Tax Audit Protest and Appeal — Arizona

Tax Audit Protest and Appeal (ARIZONA)

Quick-Reference Summary

Part A — Appeals-Officer Conference Request Letter

Sender Letterhead

[LAW FIRM OR TAXPAYER NAME]
[Street Address]
[City], Arizona [ZIP]
Telephone: [(___) ___-____]
Email: [______________________]
[AZ Bar No. (if attorney): ____________]

Date and Recipient

Date: [__/__/____]

VIA EMAIL AND CERTIFIED MAIL, RETURN RECEIPT REQUESTED

[AUDITOR / AUDIT SUPERVISOR NAME]
Arizona Department of Revenue
[Audit Division — Individual / Corporate / TPT / Withholding]
1600 W. Monroe Street, Division Code [__]
Phoenix, AZ 85007

Re Block

Re: Request for Appeals-Officer Conference / Protest Companion Letter
Taxpayer: [TAXPAYER LEGAL NAME]
AZ TPT License No. / SSN / FEIN: [____________]
Tax Type: [Individual Income / Corporate Income / TPT / Withholding / Other]
Period(s) at Issue: [MM/YYYY] – [MM/YYYY]
Notice of Proposed Assessment ("NoPA") / Determination Date: [__/__/____]
NoPA Reference No.: [____________]
Total Proposed Assessment: $[__________]

Body

Dear [Auditor / Supervisor]:

Taxpayer has timely filed (or is timely filing today) a written petition concerning the above Notice of Proposed Assessment under A.R.S. § 42-1251(A). If this is not an individual-income-tax appeal, Taxpayer requests a conference with a designated Department appeals officer under A.R.S. § 42-1251(B)-(C) to clarify disputed facts and legal issues, identify useful additional documentation, and discuss whether the matter can be resolved or bypass the hearing process.

1. Authority. A.R.S. § 42-1251(B) permits a non-individual-income-tax appellant that has conferred with a designated appeals officer to bypass the Department hearing process and appeal to BOTA or bring an action in Tax Court. Under subsection (C), if the Department fails to schedule a requested conference within forty-five days, the appellant may bypass the meeting.

2. Representative. [REPRESENTATIVE NAME, FIRM, ADDRESS, PHONE, EMAIL, BAR NO.] is authorized to represent Taxpayer. A duly executed Arizona Form 285 is enclosed.

3. Disputed Items. Principal disputed items are described in Exhibit A and include:

4. Conference Format. Taxpayer requests a [telephone / video / in-person] conference with a designated Department appeals officer.

5. Bypass Route. [If this is not an individual-income-tax case:] After the conference, Taxpayer reserves the right under A.R.S. § 42-1251(B) to bypass the Department hearing process and appeal directly to BOTA or bring an action in the Arizona Tax Court. If the Department does not schedule the requested meeting within forty-five days, Taxpayer reserves the subsection (C) bypass route.

6. Reservation of Rights. Taxpayer reserves all rights to escalate to a formal hearing, to appeal to BOTA under A.R.S. § 42-1253, to bring an action in the Arizona Tax Court under A.R.S. § 42-1254, and to seek a refund under A.R.S. § 42-1118.

Respectfully,

________________________________
[NAME], [TITLE]
[For:] [TAXPAYER]

Part B — Formal Protest / Petition for Hearing or Redetermination

I. Caption

STATE OF ARIZONA
DEPARTMENT OF REVENUE
HEARING OFFICE / OFFICE OF ADMINISTRATIVE HEARINGS

PROTEST AND PETITION FOR HEARING / REDETERMINATION
(A.R.S. §§ 42-1108, 42-1251; A.A.C. R15-10)

II. Identifying Information

1. Taxpayer: [Name]; [Mailing address]; [Phone]; [Email].
2. Tax IDs: SSN [____]; FEIN [____]; AZ TPT License [____].
3. Tax Type / Period(s): [____].
4. Representative: [NAME, FIRM, ADDRESS, PHONE, EMAIL, AZ BAR NO.]; Form 285 attached as Exhibit 1.
5. NoPA / Determination Protested: Notice of Proposed Assessment dated [__/__/____]; Ref. No. [______]; attached as Exhibit 2.
6. Amount in dispute:

7. Uncontested amount: Taxpayer [has paid / will pay] the uncontested portion ($[____]) and any uncontested local TPT to stop the interest clock as to that amount. Exhibit 3.

