Sales Manager

-**** lvywood l.anc, (lolorado Springs, C'O ***** r (?19) 761-3582 . Colorndo,GallaghcrlQconcâst.nct

Robert J. Gallagher, CMI

Experience

Mar 2009 to Nov 2009 (ìooglc, lnc. Mountain Vicrv. CA

Sales & Use Tax Manager (Interim)

r Âssunrcd ruponsibility fbr tlris position sles and usc tax nìgr.

dr c to thc rctircnìcnt in Junc of'thc prior

r l2M of'salcs

lìccovcrcd over thror glì aggrcssivc audit dcfènsc clainls li r rclìr ld.

uld usc t D(

$ urd

I Worlie'd on nrary sakx and rsc tax audits urd onc VI)A.

l)articipatcd in ntiuty fist ntoving intcnrct-rclatcd projccLs rvhich requin'd nscarcl into that thc

arc r-s

sales and usc ta>i larv h s not cituglìt up to yct.

Aug 2007 to Âug 2008

Colorado I)cpartnrcnt of' Iìcvcnuc I)cnvcr. CO

Revenue Agent II

Âtrditcd all statc-adnrinistcrcd salcs iurd rßc t D(cs. ln addition, rvithlmlding iurd inconrc ta"r.

Nov 1987 to Nov 2006 Âlto. CA &

Icrvlctt-l)ackard Conrpany

I I'}alo

Colorado Springs, CO

200ó)

Senior Corporate Sales & Use Tax Manager (Nov 1999 to Nov Colorado Springs, Co

! l)ronìotcd to Scnior Miuragcr rvhcn I II) split rvith Âgilcnt'l'cchnokrgics.

I Evcnttrally ru;porrsiblc fbr a salcs and usc tax dcparlnrcnt of'23 cnlployccs in fìvc lrrcations.

1999)

Financial Services Center Tax Manager (lìcb 1994 to Nov Colorado Springs. CO

I Move'd fiorn l)alo 1,lto to Colontdo Springs to ovcrscrc salcs a rd r sc tax at I Il)'s tJ.S. Financial

Scrvicus Ccntcr (li.S.C.). Substantial acmrurting sh utd scrviccs cxpcricncc.

l)rovide.d training ancl tax tmls to thc transâction proccssonì at thc F.S.C.

l)rovided consulting to Ij.S.C. projcct cnginccrs on salqs uld usc tax logic to [* uscd in ncrv

systctìts. I;ilcdscvcral patcntapplicationsonthislogic: prinraryinvcn(orof'USI)'I'Ol)atcnt

i17200569, contributing invcntor to a couplc ofrclatcd Gcnnan patcnts.

2004)

Senior Tax Analyst (Nov 1987 to lìcb I,alo Âlro. CA

I Managcd salcs and usc tax audits ol I lcs,lctt-l)ackanl Conrpany.

I Intplctncntcd lnsourcc fbr tlrc prcparation ofthc conrpiury's salcs and rßc tax rctunìs.

Crcatcd ut intcntal-usc dtxurnent: Salcs & tJsc'l'ax lixcnrption Ccrtifìcatc Ilandtxxrk (prc-lntcnrct)

I Prcparcd thc nrorc contplcx sal<x ancl usc tax rctr nìs.

Âug I983 to Nov Calil'ornia Statc lloard of' lìqualization

1987 San.losc, CÂ

Senior Tax Auditor

'lhx Âuditor I to'lhx Auditor ll to'l'ax Auditor lll

I Auditcd nrcdiurn to laryc taxpayers in tlrc S ur Josc District (Silicon Vallcy). Pronrotcd vcry

quickly to Scnior'l'ax Auditor base'd ort pcrlbnnancc. Also. traincd ncrv t r auditors.

Education

Craduated: May 1983 Saint Mary's Collegc of'California Moraga, CÂ

. B.S. in r\ccounting

rCalifònliaRescrvcPolice OfììcerStand rdized'lraining, l.cvel l,SanJoscCityCollcge,0Tl30/1985

Passcd all4 parts olthc CPÂ exan in Norcmbcr, 1987

I C.M.l. crcdcntial #l l0 obtained in Septenrbcr, 1989

r Attendcd II)'l'and COS'I'schools. and rcgular attcndcc at ll)'l' uld COS'I'Synìposir rìls.

