Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  



The provision for income taxes consists of the following for the six months ended June 30, 2017 and June 30, 2016:


    Six Months Ended June 30,  
    2017     2016  
Federal   $ 166,387     $ 502,027  
State     42,554       159,227  
Federal     (46,449 )     65,834  
State     (10,929 )     3,056  
Provision for income tax expense   $ 151,563     $ 730,144  


    Six Months Ended June 30,  
    2017     2016  
Federal income tax rate     34 %     34 %
State tax, net of federal benefit     8 %     8 %
Permanent differences     %     %
Change in accrued liabilities     (6.6 )%     17 %
Change in valuation allowances     %     (15 )%
Other     2.6 %     %
Effective income tax rate     38 %     44 %


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at June 30, 2017 and at December 31, 2016 are as follows:



June 30,





December 31,


Deferred tax assets:                
Inventory reserves   $ 230,730     $ 105,000  
Accrued liabilities     137,313       209,084  
Total deferred tax assets     368,033       314,084  
Accumulated depreciation     (150,018 )     (153,447 )
Net deferred tax assets   $ 218,015     $ 160,637  


Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of June 30, 2017 and December 31, 2016, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.


The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for tax years after 2010.


The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2017 and December 31, 2016, the Company has no accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2010 through 2016 remain open to examination by the major taxing jurisdictions to which the Company is subject.


The Company has refundable income taxes of $988,168 as of June 30, 2017. This was a result of estimated tax payments for the first quarter of 2017. The refundable income taxes will be used to offset any taxable net income in the annual tax return.