1. Celebrating
10 Years
Of Excellence
Liberty Tax Service
2007 Annual Report

2. Contents
To Our Shareholders .................................. 2
Celebrating Growth ................................... 8
Celebrating Change and Vision................. 10
Celebrating Celebrity .............................. 12

3. tax returns. Moreover, we accomplished
to balance strong
that with just 2,000 offices, compared to
growth, best busi-
19,000 offices for the competition. We
ness practices, social
have made history in the income tax
responsibility, and a
industry. Just 10 short years ago, we had
fulfilling life experi-
no offices and people kept asking me why
ence for our franchi-
I wanted to start over, to compete against
sees and employees
H&R Block and a company that still bore
has guided us. Our
my name. Today it is clear to see why.
Mission Statement
Our results are an amazing testament to
of “Set the Standard,
my vision and my goal. There are many
Improve Each Day,
reasons why Liberty is successful; we
Have Some Fun,”
have a great name, proven strategies for
calls us to use our
getting customers, and a solid business
business model to
model. Nevertheless, what it really boils
improve the quality of
down to is the people. We have the best
life of our community,
franchisees and the best employees in the
country and the world.
industry. These results could not have
been achieved without them.
So let me tell you how
we are doing.
It seems hard to believe that a year has
gone by since our last Annual Report,
From my perspective,
and much has happened. We have made
2007 was a year of
major strides in software development
success across all fac-
and online tax preparation. This year we
ets of our Mission Statement, with par-
To Our deployed our new proprietary software
ticularly strong financial results. Our rev-
Shareholders, “LibTax™” to 534 offices. Generally,
enue increased 13.6% from $66,152,546
acceptance by the franchisees is positive
to $75,147,670. Net income rose 90.2%
and we remain optimistic that full deploy-
from $8,271,700 to $15,729,677.
It is a distinct privilege for me to have ment for tax season 2008 will be success-
this opportunity to reflect on Liberty Tax We added 433 net new
Service’s 10th year anniversary. The locations and grew the
chance to be the leader of a front running, number of franchisees to
principles-led company is what inspired 1,607. However, per-
me to found Liberty Tax Service in the haps the most significant
first place, and it’s what keeps me fanati- result is one that cannot
cal about the journey that still lies ahead be extrapolated from our
of us. financial statement. This
year, in the United States,
At Liberty Tax Service, being a prin- Liberty Tax Service beat
ciples-led company is more than a list of both Jackson Hewitt and
ideals –it is part of our mission. Since H&R Block combined in
1997, a mission statement that seeks increase of raw number of
2

4. ful. We are very excited about
the software rollout as it adds yet
another technological advantage to
our growing arsenal of strengths.
No longer are we dependent on a
third party for our tax software.
We have total control over how
the software functions and will
continue to modify it to fit our ever
growing needs.
We are also conducting compre-
hensive trainings both over the
internet and on-site to teach the
franchisees how to effectively use
the software. LibTax™ contains
tremendous tools that will make Page 2 top: John Hewitt, CEO & Founder
of Liberty Tax Service. Page 2 bottom: John
our offices run even more efficiently. We Hewitt speaks with franchisees and area devel-
opers at this year’s convention. This page top
have been able to recruit and hire our
and right: Liberty tax preparers provide the
franchisees to assist both in the testing best customer service in the industry.
and training phases of the software de-
ployment. It has proven to be invaluable
to the development phase of this program
by allowing the franchisees to get com-
fortable with the new software as well as
Another exciting development concerns
generate some off season income.
our continued expansion into online tax
preparation. Late last fall, we purchased
E Smart Tax, an internet income tax
preparation business. With this acquisi-
$75.1
Revenue (in millions) tion, Liberty is able to provide an internet
$66.2 solution for individual tax preparation
that is user-friendly, well supported, and
affordable. E Smart Tax software will
$51.0
enhance and expand our existing product
$42.2 offering by allowing customers who wish
to prepare and file their individual income
tax returns on the internet to do so from
$28.5
our company’s website.
$17.9
$10.7 Last year, 21.7 million individual tax
returns were filed using the internet. On-
line filing is the fastest growing segment
2001 2002 2003 2004 2005 2006 2007
3

