Arizona Revised Statutes Title 42. Taxation § 42-2062. Abatement of penalties and fees; definition

A. If a taxpayer has been assessed a penalty or fee pursuant to § 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department, on written application by the taxpayer, shall abate the penalty or fee if it determines that the conduct, or lack of conduct, that caused the assessment to be imposed was due to reasonable cause and not due to wilful neglect.

B. If, before an assessment is issued, a taxpayer applies in writing requesting waiver of a penalty or fee that may be assessed pursuant to § 42-1107, 42-1125, 42-1126, 43-581 or 43-582, the department shall not assess that penalty or fee if it determines that the conduct, or lack of conduct, that would cause the assessment was due to reasonable cause and not due to wilful neglect.

C. For the purpose of this section, and only as applied to the taxes imposed by chapter 5, articles 1 through 6 and chapter 6, article 3 of this title,  1 “reasonable cause” includes situations in which the taxpayer had a reasonable basis to believe that the tax did not apply to the business activity or the storage, use or consumption of the taxpayer's tangible personal property in this state.