, using the Limited Access Functions.
To request a written opinion on whether the CDTFA would approve a voluntary disclosure request, see the instructions on the tab How to Request a Written Opinion.
How to Seek Relief from Penalty
To seek relief of penalty, a written request which sets forth the facts regarding why the late filing or late payment occurred must be made and signed under penalty of perjury.
The CDTFA-38 application contains a section where you may request relief from penalty.
How to Request a Written Opinion
To request an opinion as to whether or not the CDTFA would approve your voluntary disclosure request or to discuss your eligibility for consideration under either voluntary disclosure program, please contact the Voluntary Disclosure Specialist at the following address:
Voluntary Disclosure Program
California Department of Tax and Fee Administration
PO Box 942879 MIC:44
Sacramento, CA 94279-0044
1-916-309-5223
1-916-227-6600
1-916-322-0187 (fax)
voluntary.disclosure@cdtfa.ca.gov (email)
You or your representative may request an opinion on your behalf without disclosing your identity.