5. of the tax industry and we are going to
take advantage of that growth.
We are also using the software platform
to participate in the Free File Alliance
partnership that provides a free tax prepa-
ration alternative through the IRS’s web-
site. Since the Free File’s debut in 2003,
15.6 million returns have been prepared
and filed through the program.
The online program is easy to use and
features an IRS forms based application,
online help, and guaranteed calculations,
as well as a fully translated Spanish lan-
guage version. The addition of the online
tax preparation product complements our
Above: Liberty mascots work year-round to get the Liberty name out. Below: Taking a breather from mascot duties.
brick-and-mortar operations because we
can now serve consumers who routinely
switch between self-prepared and paid
“We have the best franchisees
preparation based upon life style changes
or tax law changes. Due in most part to
and the best employees in the
their complexity; well over half of all tax
returns started online are not completed.
industry.”
Our goal is to move those filers who
don’t finish their return online into one of
our nearby offices. We are enthusiastic of Miami Beach and everywhere in be-
about the possibilities the online service tween. Here is a synopsis of the recogni-
presents to our franchisees. By having a tion we have received in the last year:
product offering for each type of con-
sumer, the paid filer and the “do-it-your- • The Virginia Chamber of Commerce
selfer,” our customer retention should recognized Liberty as one of the
improve significantly. This is a huge step Fantastic 50 companies in the state
forward for Liberty and our franchisees. for the third year in a row.
• Inside Business named Liberty as
Finally, I would like to comment on the
expansion of our brand. Liberty Tax one of the 25 best places to work in
Service is gaining tremendous recognition Hampton Roads.
all across the country. Our wavers can be
seen from Anchorage, Alaska to the sands

6. • Hispanic Trends named Liberty one
of the top 25 franchise opportunities
for Hispanics.
• Bond’s Top 100 Franchises featured
Liberty Tax Service.
• I was featured in an article in Entre-
preneur magazine on Franchising
Legends.
• Black Enterprise magazine named
Liberty to its list of top 30 franchise
opportunities.
• Accounting Today recognized me as
one of the most influential people in
Top: Franchisees dress family members in costume
the accounting industry for the sixth during special events. Right: Roadside parties are
held during tax season to bring passersby into
year. Liberty offices.
• Entrepreneur magazine ranks us in
decade of Liberty’s growth. There
their top 20 best franchise opportu-
are so many new opportunities
nities.
awaiting us that we are exploring
and others that are still to be discov-
Of course, we are proud of what we have
ered. Our number one goal is to continue
done, but that is yesterday’s news. We
to find ways to delight and amaze our
to create raving fans! Liberty Tax Ser-
are ready to move forward into the next
customers, to exceed their expectations,
vice is a company on the move. We have
proven that passion, focus, and dedication
2363
are the characteristics needed to build a
Number of Offices world-class organization. We are well on
our way.
1946
1735
Sincerely,
1409
919
John T. Hewitt
611
551
Founder and CEO
2007
2001 2002 2003 2004 2005 2006
5

