A.R.S. tit. 42 ch. 1 — Arizona Revised Statutes Title 42 Chapter 1 — Administration

42-1001. Definitions In this title, unless the context otherwise requires: 1. "Board" or "state board" means either the state board of tax appeals or the state board of equalization, as applicable. 2. "Court" means the tax court or superior court, whichever is applicable. 3. "Department" means the department of revenue. 4. "Director" means the director of the department. 5. "Electronically send" or "send electronically" means to send by either email or the use of an electronic portal. 6. "Electronic portal" means a secure location on a website established by the department that requires the receiver to enter a password to access. 7. "Email" means: (a) An electronic transmission of a message to an email address. (b) If the message contains confidential information, the electronic transmission of a message to an email address using encryption software that requires the receiver to enter a password before the message can be retrieved and viewed. 8. "Internal revenue code" means the United States internal revenue code of 1986, as amended and in effect as of January 1, 2026, including those provisions that became effective during 2025 with the specific adoption of their retroactive effective dates but excluding all changes to the code enacted after January 1, 2026. 42-1002. Department of revenue; director; appointments; compensation A. There is established a department of revenue. B. The direction, operation and control of the department are the responsibility of the director. C. The director shall be appointed by the governor pursuant to section 38-211 and shall serve at the pleasure of the governor. D. Compensation for the director and the personnel required by the department shall be established pursuant to section 38-611 and title 41, chapter 4, article 4. 42-1003. Department organization; director's staff; deputy director; assistant directors; fingerprinting; consumer reports; definitions A. The department consists of such divisions as the director deems necessary to achieve maximum efficiency, economy and effectiveness in administering and collecting taxes. The departmental organization shall provide for administering taxes as prescribed by law and for administrative services to the department, including data processing, accounting, records management, publications, collection of delinquent accounts, personnel services and budget and property control. B. The director may divide the state into a reasonable number of districts and establish a full-time or part-time branch office or offices in each district as may be necessary. In establishing districts and branch offices, the director shall give due consideration to economy of administration and service to the taxpayers. C. The director may employ, appoint and remove, in the manner prescribed by law, such officers, agents, branch office deputies and other staff personnel as the director deems necessary to assist in administering the department. The director's staff may perform such functions as the director prescribes, including budget development, legal research and analysis, tax research, departmental audit and public relations. D. A deputy director of the department may be appointed by the director with the approval of the governor. The deputy director, if appointed, serves at the pleasure of the director with the approval of the governor. The deputy director shall assist the director in administering the department and has the duties and responsibilities as the director assigns. E. The director, with the approval of the governor, may appoint an assistant director to head each division of the department. Any assistant director appointed is directly responsible for the functions performed by the assistant director's division. Each assistant director serves at the pleasure of the director with the approval of the governor. F. The director may appoint other deputies or assistants to conduct hearings, prescribe administrative rules or perform any other duty prescribed for the department by law. G. The director may require officers, agents, deputies and other employees designated by the director to give bond for the faithful performance of their duties in such an amount and with such sureties as the director determines or as prescribed by statute. The department shall pay all premiums on the bonds out of monies appropriated for the administration of the department. H. The director and officers and employees designated by the director may administer an oath to any person or take the acknowledgement of any person in respect of any return or report required by law or the administrative rules of the department. I. The director may reassign the administration of taxes and may assign and delegate the duties, powers and functions of the department among its divisions in order to achieve maximum efficiency, economy and effectiveness. The director or the deputy director, if any, shall enforce cooperation among the divisions in the provision and integration of all functions at all levels of the department. J. The director may obtain a state and federal criminal records check for an applicant for employment for the purpose of hiring personnel or for any employee or contractor if the applicant, employee or contractor may receive or access federal tax information obtained from the internal revenue service in the course of employment with the department. Before making a final offer of employment or for purposes of screening an employee or contractor, the director shall require the applicant, employee or contractor to submit a full set of fingerprints. The director shall submit the fingerprints to the department of public safety for the purpose of obtaining a state and federal criminal records check pursuant to section 41-1750 and Public Law 92-544. The department of public safety may exchange this fingerprint data with the federal bureau of investigation. The department of revenue may disclose information obtained pursuant to this subsection only to members of the department's staff solely for employment purposes. An applicant, employee or contractor is not disqualified from employment under this subsection except in accordance with section 13-904, subsection E. K. The director may obtain a consumer report for an applicant for employment for the purpose of hiring personnel whose job duties include distributing tax revenues pursuant to this title and title 43. Consumer report information may be obtained and used only in accordance with the fair credit reporting act (P.L. 90-321; 84 Stat. 1128; 15 United States Code sections 1681 through 1681x). The consumer report information shall not be the sole reason for the disqualification of the applicant. L. For the purposes of this section: 1. "Applicant" means any person who seeks employment as a new hire or any employee of the department who seeks a transfer, a reclassification or a reassignment to a different position. 2. "Federal tax information" means returns and return information as defined in 26 United States Code section 6103(b) that the department receives directly from the internal revenue service or obtains through an internal revenue service-authorized secondary source and that are subject to the confidentiality protections and safeguarding requirements of the internal revenue code and corresponding federal regulations and guidance. 