III. Timeliness

For an individual-income-tax matter, the NoPA was mailed on [__/__/____], and the 90-day petition period expires on [__/__/____]. For another covered tax, the NoPA was received on [__/__/____], and the 45-day petition period expires on [__/__/____]. This Protest is filed on [__/__/____] within the applicable period under A.R.S. § 42-1251(A).

IV. Election

Taxpayer elects:

☐ Hearing requested under A.R.S. § 42-1251(A); OR

☐ Appeals-officer conference requested for a non-individual-income-tax appeal under A.R.S. § 42-1251(B)-(C), with the statutory bypass routes reserved.

V. Statement of Facts

1. Taxpayer is a [_____] with principal place of business at [_____].
2. During the audit period, Taxpayer's business activities consisted of [_____].
3. ADOR commenced an audit on [__/__/____] under [audit type].
4. The audit yielded a NoPA dated [__/__/____] reflecting [SUMMARIZE ADJUSTMENTS].
5. The audit workpapers, IDR responses, and reconciliations are attached as Exhibit 4.

VI. Grounds for Protest (A.R.S. § 42-1251(A): "reasons why the redetermination should be granted and the amount in which any tax, interest and penalties should be reduced")

☐ Ground 1 — Erroneous Application of Statute. The Department erroneously [included/excluded] [item] under A.R.S. § 43-____ / § 42-5____ / [other]. Correct application yields a reduction of $[____].

☐ Ground 2 — TPT Classification. Gross receipts were misclassified under A.R.S. § 42-5061 (retail) when properly classified under [§ 42-5071 / § 42-5075 / other] or are exempt under [Article 4 / 5].

☐ Ground 3 — Apportionment / Sourcing. Receipts were improperly apportioned to Arizona under A.R.S. § 43-1147 / market-based sourcing rules.

☐ Ground 4 — Use Tax / TPT Nexus. Taxpayer lacked substantial nexus under A.R.S. § 42-5044 and South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), during [periods] because [____].

☐ Ground 5 — Statute of Limitations. A.R.S. § 42-1104 bars portions of the assessment.

☐ Ground 6 — Reasonable Cause / Penalty Abatement. Penalties should be abated under A.R.S. § 42-1125 because Taxpayer acted with reasonable cause and not willful neglect (rely on Form 290 — Request for Penalty Abatement, if applicable).

☐ Ground 7 — Sampling / Methodology. The audit projection is statistically invalid because [____].

☐ Ground 8 — Federal Conformity / Federal Change. Income tax adjustments derive from a federal RAR that is incorrect or not yet final.

☐ Ground 9 — Constitutional. The assessment violates the Commerce Clause, Due Process, P.L. 86-272, or Internet Tax Freedom Act as applied.

VII. Supporting Facts and Documents for Each Ground

For each ground asserted, Taxpayer provides:

Ground 1: Facts: [____]. Documents: Exhibits [__]–[__]. Authorities: [A.R.S., A.A.C., ADOR Decisions, Court of Appeals opinions].

[Repeat for each ground.]

VIII. Payment of Unprotested Amounts

If only part of the deficiency assessment is protested, A.R.S. § 42-1251(A) requires payment of all unprotested tax, interest, and penalties when the protest is filed. Taxpayer will confirm separately the collection and interest treatment of the contested amount.