Bob Gallaoher's HP Position Plan

Position Purpose

&

Senior Comorate Sales. Usc Excise Tax Manaper

Aspanofaworldwidetransactiontaxteâm,provideleadershipfortheU.S.sales,use,andexcisetaxfunction. lnaddition,provide

leadenhipfortheunclaimedproperty(escheat)function. Includesmanagementoversightofthefollorvingtaxfunctions:

o research and planning

o compliance

o audit

. legislation

. proccss improvement nit at ves

. systems development

. business consulting

Organizational Placement

Reporls to Vice President, Worldrvide Transaction l'axes

Key Responsibilities

. Keep HewleÍ-Packard Company in compliance with various state and locat sales, use, and cxcise tax larvs, while ma ntaining

a low cost ofcompliance.

. Drarving upon experience, make tax decisions that balance the facton of: appropriate resource allocation, maintaining an

appropriate level ofrisk, and maintaining HP's reputation as a compliant and good corporatc citizen.

Facilitate llP's business by providing sound analysis of large, complex customer deals. lncludes consulting designed to

minimize our customer's tax liability.

o Managementandprofessionaldevelopmentofdepanmentstafl Staffrangesfromprofessional(taxlarvyer,taxanalysts)to

clerical/admin istrative.

o StayabrcastofpendinglegislationthatrvillaflectHP. Activelysupponorattempttodefeatasappropriate. lncludes

introducing and lobbying legislation as required to create a favorable ax environment for HP.

o Contribute to the development and/or reengineering of HP's linance systems. Provide state-of-the-an tax solutions to facilitate

llP's business.

o Maintain HP's repulation as a good corporate citizen by cstablishing and maintaining good relationships with key contacts in

state and local govemment.

Primary Relationships

o Worldrvide Transaction'fax Team

. CorporateTax Depanment

Consolidated Financial Reponing

. Various HP Businesses

HPFO

o HP Procurement

o HPIT

. & l cal Govemments

State

Metrics of the Position

r Annual cost ofsales, use, excise & unclaimed property tax depanment.

Amount ofsales tax paid under audit, not funded by customer paytnents.

o Percentage oferror developed during søte4ocal tax audits.

o Dollar value ofcustomer deals facilitated by tax consulting.

o Dollar value oftax dollars saved through strategic planning rv/ HP's procurement groups.

o lnternal parlnersatisfaclion as measured by various surveys.

. Department satisfaction as measured by various employee surveys.

reer Accompl ish ments

Ca

Will discuss during application/intervierv process.

Personal

Manied to Amy. Three boys: Robbie (19), John (17), Michael (8). .Appointed to a Tax Oversight Comminee by rhe Colorado Springs City

Council (PSSTOC). PSSTOC = Public Safety Sales Tax Oversight Commiuee. Member of CACI Tax Commirree, 1995 - 200ó. CACI:

Colorado Association of Commerce & Industry. Colorado Mounted Ranger,2d Lieutenant, Badge #309. Mernber, Denver Press Club.

Robert J. Gallagher, CMI

Sales & Use'[ax Professional

(Updated Through November, 2009)

High-Level Career Overview

. California State Board of Equalization: August 15, 1983 to November 25, 1987.

San Jose District (Santa Clara County, CA, aka "Silicon Valley"). Held positions of

Tax Auditor l, Tax Auditor ll, and Tax Auditor lll (Senior Tax Auditor). Promoted as

fast as Board procedures would allow. Exposed to a wide variety of taxpayers and

accounting systems. Was assigned "Super D" (large, complex) audits earlier than

usual based on ability and desire to be more challenged. Most of these audits were

of high-technology companies (software/hardware) in the pre-internet era. Earned

a reputation as a competent, fair, and impartial auditor.

. Hewlett-Packard Comoanv: November 30, 1987 to December 01, 2006, First hired

nto Corporate Tax Department in Palo Alto, CA as a Tax Analyst. Held positions of

Tax Analyst and Senior Tax Analyst in Palo Alto. Held positions of Financial Services

Center Tax Manager and Senior Corporate Sales & Use Tax Manager while in

Colorado Springs, CO. Relocated to Colorado Springs in February, 1994 as per

HP's request that I establ sh a tax presence at HP's new shared-services operation,

A 19 year career with HP with above average performance and a steady pattern of

promot on. Effective L2/Ot/06 was identified to be part of an HP re-structuring of

15,000 employees. lnstead, I qualified for an "Enhanced Early Retirement."

igh-Level Career Overview, Cont'd

H

. Colorado Deoartment of Revenue. Denver Field Audit Office: From August 2007 to

August 2008. Held position of Revenue Agent ll. Responsible for auditing all state-

administered sales and use taxes, plus withhold ng and income tax.