7. Liberty implements a tax
2007
preparer certification
process.
There are over 100 Liberty
Area Developers throughout
80% of the country.
2006 THE WALL STREET JOURNAL. Hispanic Trends recognizes
© 2006 Dow Jones & Company, Inc. All Rights Reserved.
MONDAY, APRIL 17, 2006
attention-getting. Children know that the In working-class neighborhoods—
Liberty as one of the top 25
Upstart Tax Preparer two are often good for free Statue of Liberty says it serves the same market as
Liberty crowns. Wal-Mart Stores Inc.—Uncle Sam and
Uncle Sam and Lady Liberty have been Lady Liberty have become cultural icons.
Surges to No. 3 Spot at it since January, and today their “They’re always out there, and they’re
numbers could reach a new high. As the hilarious,” says 22-year-old Delissa Drake
PROOF
Riding ‘the Wavers’ midnight deadline approaches for filing of Kansas City, Kan., who says the wavers
tax returns in most states, the population attracted her to Liberty this year for help
of Uncle Sams and Lady Libertys on the in filing her first-ever return.
i i i streets of America could hit 3,000. Mr. Hewitt doesn’t have strict require-
Tomorrow, all will be gone. ments for the job. He says homeless
Dancing Uncle Sams Lure
franchise opportunities for
“Uncle Sam gets hung up for another people are welcome. Many of the actors
John Is Named
year,” says Willis Tyus, the most popular interviewed described themselves as
Customers to Liberty; of several Uncle Sams on 39th Street here unemployed or underemployed. Mr. Tyus,
in Kansas City, Kan. the star of 39th Street here, lost his job of
Dodging a Tossed Hot Dog 7
7 Uncle Sam and Lady Liberty are the seven years as a window washer over the
creations of a tax-preparation industry winter. From the median of 39th Street
pioneer named John Hewitt. After build- one recent day, he pointed disapprovingly
By KEVIN HELLIKER
ing a firm called Jackson Hewitt Inc. into at streaks in some recently washed
the industry’s second-largest player be- windows across the street.
KANSAS CITY, Kan.—Kebba Njie was hind H&R Block Inc., Mr. Hewitt orches-
Hispanics.
earning $6 an hour moving furniture and trated a sale of Jackson Hewitt, resigned
In working-class
Entrepreneur Of The Year
cleaning up messes when the opportunity and soon afterward started a new
arose to play Uncle Sam. company, Liberty Tax Service. To get
Never mind that Mr. Njie, a West
neighborhoods,
customers into Liberty’s doors, he started
African immigrant, isn’t old, bearded or hiring costumed wavers.
an American citizen. To passersby on The strategy seemed ill-advised to some
Uncle Sam and
State Avenue here, he became the because costumed wavers—for instance,
nation’s symbol. the Chick-fil-A restaurant cows that hold
Lady Liberty are
signs saying Eat Mor Chikin—generally
personify the promise of food and fun. By
now cultural icons.
contrast, Uncle Sam and Lady Liberty
By The International
tout the promise of a well-prepared Form
1040.
When a Florida official of H&R Block
took a page out of Liberty’s book by dress- Then he quickly returned to character,
ing up as a big green block, H&R head- dancing and bantering with drivers
quarters wasn’t amused. stopped at a light. Praised by his boss as
“This was off-strategy and that person the top waver at this site, the 57-year-old
was reprimanded for doing it,” says an Mr. Tyus says, “I like to be the best at
H&R Block spokeswoman. “Americans whatever I do.”
expect an experienced, highly trained tax Liberty Tax says the job pays between
Franchise Association.
professional to lead them through the $8 and $10 an hour. Here in Kansas City,
myriad of tax-law changes. That’s why however, some wavers report receiving
H&R Block is serious about the image it only $7 an hour, including Mr. Njie, the
projects.” West African immigrant. The wavers
work in shifts of only four hours so as not
Yet Liberty and its franchisees have
to lose their enthusiasm and energy.
opened nearly 2,000 offices in nine years.
Kalid Baste
Anyone who asks a question about the
That makes Liberty the industry’s third-
service is told to visit the office.
largest player after H&R Block and
Those new to the job must watch a
Jackson Hewitt, and its fastest-growing.
Waver Jerron Dennis and Lady Liberty training video that shows wavers dancing
Mr. Hewitt gives much of the credit to his
outside Liberty Tax Service in Chicago. and doing cartwheels to get attention. The
costumed characters. “A lot of people
video recommends that wavers salute
carry their W-2 in their wallet, and when
police cars and fire trucks, give truckers
they see our wavers they pull right in,” he
On street corners across America, the “honk-the-horn gesture” and tip their
says. Chicago franchisee Kalid Baste says
Uncle Sam waves, dances, shouts, sings headgear toward senior citizens. Young
he considered wavers “foolish” until
and plays air guitar on behalf of a tax- people should be given the peace sign,
heavy losses at his Liberty stores forced
preparation service. A regular companion although some wavers have found that
him to give them a try. Soon, he says,
is Lady Liberty. Her antics are similarly this can be misinterpreted. “The police
revenue doubled.
(over please)
THE PUBLISHER’S SALE OF THIS REPRINT DOES NOT CONSTITUTE OR IMPLY ANY ENDORSEMENT OR SPONSORSHIP OF ANY PRODUCT, SERVICE, COMPANY OR ORGANIZATION.
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!
Liberty Reaches Liberty Makes The Front Page
The Top 10 On Of The Wall Street Journal.
Entrepreneur’s
List of Best RANKED
Franchises. #10 OVERALL
2004
Liberty franchisees and
2005
Liberty is ranked #15 staff visit New York
on Entrepreneur’s City on the day of the
Franchise 500; #6 on reopening of the Statue
their list of Top of Liberty in August.
Low-Cost Franchises
Liberty is ranked #28 on
and #8 on the list
Entrepreneur’s Franchise
of Fastest Growing Liberty world head-
500; #12 on their list of Top
Franchise quarters moves to
Low-Cost Franchises and #9
Opportunities. Corporate Landing
on the list of Fastest Growing
Parkway in Virginia
Franchise Opportunities.
Tax Wars heated up when Beach, VA.
H&R Block tried to compete
with Liberty in guerrilla
marketing.
2003
John Hewitt is named
Liberty is ranked #106 on Inc.
Virginia Entrepreneur of
2002
magazine’s Inc. 500 list of
the Year by Ernst & Young.
privately-held companies.
Here, John’s son Danny
accepts the award.
Liberty makes
NBC Today Show debut
appearance.
6