IX. Relief Requested

WHEREFORE, Taxpayer respectfully requests an order:

(a) Cancelling the contested deficiency in the amount of $[______];
(b) Abating penalties of $[______];
(c) Confirming refund of any contested amounts previously paid, plus statutory interest under A.R.S. § 42-1123 / § 42-1118;
(d) Such other and further relief as is just.

X. Verification

I declare under penalty of perjury under the laws of the State of Arizona that the foregoing is true and correct to the best of my knowledge and belief.

Dated: [__/__/____]

________________________________
[NAME], [TITLE]
[For:] [TAXPAYER]

XI. Filing Instructions

By Mail:
Arizona Department of Revenue
Hearing Office / [Audit Division Code]
1600 W. Monroe Street
Phoenix, AZ 85007

Online: Through AZTaxes.gov secure messaging or the Department's online appeals portal (available since August 2018).

XII. Exhibit List

Part C — Appeal Cover Letter to BOTA or Arizona Tax Court

Sender Letterhead

[LAW FIRM NAME]
[Street Address]
[City], Arizona [ZIP]
Telephone: [(___) ___-____]
Email: [______________________]
AZ Bar No.: [____________]

Date: [__/__/____]

OPTION 1 — Notice of Appeal to BOTA

VIA BOTA E-FILING (https://bota.az.gov) AND CERTIFIED MAIL

State Board of Tax Appeals
100 N. 15th Avenue, Suite 140
Phoenix, AZ 85007

Re: [TAXPAYER] v. Arizona Department of Revenue
Notice of Appeal — Final DOR Order dated [__/__/____]
Tax Type / Period: [____________]
Amount in Controversy: $[__________]

Dear Clerk:

Enclosed for filing are:

1. Notice of Appeal pursuant to A.R.S. §§ 42-1253 and 42-1251(E), appealing the Final Order of the Director / OAH decision dated [__/__/____].
2. Filing fee of $[______].
3. Copy of the Final Order being appealed.
4. Certificate of Service on the Arizona Department of Revenue and the Office of the Attorney General — Tax, Bankruptcy and Collections Section.

Timeliness. The DOR Final Order was issued on [__/__/____]. This Notice of Appeal is filed on [__/__/____], within the 30-day window in A.R.S. § 42-1253 and § 42-1251(E).

Issues. The Final Order is in error for the reasons stated in the Petition under appeal, incorporated herein by reference.

Respectfully submitted,

________________________________
[ATTORNEY NAME], Esq.
AZ Bar No. [__________]
Attorney for Appellant

OPTION 2 — Complaint to the Arizona Tax Court

VIA E-FILING AT MARICOPA COUNTY SUPERIOR COURT

Clerk of the Superior Court — Arizona Tax Court
Maricopa County Superior Court
201 W. Jefferson Street
Phoenix, AZ 85003

Re: [TAXPAYER] v. Arizona Department of Revenue
Complaint — De Novo Action under A.R.S. § 42-1254
Final Order dated: [__/__/____]
Amount in Controversy: $[__________]

Dear Clerk:

Enclosed for filing are:

1. Complaint appealing the Final Order of the Department of Revenue / BOTA / OAH dated [__/__/____], pursuant to A.R.S. § 42-1254 and A.R.S. § 12-163.
2. Civil Cover Sheet and Summons.
3. Filing fee of $[______].
4. Proof of payment of the contested tax of $[______] (Check / EFT No. [____] dated [____]) OR Bond under A.R.S. § 42-1254(D) in the penal sum of $[______].
5. Certificate of Service on the Department of Revenue and the Office of the Attorney General — Tax, Bankruptcy and Collections Section pursuant to A.R.S. § 42-1254(F).

Timeliness. The DOR / BOTA Final Order was issued on [__/__/____]. This Complaint is filed on [__/__/____], within 60 days as required by A.R.S. § 42-1254(C).