42-1004. General powers and duties of the department; res judicata; remedies; enforcement; special collections account A. The department shall administer and enforce this title, title 43 and other laws assigned to it and has all the powers and duties prescribed by law for such purposes. In all proceedings prescribed by law the department may act on behalf of this state. In addition, the department shall: 1. Formulate policies, plans and programs to effectuate the missions and purposes of the department. 2. Employ and remove personnel subject to title 41, chapter 4, article 4 and, as applicable, articles 5 and 6, determine the conditions of employment and prescribe the duties and powers of administrative, professional, technical, secretarial, clerical and other personnel as may be necessary in the performance of its duties, and contract for the services of outside advisors, consultants and aides as may be reasonably necessary. 3. Make contracts and incur obligations within the general scope of its activities and operations subject to the availability of its funds. 4. Contract with or assist other departments, agencies or institutions of the state, local, Indian tribal and federal governments in the furtherance of its purposes, objectives and programs. 5. Accept grants, matching funds and direct payments from public or private agencies for the conduct of programs which are consistent with the overall purposes and objectives of the department. 6. Provide information and advice within the scope of its duties subject to the laws on confidentiality of information and departmental rules adopted pursuant to such laws. 7. Advise with and make recommendations to the governor and the legislature on all matters concerning its objectives. 8. Have an official seal which shall be judicially noticed. 9. Provide an integrated, coordinated and uniform system of tax administration and revenue collection for the state, including a coordinated electronic method of collecting state and municipal transaction privilege and affiliated excise taxes. B. The department may: 1. With the approval of the attorney general: (a) Abate any balance owed by a taxpayer if the balance is uncollectible. Related liens, if any, are extinguished on abatement. (b) Abate all or part of the unpaid portion of any tax if the director determines that the administration and collection costs involved would exceed the amount of the tax. 2. Offer publications relating to the administration of state taxes for sale at a price equal to the pro rata cost of publication and distribution. Monies received from the sale of publications shall be placed in a revenue publications revolving fund. Monies in the fund: (a) Shall be used to meet publication and distribution expenses. (b) Are exempt from the provisions of section 35-190 relating to lapsing of appropriations. 3. Enter into contingent fee contracts to collect delinquent state taxes, penalties, interest and other amounts owed to the department under title 43 and chapter 5, article 1 of this title, consistent with the requirements of chapter 2, article 1 of this title. No contract may be entered into for the hiring of auditors on a contingent fee basis except auditors that are hired to enforce title 44, chapter 3. C. In the determination of any issue of law or fact under this title or title 43, neither the department, nor any officer or agency having any administrative duties under this title or title 43, nor any court is bound by the determination of any other executive officer or administrative agency of this state. In the determination of any case arising under this title or title 43, the rule of res judicata is applicable only if the liability involved is for the same year or period as was involved in another case previously determined under this title or title 43. D. The remedies of this state provided for in this title and title 43 are cumulative, and no action taken by the department constitutes an election by this state to pursue any remedy to the exclusion of any other remedy provided by law. E. The attorney general shall prosecute in the name of this state all actions necessary to enforce this title and title 43. The attorney general may defend all actions brought against this state or an officer or agency of this state arising under this title and title 43. The attorney general may delegate the prosecuting authority to any county attorney for prosecution in that county. F. A special collections account is established in the state general fund. All monies collected pursuant to contracts authorized by subsection B, paragraph 3 of this section shall be deposited in the special collections account. The department shall pay from the account all fees and court costs provided for in the contracts authorized under subsection B, paragraph 3 of this section. The department shall allocate the remainder of the amounts collected under subsection B, paragraph 3 of this section to the state or the political subdivision in the proportion that the monies would have been distributed pursuant to chapter 5 of this title or section 43-206, respectively. 42-1005. Powers and duties of director A. The director shall be directly responsible to the governor for the direction, control and operation of the department and shall: 1. Make such administrative rules as he deems necessary and proper to effectively administer the department and enforce this title and title 43. 2. On or before November 15 of each year issue a written report to the governor and legislature concerning the department's activities during the year. In any election year a copy of this report shall be made available to the governor-elect and to the legislature-elect. 3. On or before December 15 of each year issue a supplemental report which shall also contain proposed legislation recommended by the department for the improvement of the system of taxation in the state. 4. In addition to the report required by paragraph 2 of this subsection, on or before November 15 of each year issue a written report to the governor and legislature detailing the approximate costs in lost revenue for all state tax expenditures in effect at the time of the report. For the purpose of this paragraph, "tax expenditure" means any tax provision in state law which exempts, in whole or in part, any persons, income, goods, services or property from the impact of established taxes including deductions, subtractions, exclusions, exemptions, allowances and credits. 5. Annually, on or before January 10, prepare and submit to the legislature a report containing a summary of all the revisions made to the internal revenue code during the preceding calendar year. 6. Provide such assistance to the governor and the legislature as they may require. 7. Delegate such administrative functions, duties or powers as he deems necessary to carry out the efficient operation of the department. B. The director may enter into an agreement with the taxing authority of any state which imposes a tax on or measured by income to provide that compensation paid in that state to residents of this state is exempt in that state from liability for income tax, the requirement for filing a tax return and withholding tax from compensation. Compensation paid in this state to residents of that state is reciprocally exempt from the requirements of title 43. 