The revenue agent posit on appealed to me on several levels: (1) t d d not involve

relocation outside of Colorado, (2) the salary was low compared to HP, but the

Colorado Public Employee's Retirement System is qu te generous, and (3) I was

looking forward to contributing beyond the Revenue Agent ll role, a "change

agent" of sorts.

. lnstead of repeating the wonderful experience I had with the Cal fornia State

Board of Equalization, I found myself a target for resentment among my colleagues

due to the fact that I was able to enter the Department at a Revenue ll level while

they had to work their way up from an lntern level. Plus, the premise of calling

upon my experience with other states and with corporate Amer ca was not

welcomed. For these reasons and others, plus the "blame the victim" mentality,

decided to leave Department in August, 2008.

I

Got)gle"

lnterim Sales & Use Tax Manager for Google for the period March, 2009 through

December, 2009. Assumed responsibility for this position due to the ret rement

n June, 2009 of the prior Sales & Use Tax Manager.

Was given a refund project to work on as my first task, but suspended t long

enough to work on a sales and use tax aud t with a very high liability. My work

was directly responsible for aud t sav ngs of approximately S10.5M

Also worked on other state audits nclud ng one VDA aud t.

Worked on a S1.2M tax refund request related to the build-out of a new data center

where Google had negot ated econom c ncentives.

Partic pated in many nternet-related projects, representing the sales and use

function. Most project t me-l nes were very fast moving and required fast research.

Managed one FTE who handled return compliance and some well defined audit

n si b lities.

respo

"Plugged myself into the organ zat on" by developing a l st of internal customers

who relied on me for responses to various tax questions.

of Equalization

CA State Board

. Benef ted by attending various Board training classes which included:

. California sales and use tax law

. General sales and use tax audit procedure

r Statist cal sampling in sales and use tax audits

. Board compliance procedures & policies

. California use fuel tax law and audit procedures

. Learned to tailor audit procedures to a wide variety of taxpayers and

books/records which varied from primitive manual record-keeping to

sophisticated accounting systems.

. Quickly learned how to succeed as a tax auditor through:

I Earning the taxpayer's confidence

. Utilizing audit cut-off techniques when appropriate

I Having a strong basis for assessment for all liability areas of the audit

. Negotiating final assessment n order to gain concurrence on the aud t

(if reasonable and appropriate)

. Providing taxpayer with go-forward advice and tra ning

Hewlett-Packa rd Compa ny

First responsibility was sales, use, and business license return preparation,

represent ng HP n the current California sales and use tax audit, and light

mult -state sales and use tax consulting.

Return preparat on was done manually from manually-prepared reports provided

by field sales organizations and manufacturing divisions. A very t me intensive

activity for HP and embarrassing for a high-technology company!

ln late 8O's/early 90's HP acquired FASTTAX in order to automate the sales and

use tax return preparation. (First run on a 286 PC t ed to a LaserJet ll) On the tax

side I was primarily responsible for the project, and on the lT s de there was one

dedicated resource to take my specifications and develop custom FASTTAX input

files from numerous disparate sources. Huge gain in return preparation efficiency,

please see attached article from September/October 1991 "Financial Notes", an

internal publication for HP's finance community.

Hewlett-Packa rd Compa ny

. W th the extra time provided by FASTTAX efficiency gains, my internal sales

and use tax consulting increased. I quickly determined that there was an

internal need for (1) resale/exempt sale documentation and guidance, and

(2) state-specific general sales and use tax training for HP's manufacturing

divisions.

. ln order to provide HP's sales order admin commun ty with a tool for handling

tax exempt sales, I compiled, published, and internally distributed the "Sales &

Use Tax Exempt on Certificate Handbook." This publication pre-dated any

commercially available equivalent and the nternet. I issued regular updates

until the same resource was available on HP's internal website. This was a very

important field tool as 70%+ of HP's sales are tax exempt for one reason or

another,

. I provided state-spec f c sales and use tax tra n ng upon request or when I was

on-s te at a division to work with auditors on an audit. ln order to conduct th s

. tra ning I developed and continually improved/updated training presentat ons.

For HP's manufacturing divisions the tra ning emphasis was on use tax issues,

and for HP's sales order admin groups the emphasis was on sales tax issues.

