Suppose that OZ Inc. is a large multi-national firm based in Kansas (producing brains, hearts, and courage) with annual worldwide net income of $60 million. OZ has 75 percent of its payroll and 90 percent of its property in Kansas, but just 1 percent of its sales.
a. Compute the amount of net income that would be taxable in Kansas using the three-factor apportionment formula.
b. Compute the amount of net income that would be taxable in Kansas using a double-weighted sales apportionment formula.
c. Compute the amount of net income that would be taxable in Kansas using a sales-only apportionment formula.
d. Explain what factors policymakers in Kansas should consider as they debate what apportionment formula to apply.