8. Liberty has 2,363 offices
throughout the U.S and Canada
Liberty acquires E Smart Tax as an
inroad to the growing online tax
preparation market.
Our proprietary software,
LibTax™, is deployed to a test
Inside Business names Lib- market of 534 offices.
erty one of the 25 Best Places to
Work in Hampton Roads, VA for
the 2nd consecutive year.
2001
Liberty wins a lawsuit against
H&R Block, forcing Block to
stop misrepresenting tax loans
as refunds or refund amounts.
2000
Liberty moves
John Hewitt is named
its world
one of the top 100 most
headquarters to
1999
influential people in
Bonney Road in
accounting by Account-
Virginia Beach,
ing Today.
VA.
John’s
non-compete
clause ends.
1997
1998 Liberty officially
begins operations
in Canada.
Five Liberty offices
U&R name changes
open in the U.S. in
to Liberty Tax Ser-
Columbus, Ohio.
vice. Pictured-the
statue in Las Vegas
that gave John the
idea for the name.
7

9. Left: Franchisees in training love the opportunity to
don Liberty costumes and meet the public on the Vir-
ginia Beach oceanfront boardwalk. Below: Role-playing
helps new franchisees learn by doing.
plishment validates the strength and
sustainability of our operating system.
In FY 2007, Liberty Tax Service wel-
comed 438 new franchisees into our
system. This outstanding performance by
our development team smashed our prior
record of 341 new franchisees. Subse-
quently our training department was very
busy. That group trained 763 people in
our Effective Operations module, which
Celebrating was a 23% increase over 2006. In our
U.S. offices was approximately 174,000,
total training tally, including the interme-
more than H&R Block and Jackson
Growth diate and advanced modules, we trained
Hewitt combined! Again, this accom-
A 10-year anniversary is rare for any
“We continue to be the fastest
business. Businesses fail at the rate of
80% within the first five years if you sub-
growing retail tax preparation
scribe to that parable. So, for Liberty Tax
Service to have reached our 10-year mile-
company EVER.”
stone is remarkable. Then, when you take
into consideration our meteoric growth,
remarkable becomes extraordinary. We
continue to be the fastest growing retail
tax preparation company EVER. In fiscal
year 2007, the Company operated 2,363
offices in the United States and Canada.
In FY 2008, we expect to operate approx-
imately 3,000 offices. Each year the tax
industry grows in two ways; more people
file and more people pay a preparer. We
are capitalizing on that growth by increas-
ing our network of offices through new
franchisees and the expansion of exist-
ing franchisees. This year our network
completed approximately 1.5 million
tax returns in the U.S. and Canada. Our
increase in raw number of returns in our
8

10. 1,755 people, an increase of 43% over the
prior year.
Our theme for attracting new franchisees
this year is “Don’t Quit Your Day Job.”
Obviously this a twist on the old adage.
But, as our ad says, “We mean it in the
nicest way.” The focus of the campaign
is to enlighten corporate America to the
opportunity Liberty Tax Service offers
to frustrated entrepreneurs who feel
“trapped” by the security a full time job
provides. The retail tax industry offers a
unique challenge to people who are “con-
fined to a cubicle” but would like to own
a business and become self-employed. Above: Liberty’s training department takes franchisees
16 weeks. If someone can spare an extra
to local offices so they can see how an office should be
Many of the people who have joined our 25-30 hours a week for less than four set up. Below: Our wavers get Liberty lots of free public-
ity in newspapers around the country.
system keep their jobs because the busi- months, this is certainly a business to
ness model allows them to adjust their consider. Franchisees can continue to
schedules to accommodate the inclusion work their “day job,” be paid, and receive
of an income tax business. Since the benefits while building a business that
tax season is only 105 days, a franchisee will some day allow them to step into the
can work in the office in the evening and role of an entrepreneur when the time is
weekends. Unlike other retail business right.
models that require a 52 week, 12 hour
day commitment, Liberty Tax Service
needs daily attention for approximately
1607
Number of Franchisees
1314
1097
804
551
376
248
2007
2001 2002 2003 2004 2005 2006