Jurisdiction. The Arizona Tax Court has exclusive jurisdiction over this de novo action under A.R.S. § 12-161 et seq. Venue is proper in Maricopa County.

Burden of proof. Taxpayer acknowledges the prima facie correctness of the assessment but the record evidence rebuts it for the reasons stated in the Complaint.

Respectfully submitted,

________________________________
[ATTORNEY NAME], Esq.
AZ Bar No. [__________]
Attorney for Plaintiff

cc: Arizona Department of Revenue — Office of the Director
Office of the Arizona Attorney General — Tax Section

Part D — Pre-Filing Checklist

Calendaring

☐ NoPA mailing date logged for individual income tax: [__/__/____]
☐ NoPA receipt date logged for other covered tax: [__/__/____]
☐ Tax type confirmed → petition window (90 days after mailing for IIT vs. 45 days after receipt for other covered tax): [__/__/____]
☐ Protest filing deadline (HARD): [__/__/____]
☐ Appeals-officer conference requested by: [__/__/____]
☐ DOR / OAH final decision received: [__/__/____]
☐ BOTA 30-day appeal deadline (HARD): [__/__/____]
☐ Tax Court 60-day appeal deadline (HARD): [__/__/____]

Protest Package — A.R.S. § 42-1251.A Required Contents

☐ Reasons why redetermination should be granted
☐ Amount by which tax, interest, and penalties should be reduced
☐ Form 285 (Power of Attorney) for representative
☐ Copy of NoPA attached
☐ Hearing request or eligible appeals-officer conference request stated
☐ Taxpayer signature / authorized officer

Substantive Review

☐ Audit workpapers and IDR responses analyzed
☐ Reconciliation: book to AZ taxable income / gross receipts
☐ Federal RAR / amended return status confirmed
☐ TPT classification reviewed against current ADOR rulings
☐ Exemption certificates / wholesale (Form 5000) verified
☐ Nexus / South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), analysis completed
☐ Apportionment / sourcing reviewed (A.R.S. § 43-1147)
☐ Statute of limitations (A.R.S. § 42-1104) confirmed
☐ Penalty abatement (Form 290) considered
☐ Voluntary disclosure / closing agreement options reviewed

Collection / Payment

☐ Uncontested amount paid (interest stops as to that portion)
☐ Decision on payment vs. bond for Tax Court (A.R.S. § 42-1254)
☐ Interest accrual monitored (A.R.S. § 42-1123)

Service / Filing

☐ Protest filed within 90/45-day window
☐ BOTA appeal e-filed within 30 days of DOR final order
☐ Tax Court complaint filed within 60 days; AGO served per A.R.S. § 42-1254(F)
☐ Filing fees paid; bond posted if applicable

Sources and References

• Arizona Department of Revenue — Appeals: https://azdor.gov/appeals
• "Your Rights as an Arizona Individual Taxpayer" (Pub. 2012-003): https://azdor.gov/sites/default/files/2023-03/PUBLICATION_2012_003.pdf
• A.R.S. § 42-1108: https://www.azleg.gov/ars/42/01108.htm
• A.R.S. § 42-1251: https://www.azleg.gov/ars/42/01251.htm
• A.R.S. § 42-1253 (BOTA appeal): https://www.azleg.gov/ars/42/01253.htm
• A.R.S. § 42-1254 (Tax Court): https://www.azleg.gov/ars/42/01254.htm
• A.A.C. R15-10 (DOR hearings): https://apps.azsos.gov/public_services/Title_15/15-10.pdf
• State Board of Tax Appeals: https://bota.az.gov
• Arizona Tax Court (Maricopa County Superior Court): https://superiorcourt.maricopa.gov/departments/civil-court/tax-court/
• Form 285 (POA): https://azdor.gov/forms/poa-and-disclosure-forms
• Form 290 (Penalty Abatement Request): https://azdor.gov/forms/penalty-abatement-form
• Online Appeals Portal: https://azdor.gov/appeals/online-appeals