Hewlett-Packa rd Com pa ny

. For several years before moving to Colorado, and for a short while afterward, I was

assigned to handle most of the state audits of HP. Most of these were states in

which HP had only a sales/service office presence. These audits were conducted

in the Atlanta, GA at HP's sales order admin shared-services facility.

. Many months I handled two different audits which involved two week-long trips

to Atlanta. Usually the aud tor was traveling to Atlanta as well. The auditor and I

shared the same goal: complete the audit in one week, hopefully concurred.

. Developed strategies in support of the week long audit goal. One of the break-

through strateg es involved not over-preparing. Auditors were presented with

reports for both the sales examinations and A/P exam nations and asked to apply

their knowledge of their state, it's taxpayers (e.g., the exempt orgs n the r state),

and common sense when choosing which sample tems they wanted documentation

for. Many times auditors wanted to block-sample one month for each audit year.

We asked that they finish the first month and then determine if more was necessary,

and more often than not the aud tor decides to project the one month.

ewlett-Packa rd Com pa ny

H

. Although too subjective to quontify, HP beneÍited under oudit bosed on my

credibility os o former ouditor ond my obility to build o cordiol and respectful

relotionship with them in o short period of time. lt was clearly not the "HP Way''

to make the aud tor uncomfortable or use hard-balltactics.

. One very important metr c that the HP Sales & Use Tax Department kept updated

the "sales testo/o of erro/', as liabilities generated from the sales exam nat on

is

came right off HP's bottom line (the l abil t es were usually projections from a test

and therefore most of the liability was unrecoverable from customers, plus Hp

was reluctant to come back to a customer years later with a tax bill). The HP

we ghted average % o1 error hovered around,25/o, an excellent demonstration

that our department was adding value by preventing large tax liab lit es and

further establishing our reputation as a good, compliant corporate citizen.

. Just prior to my departure from HP we implemented an audit follow-up evaluat on

of how well HP handled the audit from the aud to/s perspective. We were very

encouraged by the praise we received about our audit process and our level of

cooperat on.

Hewlett-Packard Company

. ln addition to manag ng state audits where HP had a minimal presence, I also

managed audits in states where HP had a factory presence (e.g., California,

Colorado, Washington, ldaho, Massachusetts, etc.). These audits were so use

tax ntensive that n many cases we were able to talk the auditor out of a sales

test !

. One audit worth not ng - ldaho. HP has a major presence in Boise where the

Laserjet printing business is located. The ldaho State Tax Commission seemingly

assigned virtually the entire Boise audit staff to our aud t. As I and my co-worker

could not be there every minute of the audit, we had to deput ze local accounting

people to work with the auditors on a day-to-day basis. Towards the end of the

audit we came out and discovered the auditors had assessed over SSM of use tax!

Knowing this was not possible, I and my co-worker combed through the audit

work papers and proved that most of the assessed transact ons were not errors,

plus the auditors overlooked many credit areas, particularly the product on

exemption. Overturning many of the assessed items and factoring in the credit

transact ons from our reverse audit, the audit was turned in as a S2M credit I

. ldaho has not been back to audit sincel

Hewlett-Packa rd Com pa ny

. audit unless we're finished conducting a reverse

HP does not concur w th any

audit. We never hired firm to do this for us as we had the staff to handle it

a

internally, plus years of audit history taught us exactly what to go looking for.

. The vast majority of HP sales and use tax audits are concurred when completed.

HP Financ al Services Center (FSC)

. Was a one man tax department when I moved to Colorado Spr ngs in February

1994 to work in HP's new Financial Serv ces Center, a shared services center for

all of HP's domestic factories. From th s point and for the rest of my career, I

reported to a boss 1,200 miles away n Palo Alto, California.

. My early responsibilities were:

. Manage factory state audits as most of the account ng records and source

documents were now in Colorado Springs.

. Provide guidance to the FSC Process Engineers concerningthe tax logic

which must be built into the transaction processing systems, and the related

procedures which must be followed by the transact on processors.

r When transaction processors were finally aligned by factory (instead of by

vendor), provided state-specific training and documentation.

. Handle many transaction-specific questions from transact on processors.

. Prepare the Colorado state and local sales and use tax returns as my

contr bution to the return preparat on chore. (Helped me to understand the

complex sales and use tax environment of Colorado.)

HP F nancial Services Center (FSC)

. After all of HP's manufacturing division accounting had migrated to the FSC,

the FSC began a wave of process-improvement n tiatives with SAP enterprise

software as the centerpiece.