42-1006. Interrogatories to taxpayers; power to require information; classification A. The director may prepare interrogatories to be propounded to taxpayers concerning matters relating to taxes, with an oath or affirmation annexed, which shall be fully answered by the taxpayers to whom they are submitted. B. Any person who knowingly makes a false answer to any proper question submitted to him by the director or who knowingly fails to answer any question submitted, or to take or subscribe the oath or affirmation annexed thereto, is guilty of a class 2 misdemeanor. C. The director may administer oaths or affirmations, issue subpoenas requiring attendance and testimony of witnesses, take evidence and require by subpoena duces tecum the production of books, papers and other documents which may be relevant to the powers and duties of the department. D. The director may hold hearings to obtain information deemed necessary to carry out the powers and duties of the department. Hearings shall be held at a time and place and in the manner prescribed by the director, and notice of such hearing shall be given in the manner and form prescribed by the director. E. In the case of refusal of the person to obey a subpoena issued by the director, the superior court, upon application by the director, shall issue to such person an order requiring him to appear before it and to produce evidence if so ordered, or give testimony, or to appear before the court and show cause why he should not be required to do so. Failure to obey such order of the court may be punished by the court as contempt. 42-1007. Service of process upon the director If an action is commenced against the department, a copy of the summons and the complaint or the notice of appeal, whichever is applicable, shall be served upon the director to effect service upon the department. 42-1008. Employee, agent, contractor preparation of tax returns for compensation prohibited An employee of the department of revenue, any individual acting as an agent or contractor of the department to perform any duties of the department or any manager or supervisor of an individual acting as an agent or contractor of the department shall not for compensation prepare or assist in preparing any tax return that is required to be filed with the federal, the state or a local government. A violation of this section is grounds for immediate dismissal or removal from any duties performed as an agent or contractor of the department as allowed by law. 42-1009. Department of revenue tax system modernization project advisory committee; membership (Rpld. 1/1/32) The department of revenue tax system modernization project advisory committee is established and shall serve as the liaison between the department and the users of the tax system. The committee shall consist of the following members: 1. The director of the department of revenue or the director's designee who shall serve as the chairperson of the committee. 2. The director of the department of administration or the director's designee. 3. The auditor general or the auditor general's designee as a nonvoting member. 4. The director of the joint legislative budget committee or the director's designee as a nonvoting member. 5. The director of the governor's office of strategic planning and budgeting or the director's designee. 6. One member who represents a city or town in this state. The director of the department of revenue shall appoint this member. 7. One member who represents a county in this state. The director of the department of revenue shall appoint this member. 8. One member who represents the business community in this state. The director of the department of revenue shall appoint this member. 9. One member who is appointed by the president of the senate. 10. One member who is appointed by the speaker of the house of representatives. 42-1051. Definitions In this article, unless the context otherwise requires: 1. "State" means the District of Columbia and any state, territory or possession of the United States. 2. "Tax" means: (a) Assessments lawfully made, whether based on a return or other disclosure of the taxpayer, upon the information and belief of the taxing authority, or otherwise. (b) Penalties lawfully imposed pursuant to a taxing statute. (c) Interest charges lawfully added to the tax liability which constitutes the subject of the action. 42-1052. Suits to enforce state tax; comity If authorized by the law of another state, the attorney general or any person authorized by him, or any appropriate officer of a political subdivision of this state, may bring suits in the courts of such other state to collect taxes legally due this state or the political subdivision. 42-1053. Recognition and enforcement of other states' taxes A. The officials of states which extend a comity to this state in authorizing suits as provided for in section 42-1052 may sue for the collection of such taxes in the courts of this state. A certificate issued by the secretary of state under the great seal of the state that such officers have authority to collect the tax is conclusive evidence of such authority. B. The courts of this state shall recognize and enforce liabilities for taxes lawfully imposed by any other state, or the political subdivision thereof, which extends such comity to this state. 42-1101. Application This article and chapter 2 of this title apply generally to the administration of income tax, withholding tax, transaction privilege tax, telecommunication services excise tax, county excise taxes and any other privilege excise tax administered by the department, severance tax, use tax, luxury tax, tax on water use and jet fuel excise and use tax. 42-1101.01. Definitions In this article, unless the context otherwise requires: 1. "Audit" means a review or examination of a taxpayer's accounts, financial information, books and records and any other document to ensure information is reported correctly on a return in accordance with this chapter and to verify the reported amount of tax is correct. 2. "Electronic return preparer" means a person who for compensation prepares an electronic return, statement or other document or prepares a substantial portion of an electronic return, statement or other document or transforms a paper version of a completed return, statement or other document to an electronic version of the same return, statement or other document for filing with the department. Electronic return preparer does not include a person who for compensation provides only computational and informational software used to prepare and file taxes. 3. "Electronic return transmitter" means a person who receives the electronic return, statement or other document from a taxpayer or electronic return preparer for ultimate transmittal to the department. 4. "Return preparer": (a) Means any person that prepares a return, statement or other document or substantial portion of a return, statement or other document for compensation, regardless of the media used to prepare the return. (b) Does not include a person because the person: (i) Furnishes typing, reproducing or other mechanical assistance. (ii) Prepares a return, statement or other document for an employer and is regularly and continuously employed by the employer. (iii) Prepares as a fiduciary a return, statement or other document for any person. (iv) Prepares a claim for refund or a return, statement or other document for a taxpayer in response to any notice of deficiency issued to the taxpayer or in response to any waiver of restriction after the commencement of an audit of the taxpayer. (v) Furnishes computational and informational software used by the taxpayer to prepare the taxpayer's return, statement or other document. (vi) Only prepares payment documents for payment made to the department pursuant to section 42-1129. 