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- Case Study -

Software company limits their look back period through a VDA with the help of TaxConnex before moving forward with investors


The Challenge: 

Sales tax is especially tricky for the software industry. Software-as-a-service (SaaS) companies often find themselves in a conundrum: their software is hosted in one state but is accessed by their customers across many states. Adding another layer of complexity, the taxability of SaaS differs on a state-by-state basis. Therefore, when a $15 million software company with a compelling B2B product was preparing for investors, they panicked at the realization that they had only been collecting sales tax in their home state, New York.

They were acutely aware that potential investors would rigorously evaluate their financial and legal standing… and they could not guarantee what the investors would conclude relative to sales tax. Due diligence and prospective compliance became top of mind for them.


Why TaxConnex?

Knowledgeable. Trustworthy. Professional.

This software company urgently needed to talk to a knowledgeable sales tax professional they could trust. 

“I attended a TaxConnex webinar where they were able to break down complex sales tax issues into simplified explanations that I could understand, this is why I scheduled a call with them. TaxConnex took the time to understand our personal situation, ask the questions we didn’t know to ask, and address every concern we had.” explained the Controller of the SaaS company.

The first step taken by TaxConnex was a nexus and taxability review to better understand the risk. By identifying which states there was a sales tax obligation, and, of those states, which had significant exposure, TaxConnex was able to advise this client on where voluntary disclosure agreements (VDAs) may be warranted.  

A VDA is an agreement between the taxpayer and the state in which the company acknowledges unpaid tax obligations in exchange for concessions from that state. The benefits include: a limited look back period on tax (usually 3-4 years depending on state) plus a waiver or drastic reduction of penalties by the state.

“Prior to working with TaxConnex we didn’t know that a VDA was an option. The VDA process can be terrifying but working with TaxConnex alleviated a lot of stress for us because they have experience navigating other businesses through similar situations. With a VDA, we were able to gain a limited look back period that saved us from having to pay many more years of back owed taxes. With the help of TaxConnex, we were able to save a lot of money.”


The Results:

TaxConnex successfully mitigated this software company’s sales tax exposure by executing VDAs in 3 states. The software company hired TaxConnex to guide them through the VDA process and subsequently, to manage their entire sales tax compliance process moving forward so that noncompliance would never impact them again. The software company can now enter due diligence knowing their I’s are dotted and T’s are crossed. When you work with TaxConnex you get all of the backup and none of the risk. Sales Tax. Done. 

“Our company has grown since we started working with TaxConnex. Now we have sales in every state which means our tax obligation has grown too. The only thing that hasn’t grown is the burden we face every month when it’s time to file. We have a dedicated practitioner that knows our business inside and out. We send the data and payment to them (TaxConnex), and we get a report back. Everything is handled for us by a team we trust. We have direct access to our practitioner, so our questions get answered promptly. Compliance shouldn’t be this easy!”


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Growing software company, based in New York, that was preparing for funding from outside investors. 


Looking for more info on vda's? Download our guide to vOLUNTARY DISCLOSURE AGreEMENTS!


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