. W th the acquisition of SAP came the necessity to purchase a bolt-on sales and

After evaluating Vertex and Taxware, HP made the choice to buy

use tax eng ne.

Taxware. The job of configuring Taxware to our nexus profile fell to me since I

know Unix and how to build and execute the files which modified Taxware. (This

was before Taxware had a nice graphical user interface to handle this chore.)

. to revisit HP's use tax procedures in light of SAP, Taxware, and HP's pursuit

Had

of efficiency in transact on processing (e.g., the use of imaging and automatic

general ledger booking, bypassing human "touch").

. I firmly believe that you can't fully automate the sales and use tax process for

accounts payable. My goal was to identify which transactions were "safe" to

automate, and those which were too risky for automat on and which requ re

human review. 80/20 rule is probably about right.

Tra nsaction Processi ng

. The following transact on process ng systems required a tax solut on:

.lmaged trade accounts payable

.EDI/MDI trade accounts payable

.Procurement credit cards

.Employee reimbursements (travel reimbursement & legacy petty cash)

.Electronic disbursement vouchers

lntra-corporate payables

. Utilized all available data elements to create logic that would:

. Recogn ze non-taxable transact ons and allow automat c g/l booking

Accrue full or partial (local) use tax, then book to the g/l

. Pay tax as invoiced by vendor as the computed tax matched what the

vendor charged, then book to the g/l

. Cause the transact on to fall nto a queue fór human review because of

one of three reasons: (1) the logic has recognized a possible error

condition, (2) the amount of tax invoiced by the vendor is not correct for the

HP location per the logic, and (3) either the vendor or the g/l account s

flagged for review because of historical problems (e.g., vendor-retained

tooling, software with a wide distribution, etc.)

Transaction Processing

Working w th a patent attorney in New York City, I created a patent application

for the tax logic used in our various transact on processing systems. I am also

named as a co-inventor on another patent appl cation related to a major HP

transaction tax project named 'T-Square".

The patent application numbers are: 200******** and 200********.

The patent application I was most responsible for, 200********, was wr tten by

me in more precise language than what you will find in the filed version. The

patent attorney wanted a more broad application of the claim so he had me re-

write t with that goal in mind.

ln early 2007 I received word that the U.S. Patent & Trademark Office had

granted my appl cat on number 200******** and assigned t to patent number

7200569!

viewed patent work as a challenging and rewarding.

I

Transaction Processing, Fixed Assets

transition of accounting to the FSC we had problems with the quality of

S nce the

the fixed asset documentation. ln many cases the installed cost of the asset was

not supported with vendor invoices, purchase orders, journal entr es, etc. Auditors

generally will assess use tax on the difference between the installed cost of an

asset and the documentation total.

To address this inadequacy for sales and use tax purposes, not to mention GMP,

I proposed a posit on be created to rev ew fixed assets prior their filing so that we

can be assured of two things: (1) support exists for the installed cost of the asset,

and (2) sales and use tax were properly paid on the asset (or not if an exempt on

applies). This job requisition was approved.

The person who took over this role was presented with a professional development

opportunity - she assumed responsibility for the fixed asset portion of all sales and

use tax audits.

Global Shared Services

ln the late 90's HP made the decision to open global share serv ce operat ons in

several locat ons outside the U.S., the largest of which is in Bangalore, lndia.

The tax logic developed for our various transact on processes was an enabler to

this move of transaction processing activity. lnstead of U.S. tax personnel looking

at the A/P "fall-out", it would be handled by a couple of people in Bangalore.

We developed one Bangalore person to a fairly high degree of knowledge of sales

and use tax and eventually made her one of my employees.

The U.S. HP Sales & Use Tax Department still provides overs ght to the tax

decisions made in Bangalore because we had access to the invoice images and

the r SAP instance. Our fixed asset employee had her own challenges with quality

of fixed assets coming from Bangalore. (Apparently, one of the root causes of th s

problem is that in Bangalore the emphasis is more on speed and through-put

instead of quality.)

CoCreate Software, lnc.

CoCreate Software, lnc. was HP's first spin-otf. The computer-aided-design

software product line, based in Fort Collins, CO, was spun-off in the mid to late

90's.