5. "Return, statement or other document" means any return, claim for refund, statement or other document that is required or authorized to be filed with the department pursuant to this title or title 43, including returns for any political subdivision of this state for which the department collects taxes. 42-1102. Taxpayer bonds; definition A. If the department deems it necessary to protect the revenues to be collected under this title and title 43, it may require a person liable for the tax to file a bond to secure the payment of the tax, penalty or interest, which may become due from that person. The bond shall be: 1. Issued by a surety company authorized to transact business in this state and approved by the director of the department of insurance and financial institutions of this state as to solvency and responsibility or composed of securities or cash that are deposited with, and kept in the custody of, the department. 2. Except as otherwise provided in this section, in the amount that the department prescribes by administrative rule to secure the payment of any tax, penalty or interest, which may become due from the person. B. For the purposes of licenses to sell tobacco products issued under section 42-3401, the amount of the bond required under this section is the greater of $500 or four times the average monthly tax liability. For the purposes of determining the bond amount, the average monthly tax liability is equal to the average monthly tax due from the applicant for the preceding six consecutive months. If an applicant does not have a six-month payment history, the bond amount is a minimum of $500. If an applicant provides a surety bond and the bond lapses, the applicant shall deposit with the department cash or other security in an amount equal to the lapsed surety bond within five business days after the applicant's receipt of written notification by the department. The bond amount may be increased or decreased as necessary based on any reason listed in subsection D of this section or a change in the applicant's previous filing period, filing compliance record or payment history. If the bond amount is increased above the amount computed under this subsection, the applicant may request a hearing pursuant to subsection C of this section to show why the order increasing the bond amount is in error. C. If the department determines that a person is to file a bond it shall notify the person to that effect, specifying the amount of the bond required. The person shall file the bond within five days after the giving of notice unless within that time the person requests in writing a hearing before the department at which time the department shall determine the necessity, propriety and amount of the bond. The determination is final unless within fifteen days after the giving of notice of the determination the person appeals the determination to the state board of tax appeals. The board shall decide on the appeal within fifteen days of its receipt. The bond, at any time without notice, may be applied to any tax, penalties or interest due, and for that purpose the securities may be sold at public or private sale without notice to the depositor. D. For purposes of this section a bond may be required if: 1. After investigation of financial status, the department determines that an applicant for a new license would be unable to timely remit amounts due. 2. An applicant for a new license held a license for a prior business, and the remittance record for the prior business falls within one of the conditions in paragraph 5 of this subsection. 3. The department experienced collection problems while the applicant was engaged in business under a prior license. 4. The applicant is substantially similar to a person who would have been required to post a bond under paragraph 5 of this subsection or the person had a previous license that was revoked. An applicant is substantially similar if it is owned or controlled by persons who owned or controlled a previous licensee. 5. An existing licensee has had two or more delinquencies in remitting tax during the preceding twenty-four months if filing on a quarterly or less frequent basis or four or more delinquencies during the preceding twenty-four months if filing on a monthly or more frequent basis. E. If a licensee who is required to post a bond or security maintains a good filing and payment record for a period of two years, the licensee may request that the department waive the continued bond or security requirement. F. For the purposes of this section, "person" includes a firm, partnership, joint venture, association, corporation, sole proprietorship or other business or governmental entity subject to a tax administered by this article but does not include an individual subject to individual income tax. 42-1103. Enjoining delinquent taxpayer from engaging or continuing in business A. In order to ensure or to compel payment of taxes and to aid in enforcing this article, the director may apply to the tax court to enjoin any delinquent taxpayer or person who may be or may become liable for payment of any tax from engaging or continuing in business until the person ceases to be a delinquent taxpayer or complies with other requirements which are reasonably necessary to protect the revenues of this state and which are prescribed by the director. B. On application for an injunction against a delinquent taxpayer, the court may forthwith issue an order temporarily restraining the taxpayer from doing business. The court shall hear the matter within three days and, on a showing by a preponderance of evidence that the taxpayer is delinquent and has been given notice of the hearing as required by law, the court may enjoin the taxpayer from engaging or continuing in business in this state until the taxpayer ceases to be delinquent. On issuing an injunction, the court may also order the sheriff to seal the taxpayer's business premises and may allow the taxpayer access to the premises only on the approval of the court. C. On application for an injunction against a person other than a delinquent taxpayer, the court may issue an order temporarily restraining the person from engaging or continuing in business. The court shall hear the matter within three days and on a showing that the person has been given notice of the hearing as required by law, that demand has been made on the taxpayer to furnish security, that the taxpayer has not furnished security and that the director considers the collection from the primarily responsible person of the total amount of tax due or reasonably expected to become due to be in jeopardy, the court may forthwith enjoin the person from engaging or continuing in business until the person complies in full with the demand of the director for furnishing security. D. The court shall not issue a temporary restraining order or injunction under this section against any person who has furnished security pursuant to section 42-1102, 42-5006 or 42-5007. On a showing to the court by any person against whom a temporary restraining order or injunction has issued under this section that the person has furnished such security, the court shall dissolve or set aside the temporary restraining order or injunction. 