Note 14 - Income Taxes

12 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 14. INCOME TAXES

The following table summarizes income before income taxes:

	Years Ended June 30,
	2023		2022
U.S.	$	1,321,043	$	2,067,224
Foreign		272,975		290,897
Income before income taxes	$	1,594,018	$	2,358,121

Income Tax Provision

Provision for income tax as listed on the Consolidated Statements of Income for the years ended June 30, 2023 and 2022 are $428,989 and $1,212,400, respectively. 

Provision for taxes consisted of the following:

	Years Ended June 30,
	2023		2022
U.S. operations	$	356,298	$	1,062,895
Foreign operations		72,691		149,505
Total	$	428,989	$	1,212,400

Provisions for income tax consisted of the following as of the years ended:

	Years Ended June 30,
	2023			2022
Current:
Federal	$	299,707		$	741,200
States		78,723			242,393
Foreign		87,033			177,118
Total current		465,463			1,160,711
Deferred:
Federal		(22,508	)		69,422
States		376			9,880
Foreign		(14,342	)		(27,613	)
Total deferred		(36,474	)		51,689
Total	$	428,989		$	1,212,400

Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets for the years ended June 30, 2023 and 2022 are presented below:

	Years Ended June 30,
	2023			2022
Deferred tax assets:
Property and equipment and intangible assets - U.S.	$	461,680		$	445,629
Net operating loss		982			4,904
Capital loss carryover		971			-
Accruals, reserves and other - U.S.		305,808			297,521
Leasing assets		45,105			137,756
Leasing liabilities		(43,259	)		(132,732	)
Gross deferred tax assets		771,287			753,078
Less valuation allowance		-			-
Total deferred tax assets - U.S.	$	771,287		$	753,078
Deferred tax liabilities:
Intangible assets - foreign	$	(211,406	)	$	(237,844	)
Accruals, reserves and other - foreign		(30,883	)		(22,709	)
Total deferred tax liabilities - foreign	$	(242,289	)	$	(260,553	)
Total net deferred tax assets	$	528,998		$	492,525

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.  At present, the Company does believe that it is more likely than not that the deferred tax assets will be realized. The valuation allowance was unchanged during the year ended  June 30, 2023.

On March 27, 2020 the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The Company has evaluated the provisions of the CARES Act and determined that it did not result in a significant impact on the Company’s tax provision.

Income tax expense for the years ended  June 30, 2023 and June 30, 2022 differed from the amounts computed by applying the statutory federal income tax rate of 21.0% to pretax income as a result of the following:

	Years Ended June 30,
	2023			2022
Federal tax expense (benefit) at statutory rate	$	334,950		$	495,287
State income taxes		62,567			201,369
Permanent differences		73,142			371,987
Foreign tax credit		(57,036	)		(58,413	)
Change in valuation allowance		-			-
Foreign rate differential		15,366			202,170
Total tax expense	$	428,989		$	1,212,400

	Years Ended June 30,
	2023			2022
Federal tax expense (benefit) at statutory rate		21	%		21	%
State income taxes		3.92	%		8.54	%
Permanent differences *	4.59		%		20.6	%
Foreign rate differential		0.96	%		8.57	%
Foreign tax credit		(3.58	)%		(2.48	)%
Change in valuation allowance		0	%		0	%
Total tax expense		26.89	%		56.23	%

* Substantially all of the permanent differences in during the year ended June 30, 2023 related to the $2,500,000 legal settlement being permanently nondeductible for income taxes.

Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which includes interest and penalties, for the years ended  June 30, 2023 and 2022 are as follows:

Balance at June 30, 2022	$	314,932
Additions based on tax positions taken during a prior period		12,597
Reductions based on tax positions taken during a prior period		-
Additions based on tax positions taken during the current period		-
Reductions based on tax positions taken during the current period		-
Reductions related to settlement of tax matters		-
Reductions related to a lapse of applicable statute of limitations		-
Balance at June 30, 2023	$	327,530

The Company files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are subject to tax examinations for the tax years 2019 through 2022 as of year ended June 30, 2023. To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period.  There were no ongoing examinations by taxing authorities as of June 30, 2023.

The Company had $0.3 million of unrecognized tax benefits as of June 30, 2023 and 2022 that if recognized would affect the effective tax rate.  The Company does not anticipate a significant change to its unrecognized tax benefits in the year ended June 30, 2023.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2023, and 2022, the Company accrued and recognized as a liability $75,584 and $62,297, respectively, of interest and related penalties to uncertain tax positions.