. was assigned to do all of the start-up tax work which entailed:

I

. Nexus review for sales, use & business license registration

I Prepare & submit appropriate reg strations

. lnstall and configure Taxware for BAAN enterprise software

. Research CoCreate's products and services for taxabil ty

. Provide sales and use tax train ng for CoCreate's sales order admin and

A/P staff

. Create return filing calendar and train a CoCreate accountant on how to

prepare sales, use and business license returns.

. After three years had passed and audit requests started com ng in I worked with

Cocreate to prepare for the audits. l'm proud of the fact that to date the tax

liabilities found under aud t at CoCreate have been in the "parking ticket" range...

Colorado Legislation, HB 96-1333

. Shortly after arriving in Colorado Springs, I was invited to the Tax Council meeting

of CACI (Colorado Association of Commerce & lndustry) by the HP Colorado

Public Affairs Manager, Mr. John Riggin.

. The t ming of this invitation was perfect as HP was in the middle of a Colorado

sales and use tax audit and it appeared that many of our manufacturing

exempt ons were going to be disallowed for reasons such as: (1) non-exclusive

use in mfg., (2) machinery being "one step removed" from manufacturing, and (3)

machinery which did not effect a "positive step" in the process of manufacturing.

. These problems were not unique to HP as others at the CACI Tax Council

expressed similar concerns.

. CACI decided to run a b ll n the 1996 session to clean-up the Machinery

&

Machine Tool Exemption. Sponsors were found and a bill drafted (Colorado

House Bill 96-1333).

.lcontributedtothecontentofthispieceof legislationandwiththeassistanceof

a CACI lobbyist I lobbied key House and Senate Finance Committee Members

bill. (Pre-hearing vote counting.)

on the merits of the

Colorado Legislation, HB 96-1333

. I also testified in support ofthe b ll in House F nanceand Senate Finance,

represent ng HP and with the consent of CACI, all Colorado Manufacturers.

. When Colorado House Bill 96-1333 was passed by both the House and the

Senate and was sent to Governor Roy Romer for signing, I was invited to meet

with the Governor to explain the need for the bill.

. Governor Roy Romer signed House Bill 96-1333 into law on June 5, 1996.

Colorado Legislation, 98-1269

. Mv own idea - legislation which would remove use tax liabilities from the act

of donating self-manufactured tangible personal property to non-profit,

governmental and educational nst tutions.

.lcreatedthefirstdraftofthisproposedlegislationandthenturned tovertoa

local sales and use tax attorney for fine-tuning.

. From there CACI took over shepherding the bill through the House and Senate.

The bill passed

- Governor Roy Romer signed t on April 22,1998.

. stayed in the background on this bill as I didn't want to h ghlight HP's possible

I

the bill failed. HP makes major equipment

use tax l ab l ty in this area in case

grants to many Colorado organizations on a regular basis.

Colorado Legislation, HB 99-1005

. Leg slat on to create a "direct pay" program for sales and use tax in Colorado.

. I d d not write the first draft of this legislation but I d d fine tune it a bit.

. I was the main business representative to work with CACI Lobbyist Rob Schwartz

on lobbying the bill. I also had to explain it to the bill's sponsors.

. I testified in both the House and Senate Finance Comm ttees in support of the bill

and why it's a good tool for Colorado business.

. This House Bill moved very quickly. lt was ntroduced on January 6, 1999 and

signed into law by Governor Bill Owens on February 26,1999. I was invited into

the Governo/s office again for bill signing.

Colorado & Software

. Colorado's sales and use tax regulation for software (Regulation 8) was wr tten

in the very earliest years of the computer revolution and certainly well before

the nternet.

. The Colorado Department of Revenue tax aud tors did not nterpret th s

regulation uniformly. Most of the problem centered around the regu.lation's

definit on of custom software. Under a literal reading of the regulation it was

possible (easy) to exempt most software purchases.

. Software taxability is a major issue for HP as we purchase (for internal use) a

huge amount of software every year.

. ln California HP had the advantage of acquiring software free of CA sales and

to HP electronically (no tangible personal

use tax if the software was delivered

property changing hands).

Colorado & Software

. ln order to determine if Colorado would follow California's op nion of electronically

delivered software I wrote a letter ruling request to The Colorado Department of

Revenue's Chief Auditor, Mr. Phil Spencer in October, 1994.

. Mr. Spencer wrote back with the answer I expected: no Colorado sales or use tax

tangible product would have entered Colorado." I widely

is due "because no

distr buted this letter ruling to other Colorado companies so that they could

demand equal treatment.