42-1103.01. Action to enjoin return preparers A. The director may apply to the tax court to enjoin any return preparer from engaging in business if the return preparer has: 1. Been subject to a civil or criminal penalty prescribed by section 42-1125 or 42-1127. 2. Misrepresented the preparer's experience or education. 3. Guaranteed the payment of any tax refund or the allowance of any tax credit. 4. Engaged in any other fraudulent or deceptive conduct that substantially interferes with the proper administration of this title or title 43. B. On application by the director and after a hearing, the court may enjoin the return preparer from engaging in business as a return preparer. 42-1103.02. Understatement of taxpayer's liability by return preparer; civil penalty; definition A. The department may impose a civil penalty of two hundred fifty dollars against a return preparer who knew or reasonably should have known that an understatement of liability was on a return or claim for refund. The penalty under this subsection may be imposed only if there was not a realistic possibility that the position would be sustained on its merits and the position was not disclosed to the department in the return or in a statement attached to the return. B. The department may impose a civil penalty of one thousand dollars against a return preparer who wilfully made an understatement of liability on a return or claim for refund. C. A return preparer is required to only pay eighty-five per cent of the imposed penalty if the payment is made within thirty days from the date of the receipt of notification that the penalty was imposed. A return preparer may not appeal to the department pursuant to section 42-1251 if the return preparer fails to file the appeal within thirty days from the date of the receipt of notification that the penalty was imposed. If there is a final order or decision stating that the return preparer did not make an understatement of liability in a return or claim for refund, the department shall refund any penalty amount paid and interest to the return preparer. D. For the purposes of this section, "understatement of liability" means any understatement of the net amount payable with respect to any imposed tax or any overstatement of the net amount creditable or refundable with respect to any tax. 42-1103.03. Suspension from electronic filing program A. The department may suspend an electronic return preparer from participating in the electronic filing program if the department determines that the electronic return preparer has failed to comply with any of the department's electronic filing program requirements, including requirements that are set forth in rules, manuals, rulings or procedures prescribed by the department for the program. B. Within one hundred eighty days of the mailing date of the notice of suspension from the electronic filing program, the electronic return preparer may petition the department to review the action taken pursuant to section 42-1251. The petition shall set forth the reasons why the suspension should be lifted. Within fifteen days after the request for review, the department shall determine whether the suspension should be lifted. C. Within thirty days after the department notifies the electronic return preparer of the determination under subsection B of this section, the electronic return preparer may bring a civil action in tax court for a determination under this subsection. Within twenty days after service of process is made on the department, the tax court shall determine whether the suspension should be lifted. If the electronic return preparer requests an extension of the twenty day period and establishes reasonable grounds why an extension should be granted, the court may grant an extension of not more than forty additional days. A determination made by the tax court under this subsection is final except as provided in section 12-170, subsection C. 42-1104. Statute of limitation; exceptions A. For the taxes to which this article applies, every notice of every additional tax due shall be prepared on forms prescribed by the department and mailed within four years after the report or return is required to be filed or within four years after the report or return is filed, whichever period expires later. For the purposes of this section, the requirement that the notice be mailed shall include methods allowed in lieu of mail under section 42-1108 or 42-1109. B. The following are exceptions to the general rules prescribed by this section, and a deficiency assessment may be issued in any of the following cases: 1. The department may assess the tax or begin a proceeding in court for collecting the tax at any time: (a) In the case of a false or fraudulent return with the intent to evade tax. (b) In the case of failure to file a return for any tax administered under this title other than income tax and withholding tax. (c) In the case of failure to file an income tax or withholding tax return if it is shown that the failure was due to an intent to evade tax. 2. If a taxpayer omits from gross income, gross receipts, gross proceeds of sales or Arizona adjusted gross income, as defined for purposes of chapter 5 of this title or title 43, an amount that is properly includible and that exceeds twenty-five percent of the amount of gross income stated in the return, the tax may be assessed at any time within six years after the return was filed. 3. If a taxpayer during a taxable year sells at a gain property used as the taxpayer's principal residence, the statutory period for assessing any deficiency attributable to any part of the gain does not expire before the expiration of four years after the date the taxpayer notifies the United States internal revenue service pursuant to the United States internal revenue code. 4. If a claim for credit or refund relates to an overpayment on account of the deductibility of a debt as one that became worthless, a loss from worthlessness of a security, an erroneous inclusion of an amount attributable to the recovery of a bad debt, prior tax or delinquency amount due to an adjustment of a bad debt deduction or a loss deduction from worthlessness of a security, the period of limitation is seven years after the date prescribed by law for filing the return for the year with respect to which the claim is made. 5. If a taxpayer fails to report a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or fails to file an amended return as required by section 43-327, the department may assess any deficiency resulting from such adjustments within four years after the change, correction or amended return is reported to or filed with the United States internal revenue service regardless of any previous examinations by the department. 