11. Left: Liberty continued its work with Cell Phones for
Soldiers to get over $1,000,000 worth of free phone min-
utes to our troops overseas. Bottom: We also took part in
Valentines for Troops in 2007. Liberty offices sent over
600,000 valentines cards to our military.
• A tax preparer certification test-
ing process was implemented. All
franchisees are required to have pre-
parers pass level one certification in
order to operate. The company tapped
resources within the corporate tax and
software development departments and
solicited feedback from franchisees
and employees to develop a web-based
examination. The three-tier examina-
tion is crafted to measure skills of entry
“The year 2007 was a milestone
for Liberty Tax in many ways.”
• E Smart Tax online prepara- level and more experienced preparers.
Celebrating tion was acquired, giving Liberty Tax The examination is also a test of the
Service a strong foothold in the rapidly training materials and teaching methods
Change and growing internet tax preparation arena. used in our tax schools. This is another
Vision
The year 2007 was a milestone for
Liberty Tax in many ways. Not only did
we celebrate a decade of excellence, we
also took major strides in technology and
operational matters:
• LibTax™, our proprietary tax
software, was introduced to 534 offices.
The successful rollout has given us con-
fidence to implement a full deployment
in tax season 2008.
10

12. visionary program that Liberty is the
first to implement. None of the other
large retail firms have a certification
program at this time. The future holds
tougher scrutiny of the credentials
within the tax preparation industry. This
is a proactive approach to professional
standardization and customer satisfac-
tion. The ultimate goal is to have every
return prepared by a certified preparer.
• Liberty Tax Service introduced
pre-season Refund Loans in 2007.
Despite the company’s severe reluc-
tance to offer these products, Liberty
our Canadian tax preparation software
was forced to enter this business due
with a new product from Doctor Tax.
to competitive pressures. Fortunately,
The conceptual design has been com-
in early April, the financial institutions
pleted and we are in the process of in-
that were funding the loans decided to
troducing it to the Canadian franchisees
eliminate the products. Liberty fought
through a series of trainings.
to keep the pre-season loans out of the
product mix in 2005 and 2006. The
• The Area Development Program
company has gone on record that the
has almost reached capacity. Currently,
pre-season loans were bad for business. Above: Liberty gave away $100,000 in the Tax Day
Giveaway sponsored by Valpak in 2007. The grand prize
over 80% of the country has been sold
The abolishment of these products is of $45,000 was awarded to Amy Behles from the Chicago
area. The Sweepstakes was such a success, Valpak of
to Area Developers. This concept has
a step in the right direction for the tax Southern Virginia went to the Valpak convention dressed
as Liberty wavers - they won best costume! Below: John’s
been a major factor in the growth and
preparation industry and is well ground- commitment to Stop Hunger Now was supported by
corporate employees and Hampton Roads franchisees
expansion of the Liberty system begin-
ed in business considerations. through packaging meals for international hunger relief.
Liberty packaged 30,000 meals in a single day - enough
ning in 2003. There are over 100 Area to feed 180,000 people.
Developers in the program.
• The Liberty Tax websites were
redesigned to feature clean graphics,
easy navigation, and flexibility, as well
as improved content and programming
to facilitate better search engine optimi-
zation and organic rankings. Franchi-
sees also have been given unique URL’s
attached to the website that enable them
to display a customized webpage for
each of their locations. Visit the web-
sites at www.libertytax.com and www.
libertytaxfranchise.com.
• We are in the process of replacing

13. Celebrating
Celebrity
Liberty Tax Service is an explosive brand.
If not for the pioneering and fighting
spirit of our employees and franchisees,
we would not be celebrating our 10th an-
niversary. The cornerstone of our brand
development has been the local, grass-
roots outpouring created by our often
imitated, but never duplicated, guerrilla
marketing concept. There is no other way This page: Liberty’s 2007 convention celebrated 10
years of excellence with an exciting opening ceremony
to explain our incredible victories over including Ken Schmidt, former Harley-Davidson mar-
keting expert. The festivities continued with a night of
our competitors, town by town, market by game show fun and grand prizes of 2 Harley-Davidson
motorcycles.
market, state by state. From the begin-
ning, seemingly insurmountable odds
to overcome adversity and prove that an
were stacked against Liberty Tax Service.
upstart company could beat a 50-year-old
It was the remarkable courage, persever-
household name brand. And here we are
ance, and innovation of our early em-
on Virginia Beach for a three day celebra-
today proving it over and over again!
ployees and franchisees that enabled us
tion of our history making organization.
Once again, expectations were surpassed
The testament to our success occurs ev-
as our employees and franchisees took
ery year during our national convention.
time to celebrate our celebrity. It is clear
This year over 1,700 people converged
that Liberty Tax Service is the company
to watch not just in the tax industry, but in
the business world.

14. 800-790-3863
1716 Corporate Landing Parkway
Virginia Beach, VA 23454