. ln September, 1997, the Colorado Department of Revenue issued Policy Position

1-97 which contradicted Phil Spencer's opin on. Colorado compan es were put

on not ce that the Department of Revenue was go ng to draft a new regufation

on software but no date was given.

. ln mid 2001 the Colorado Department of Revenue published a proposed software

regulation with no input from Colorado business. lt was a terrible regulation from

a taxpaye/s posit on,

Colorado & Software

When the new software regulation came up for public hearing I wrote and

submitted HP's view on the poorly written regulation. HP was not the only

company with severe reservations about the regulation.

Under pressure from Colorado business (and the implied threat that CACI will

run leg slation on this topic) Mr. Fred Fisher, Executive Director of the Colorado

Department of Revenue, withdrew the proposed regulation. Further, he

promised more collaborat on w th business on the next version of the software

regulation.

part cipated in crafting CACI's version of a software regulation. The finalversion

I

of the regulat on turned out well as we kept the generous definition of custom

software and electronic delivery was memorialized as a non-taxable transact on.

Tax Plann ng

. Provided internal tax adv ce on how to acquire our corporate jets free of California

sales and use tax. (HP houses its fleet of aircraft in a San Jose Airport hangar.)

Have done three of these transact ons,

. Provided internal tax advice on how to acquire/distr bute software such that the

amount of tax legally due is minimized.

. Provided internal tax advice on how to acqu re entire manufactur ng lines from U.S.

vendors, assemble and test the lines before shipping them outside the country,

without incurring any sales or use tax l abil t es.

. Provided extensive consult ng to HP's L terature

D stribut on Center - end to end consulting on how

to acquire and distribute printed marketing l terature

n a manner that minimizes the amount of tax legally

due. (This operation is in California.)

Tax Planning, Cont'd

. On a regular basis I was called upon to consult on proposed mergers, acquisitions

and divestitures. The largest of these was the Divest ture of Agilent Technologies

in 1999, and the merger with Compaq Computers in 2002. "Out of the box

thinking" with regard to using the MTC for Compaq close-out audits.

. Established a process whereby HP s tuses most lllinois sales to Kankakee, lL and

in turn the city rebates a portion of the lllinois local tax to Hp.

. HP established a wholly owned subsidiary which strove to be as independent as

possible n order to avoid attributional nexus. This subsidiary sold computers

and computer-related devices and supplies. The goal, of course, was to go head-

to-head with Dell Computers.

. Myself and the lawyer in our group would "audit" the operat on of the subsidiary

to nsure that the separat on from HP was not eroding. We also advised on

which of their business practices put them at risk for creat ng nexus.

& Use Tax Research

Sales

. I consider myself a skilled researcher when I have access to good on-line tools

such as CCH, RlA, Lexis-Nexis, WWW, etc. Plus there are a few good general

reference guides which have handy taxabiliÇ tables.

. My most challenging research came during the nternet explosion when it seemed

like every HP business was in a hurry to create e-services and/or sell property

over the internet.

. Moststatesalesandusetaxlaws/regsdidn'tyetaddresstheuniquenatureofthe

nternet and I had to perform research without the safety-net of on-point statutes

and regulations.

Management Experience

. The Agilent split caused the HP Tax Department to split roughly in hall and the

boss I directly reported to since my hire went over to head-up the Agilent Sales

and Use Tax Department. lt was at th s t me that I was promoted into the Senioi

Corporate Sales & Use Tax Manage/s pos tion.

. Both HP and Agilent had to staff-up because neither side had the necessary

head-count.

. From this point forward I had two managers reporting to me, plus one attorney,

and one administrat ve assistant.

. From the Compaq acquis t on we only increased our headcount by two people.

The HP Sales & Use Tax Department now had 23 headcount in 5 different

geographic locations: Colorado Spr ngs, Atlanta, GA, Roseville, CA, Omaha, NE,

and Bangalore, lndia. At this point no sales and use tax people were left in the

Corporate Tax Department in Palo Alto. Only the VP of Worldwide Transaction

Tax (my boss) was left.

Management Experience

ln my years as a manager I had experience with the following:

. Wr t ng job descriptions and justifying the positions to Tax or FSC

management (l never had a position turned down)

. Quantifying employee performance using the method HP had in place at

a given t me (changed through the yeais)

. Administer ng salary increases (or not) based on the performance cr teria

noted above

. Administering corrective action policies for non-performing employees

(Fortunately this was a rare event)

. Providing a detailed budget for the department until some years ago

when managers were not called upon for this information - became

"tops down budgeting"

. Creating tra ning and development plans for all members of the department

(l'm very proud of the number of CMI's we grew in the department!)