6. If a taxpayer is required to report a change or correction by the commissioner of internal revenue or other officer of the United States or other competent authority or to file an amended return as required by section 43-327 and does report the change or files the return, any deficiency resulting from the adjustments may be assessed within six months after the date the notice of amended return is filed with the department by the taxpayer, or within the period provided in subsection A of this section or paragraph 1 or 2 of this subsection, whichever period expires last. 7. Except as provided in paragraph 8 of this subsection, if a taxpayer agrees with the United States commissioner of internal revenue for an extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, the period for mailing a notice of a proposed income tax deficiency is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later. 8. If a taxpayer agrees with the United States commissioner of internal revenue for a limited extension or renewals of the period for proposing and assessing deficiencies in federal income taxes for any year, then, solely with respect to those items specifically enumerated in this agreement, the period for mailing a notice of a proposed income tax deficiency, or claiming a refund, is four years after the return was filed or six months after the date of the expiration of the agreed period for assessing deficiencies in the federal income tax, whichever period expires later. 9. If, before the time prescribed for mailing a notice of a proposed deficiency assessment expires, the taxpayer consents in writing to an assessment after that time, the assessment may be made at any time before the period agreed on expires. The period agreed on may be extended by subsequent written agreements made before the period previously agreed on expires. 10. If a taxpayer fails to file a report or return for income tax or withholding tax, the department may assess the tax within seven years after the date the report or return was required to be filed. C. Notwithstanding subsection A of this section and subsection B, paragraphs 1 and 2 of this section, a taxpayer who has a duty to collect use tax shall not be assessed tax pursuant to chapter 5, article 4 of this title for any retail sales to purchasers who were licensed pursuant to section 42-5005 or registered pursuant to section 42-5154 and who filed use tax returns for the reporting period in which the sale was made, if the reporting period in which the sale was made is more than four years from the notice of proposed deficiency. If, before this time limitation expires, the taxpayer consents in writing to an assessment after that time for the transactions, a subsequent assessment may include any transaction within the agreed extended period. The period agreed to may be extended by subsequent written agreements made before the period previously agreed to expires. 42-1105. Taxpayer identification, verification and records; retention A. The federal taxpayer identification number, assigned pursuant to section 6109 of the internal revenue code, is the taxpayer identifier for purposes of the taxes administered pursuant to this article. Each person who is required to make a return, statement or other document shall include the identifier in order to secure the person's proper identification. If the return, statement or other document is made, electronically or otherwise, by another person on behalf of the taxpayer, the taxpayer shall furnish the identifier to the other person, and the person shall furnish both the taxpayer's identifier and the person's own identifier with the return, statement or document. B. The department may prescribe by administrative rule alternative methods for signing, subscribing or verifying a return, statement or other document required or authorized to be filed with the department that have the same validity and consequence as the actual signature or written declaration of the taxpayer or other person required to sign, subscribe or verify the return, statement or other document. While the department is adopting a rule prescribing alternative methods for signing, subscribing or verifying a return, statement or other document, the director, by tax ruling, may waive the requirement of a signature for a particular type or class of return, statement or other document required to be filed with the department. This subsection does not apply if the alternative method for signing a return, statement or other document is an electronic signature. The department shall accept or require electronic signatures in the manner prescribed in section 42-1131. For purposes of this subsection, "tax ruling" has the same meaning prescribed in section 42-2052. C. A person who is a return preparer or an electronic return preparer shall furnish a completed copy of the return, statement or other document to the taxpayer no later than the time the return, statement or other document is presented for the taxpayer's signature. D. Except as provided in section 42-3010, every person who is subject to the taxes administered pursuant to this article shall keep and preserve copies of filed tax returns, including any attachments to the tax return, any signature documents used for the tax return, suitable records and other books and accounts necessary to determine the tax for which the person is liable for the period prescribed in section 42-1104. The books, records and accounts shall be open for inspection at any reasonable time by the department or its authorized agent. E. Except as provided in section 42-3010, a return preparer or electronic return preparer shall keep copies of the return, statement or other document for six years for transaction privilege and use tax returns and four years for all other returns, statements and other documents following the date on which the return, statement or other document was due to be filed or was presented to the taxpayer for signature, whichever is later. F. Except as provided in section 42-3010, the department may require by administrative rule electronic return preparers to keep for each prepared return, statement or other document the following documents for six years for transaction privilege and use tax returns and four years for all other returns, statements and other documents following the later of either the date on which the return, statement or other document was due to be filed with the department or was presented to the taxpayer for signature: 1. The signature document or tax return form bearing the taxpayer's original signature in a manner prescribed by the department by administrative rule or tax ruling. 2. Any attachments to the return, statement or other document required to be submitted to the department if the return, statement or other document had not been electronically transmitted to the department. G. The operator of a swap meet, flea market, fair, carnival, festival, circus or other transient selling event shall maintain a current list of vendors conducting business on the premises as sellers. The list shall include each vendor name, business name and business address. On written notice, the department may require an operator to submit a copy of the list at any time to the department. H. For at least the period of time prescribed by section 42-1104, the department shall retain any return, statement or other document as a record pursuant to sections 41-151.14, 41-151.15, 41-151.16, 41-151.17 and 41-151.19. Anything submitted with the return, statement or other document that is not required, authorized or requested by the department is not part of the record and may be destroyed, unless it is, at the department's reasonable discretion, of more than de minimis value. Copies of original documents of which the department reasonably expects the taxpayer has retained any originals are presumed to be of de minimis value for purposes of this section. If the department determines that any document that is not required, authorized or requested by the department pursuant to this subsection is of more than de minimis value, within ten days after receipt the department shall notify the taxpayer in writing or by electronic means of its intent to destroy the document. If the taxpayer requests the return of any document included in the notice, the department shall immediately comply, although the director may require the taxpayer to pay any shipping costs to return the document. If the taxpayer does not request the return of the documents within thirty days after the date on the notice or the taxpayer consents to the destruction of the documents, whichever occurs first, the department may destroy the documents included in the notice. 