How far back do I owe sales tax?

Your liability starts from the day your nexus began, not from when you registered, not from when you found out, and not from when a notice arrived. The question of how far back you actually have to pay depends on how you resolve it: through voluntary disclosure, through a state audit, or not at all.

The raw liability: it runs from the start of nexus

There’s no legal cap on how far back your obligation theoretically runs. If you hired a remote employee in Ohio in 2019 and never registered, your Ohio sales tax liability starts in 2019. If you crossed the Washington State economic nexus threshold in 2021 and didn’t register until 2024, your Washington liability starts from the crossing date in 2021.

States don’t forgive the liability simply because time passes, they just may not find it, or may not be able to reach it due to statutes of limitations.

How statutes of limitations actually work

Most states have statutes of limitations on sales tax assessments, but they only help you if you filed returns.

For periods where you filed returns: The statute of limitations typically runs 3–4 years from the date the return was filed. After that window, the state generally can’t assess additional tax for that period (unless there’s fraud).

For periods where you never filed returns: The statute of limitations never starts running, because you never filed. In most states, unfiled-period liability can be reached back indefinitely. A state that discovers you had nexus in 2018 but never registered can, in many cases, assess tax for every period back to 2018, or further.

This is the critical asymmetry: sellers who registered and filed, even late, have a limited lookback. Sellers who never registered have potentially unlimited exposure in states that tie the statute of limitations to the filing date.

What a VDA does to the lookback

A Voluntary Disclosure Agreement negotiates the lookback period down to a defined window, typically 3–4 years, regardless of how long your actual exposure runs. Periods before the VDA lookback window are generally forgiven as part of the agreement.

This is why VDAs are valuable for sellers with long exposure histories. A seller with 7 years of uncollected Ohio sales tax might only need to pay 3 years under a VDA. The other 4 years are released.

Most states’ standard VDA terms:

• Lookback period: 3–4 years (varies by state)
• Penalties: Waived
• Interest: Owed on the back taxes within the lookback window (interest is not typically waived, it’s the cost of late payment, not a penalty)
• Going-forward obligation: You register and start filing from the VDA effective date forward

The Multistate Tax Commission multi-state VDA program lets you negotiate this with multiple states simultaneously, with a consistent lookback window across all of them.

The factors that affect your actual lookback

How you got into nexus matters. Economic nexus (crossing the $100K threshold) is measured against a defined window (prior calendar year or trailing 12 months). If your economic nexus threshold crossing was recent, your lookback is naturally shorter. If you’ve had physical nexus from day one of your business, the exposure can be long.

What records you have. The further back you go, the harder it is to reconstruct your taxable sales by state and period. Older payment processors may not have the granularity needed; old Shopify reports may be incomplete. Practical record availability often shapes what’s actually settleable under a VDA.

Whether you’ve already been contacted. A VDA requires you to approach the state voluntarily, before they’ve initiated an audit or contacted you about the liability. If a state has already sent a nexus questionnaire, a demand for records, or a notice of assessment, the VDA window in that state is likely closed. The situation becomes an audit response, which is more expensive and typically has less favorable terms.

The practical lookback you should plan for

If you’re working through this proactively:

• Via VDA: Plan to address 3–4 years of exposure per state. This is the window you’re settling.
• Via direct registration: Expect the state can reach back as far as your first unfiled period, with no defined limit. Penalties apply in full.
• If contacted by a state: The state sets the lookback in an audit situation. Typically 3–6 years for standard audits; longer if they find evidence of substantial underpayment or bad faith.

Related: Can a VDA protect me from penalties and interest on past-due taxes? | I haven’t been collecting sales tax — what do I do now?