Tannis Inc., a U.S. company has a foreign branch that earned an income of $150,000 and paid foreign income tax of $22,500 (15%). Tannis also paid sales and other taxes of $10,000 and paid withholding tax on dividends for $7,500. The corporate tax rate in the U.S. is 21%. Tannis Inc. must include the $150,000 of foreign branch income in its U.S. tax return in calculating U.S. taxable income.

1) Please calculate the Net tax liability using the tax deduction method and tax credit method, and comment on which method you will choose.

2) If everything stays the same from part 1) but sales and other taxes increased by $105,000, please redo Part 1).