42-1105.01. Signatures; return preparers and electronic return preparers; definition Any person who is a return preparer or an electronic return preparer shall sign the prepared return, statement or other document according to the department’s administrative rules or tax rulings. For the purposes of this section, "tax ruling" has the same meaning prescribed in section 42-2052. 42-1105.02. Date of filing by electronic means; definitions A. Any return, statement or other document that is electronically filed pursuant to an electronic filing program established by the department shall be deemed filed and received by the department on the date of the electronic postmark. If the taxpayer and the electronic return preparer or the electronic return transmitter are in different time zones, it is the taxpayer's time zone, as determined by the taxpayer’s address, that controls the timeliness of the electronically filed return, statement or other document. When a return, statement or other document has been electronically received on the host system of more than one electronic return preparer or electronic return transmitter during its ultimate transmission to the department, the return, statement or other document shall be deemed filed and received by the department on the date of the earliest electronic postmark. B. Any return, statement or other document that is filed under subsection A of this section and that is not received by the department shall be deemed filed and received on the date of the electronic filing, as evidenced by the electronic postmark if the sender: 1. Establishes the date of the electronic filing. 2. Files a duplicate filing with the department within ten days after the department notifies the sender in writing of the nonreceipt of the filing. C. If the due date of any return, statement or other document filed under subsection A of this section falls on a Saturday, Sunday or legal holiday, the filing shall be considered timely if it is performed on the next business day. D. In this section, unless the context otherwise requires: 1. "Electronic filing program" means any program established by the department that authorizes the electronic filing of a return, statement or other document. 2. "Electronic postmark" means a record of the date and time in a particular time zone that the return, statement or other document is electronically received on the host system of the electronic return preparer or electronic return transmitter that participates in the transmission of the electronic return, statement or other document to the department. 42-1105.03. Unauthorized disclosure; violation; classification A return preparer, electronic return preparer or electronic return transmitter is guilty of a class 3 misdemeanor if the preparer or transmitter knowingly or recklessly discloses information related to a return, statement or other document to another person who is not authorized to receive that information under this title or title 43. 42-1106. Time limitations for credit and refund claims A. The period within which a claim for credit or refund may be filed, or credit or refund may be allowed or made if no claim is filed, is the period within which the department may make an assessment under section 42-1104. B. If the total amount withheld under section 43-401 exceeds the amount of the tax on the employee's entire taxable income as computed under title 43, no refund, credit or offset may be made to the employee unless the employee files a return, in respect of which the tax withheld might be credited, within four years from the due date of the original return. C. If a refund or credit of any overpayment of tax resulting from the amendments made to section 121(d)(9) of the internal revenue code by the military family tax relief act of 2003 (P.L. 108-121) is prevented by the operation of any law or rule of law, including res judicata, at any time before the close of the one year period beginning on November 11, 2003, the refund or credit may nevertheless be made or allowed if the claim is filed before the close of this period. D. The failure to begin an action for refund or credit within the time specified in this section is a bar against the recovery of taxes by the taxpayer. 42-1107. Extension of time for filing returns A. The department, pursuant to administrative rule, may grant an automatic extension of time for filing an income tax return under title 43 if at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period is paid and if the request for extension is received or mailed on or before the date the return is otherwise due to be filed. If at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period has not been paid at the time of filing for the extension, the taxpayer is subject to a penalty of one-half of one percent of the tax not paid for each thirty-day period or fraction of a thirty-day period elapsing between the date the return is otherwise due to be filed and the date the tax is paid, not to exceed a total of twenty-five percent. If a taxpayer is subject to both of the penalties prescribed under this section and section 42-1125, the maximum combined penalty that may be imposed on the taxpayer under both sections shall not exceed twenty-five percent of the tax found to be remaining due. A taxpayer is not subject to the penalties prescribed under section 42-1125, subsection D if the taxpayer is subject to the penalties prescribed under this section. If in its judgment good cause exists, the department may grant a further extension or extensions of time for filing the return pursuant to administrative rule. Except as provided in subsection D of this section, an extension or extensions granted under this subsection may not aggregate more than six months after the due date provided for the filing of returns. B. If the taxpayer has been granted an extension or extensions of time within which to file a federal income tax return for any taxable year, the taxpayer is deemed to have been granted the same extension of time for filing the Arizona income tax return if the taxpayer has paid at least ninety percent of the tax liability disclosed by the taxpayer's return for the reporting period. If at the time the taxpayer has been granted a federal extension or extensions the taxpayer is required to pay at least ninety percent under this section, the payment shall be in a manner prescribed by the department. C. The department, for good cause, may extend the time for making any other return required by chapter 5, articles 1, 4 and 5 of this title, and may grant such reasonable additional time in which to make the return as it deems proper, but the time for filing the return shall not be extended beyond the first day of the third month next succeeding the regular due date of the return. D. The due date for an income tax return for a taxpayer filing a corporate or exempt organization return that has been granted an extension or extensions pursuant to subsection A or B of this section is seven months after the initial due date provided for filing returns. This subsection does not include small business corporation returns filed under section 43-1126. 