"Working Manager"

. Throughout all of HP's Corporate Tax Department the managers were all

considered "working managers,"

. This applied to me as well. I had a fairly constant and challenging workload

of mostly consulting. HeaW contract rev ew.

. My two direct-report tax managers were both very talented tax professionals

who did not require constant care and feeding. I gave them a lot of rope and I

was very rarely disappointed.

Operating Principles

. I believe that the first responsibility of a Corporate Tax Department is to nsure

that the company is in substantial compliance with all lnternational, Federal,

State and Localtax laws.

. A large corporation will never be 100% compliant in all areas of tax as perfection

carries an enormous cost. An element of risk and the cost of compliance both

need to be considered when sizing a tax department.

. Tax Departments can no longer justify their existence on the compliance function

alone. Tax Departments must now be able to demonstrate that they are adding

value (which can take many forms, e,g., a low effective tax rate).

. ln the case of sales and use taxes. value can be added bv:

I Ma nta ning a very low o/o of error related to the sales function.

. Consulting on large, complex customer deals in order to minimize the

custome/s tax liability.

r Consulting w th procurement on large acqu s tions in order to minimize taxes.

. lnsuring that all sales and use tax exempt ons are claimed.

Operating Principles, Cont'd

. ln the case of sales and use taxes. value can be added bv (cont'd):

. Reverse aud t ng before the close of an aud t to nsure that no money is left

on the table.

. of negotiation when under audit for the advantage of the company

Use the art

(reserved for gray areas of the law in order to avoid appeal/litigation when the

cost of appeal/litigation exceeds the potential upside).

. Being an enabler rather than an impediment to account ng automation.

. When appropr ate, use tools such as "Direct Pay'', or an "Effective Tax Rate",

or even internally-developed automated tax logic in order to simplify

compliance for the payables function.

. Mon tor tax legislation to determine the impact on the company, May involve

work ng to pass or block the legislation.

. Pursue legislative remedies to sales and use tax problems. May involve

wr t ng legislation, finding sponsors, lobbying and testifying.

. There's no substitute for a good, thorough knowledge of the company in order to

identify potential value-adds. Plus, it pays to become well known to your internal

partners in sales order admin, procurement, legal, M&A, etc,

M iscella neous

Graduated from St. Mary's College of Moraga, CA n May, 1983 with a

Bachelor's Degree n Accounting,

Passed all parts of the CPA examinat on in November, L987. Have not

been certified as the CA State Board of Equalization experience does

not count 1:1 compared to a person doing financial accounting work

under a CPA. And for my entire career at HP I had nobody in my manage-

ment chain who could certify my work.

Passed IPT's CMI exam in September, 1989 and have kept my CMI

credential current through cont nu ng education offered by IPT and COST.

Served on IPT's CMI Committee until my layoff at HP. I assisted n proctoring the

exam and grad ng the written exam, plus giving the oral exam.

Personal: Married to Amy since July 1988. Have three boys: Robbie, age

19, John, age 77, and Michael, age 8.

Miscellaneous, Cont'd

. Graduated from Reserve Police Academy in a tie for highest score. Was a Reserve

Deputy for the Santa Clara County Sheriff s Office from the mid to late 1980's.

. Recently joined the Colorado Mounted Rangers. An organ zat on w th a rich history.

I am a second l eutenant. (Volunteer time, no compensation for any of our work,)

. Earlier this year I was appointed by the Colorado Springs City Council to their PSSTOC

advisory board. (PSSTOC = Public Safety Sales Tax Oversight Committee.) One of

Colorado Springs sales/use tax rate increases related specif cally to provide funding

for public safety projects. Part of the ordinance required the PSSTOC be formed in

order to insure that the dollars are spent properly,

. the F nance Council for a brand new Catholic parish in Northern Colorado

Sat on

Springs. Was there from the very beginning until the first phase ofthe church was

built (7 years). Learned a lot in the course of doing this work.

Contact lnformation

Address: 1915 lvywood Lane

Colorado Springs, CO 80920

719-***-**** Home

719-***-**** BlackBerry Cell

Colorado.Gallagher@comcast. net

@Google: Corporate Tax Department

1600 Amphitheatre Parkway, Bldg 1945

650-***-**** Desk Phone

650-***-**** Fax

abnhgc@r.postjobfree.com

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