42-1108. Audit; deficiency assessments; nonaudit adjustments; electronic filing A. If a taxpayer fails to file a return required by this title or title 43, or if the department is not satisfied with the return or payment of the amount of tax required to be paid under either title, the department may examine any return, including any books, papers, records or memoranda relating to the return, to determine the correct amount of tax. This examination must occur within the time periods prescribed by section 42-1104 and may be accomplished through a detailed review of transactions or records or by a statistically valid sampling method. B. The department shall give the taxpayer notice of its determination of a deficiency by mail or as prescribed by subsection C of this section, and the deficiency, plus penalties and interest, is final forty-five days after the date of receipt of the notice to the taxpayer unless an appeal is taken to the department. For individual income tax, the period is ninety days after the date of mailing. In the case of a joint income tax return, the notice may be a single joint notice mailed to the last known address, but if either spouse notifies the department that separate residences have been established, the department shall mail duplicate originals of the joint notice to each spouse. C. The department may issue notice of its determination of a deficiency under subsection B of this section by using an electronic portal in lieu of mail, if all of the requirements of this subsection are met, after December 31, 2018 or when the department establishes the electronic portal, whichever is later. The use of the electronic portal in lieu of mail is subject to the following requirements and conditions: 1. The taxpayer agrees in writing to allow the department to use the electronic portal to issue notice of the department's determination of deficiency for specified tax periods. The agreement shall include an email address that the department may use to notify the taxpayer as required by paragraph 2 of this subsection. A taxpayer that provides an email address is certifying that the taxpayer regularly monitors that email address. If the taxpayer's email address changes, the taxpayer shall notify the department of a new email address. 2. The department shall notify the taxpayer, using the taxpayer's e-mail address, on the same day the notice of its determination of a deficiency is posted to the electronic portal. 3. The date of receipt for a notice provided by electronic portal is the later of the date the notice is posted to the electronic portal or the date the notification is received by the taxpayer. A notification sent by e-mail is considered to be received by the taxpayer on the day it is sent by the department. D. If a deficiency is determined and the assessment becomes final, the department shall mail notice and demand to the taxpayer for the payment of the deficiency. Notwithstanding section 42-1125, subsection E, the deficiency assessed is due and payable at the expiration of ten days after the date of the notice and demand. E. A certificate by the department of the mailing or e-mailing of the notices specified in this section is prima facie evidence of the assessment of the deficiency and the giving of the notices. F. Any amount of tax in excess of that disclosed by the return due to a nonaudit adjustment, as listed in subsection G or H of this section, notice of which has been mailed to the taxpayer, is not a deficiency assessment within the meaning of this section. The taxpayer may not protest or appeal as in the case of a deficiency assessment, based on such a notice, and the assessment or collection of the amount of tax erroneously omitted in the return is not prohibited by this article. G. An adjustment due to any of the following is considered a nonaudit adjustment: 1. An addition, subtraction, multiplication, division or other mathematical error shown on any return. 2. The failure of the taxpayer to properly compute the tax liability based on the taxable income reported on the return. 3. An incorrect usage or selection of information for a filed return from tax tables, schedules or similar documents provided by the department if the incorrect usage is apparent from the existence of other information on the return. 4. An entry on a return that is inconsistent with an entry on a schedule, form, statement, list or other document filed with the return. 5. An omission of information required on the return to substantiate an entry. 6. An entry on a return of a deduction or credit in an amount that exceeds a statutory limit if the limit is a monetary figure, a percentage, a ratio or a fraction and the items entered into the application of this limit appear on the return, including claiming a deduction or credit that is not authorized by statute for the taxable period. 7. Missing or incorrect taxpayer identification numbers for the purposes of claiming exemptions or credits. 8. An entry of a credit or deduction that requires a preapproval if the credit or deduction has not been preapproved or if the entry is for more than the preapproved amount. 9. An entry of a credit or deduction amount carried forward from a prior year that is outside of the statutory period allowed for the carryforward or is for an amount that is inconsistent with the taxpayer's prior year returns. H. If a taxpayer that files its return electronically is allowed to input the information from a document into the electronic filing program instead of providing the actual document with the return, the department may request a copy of the document from the taxpayer at any time. If the taxpayer provides the document, the department may adjust the return to reflect the amounts on the document. If the taxpayer does not provide the requested document within the period provided by the department, the department may deny any deduction, credit or withholding that the document is intended to substantiate. An adjustment made pursuant to this subsection is considered a nonaudit adjustment under subsection G, paragraph 4 of this section, even though the actual document is not included with the electronically filed return if the department requests the document within sixty days after the due date of the return or the date on which the return was filed, whichever is later. 42-1109. Failure to file return; false or fraudulent return; limited scope review; mandamus; order to produce documents; electronic portal A. If a person who is required to file a report or return fails to do so within fifteen days after written demand by the department, the department shall proceed to obtain facts and information on which to base the tax, and for that purpose the departmen