INCOME TAXES

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 17 – INCOME TAXES

The income tax (provision) benefit for the periods shown consist of the following:

	2023			2022			2021
Current
US Federal	$	-		$	(1,302,811	)		-
US State		-			(446,677	)		-
Total current provision		-			(1,749,488	)		-
Deferred
US Federal		(578,679	)		(7,727,011	)		582,724
US State		(151,559	)		(2,649,261	)		137,276
Total deferred benefit		(730,238	)		(10,376,272	)		720,000
Change in valuation allowance		-			8,839,791			(720,000	)
Income tax (provision) benefit	$	(730,238	)	$	(3,285,969	)		-

The reconciliation of income tax expense computed at the U.S. federal statutory rate of 21% to the income tax provision is as follows:

	2023			2022			2021
Computed tax expense	$	21	%	$	21	%		21	%
State taxes, net of Federal income tax benefit		6	%		7	%		5	%
Change in valuation allowance		0	%		24	%		(10	)%
Employee stock awards		(40	)%		4	%		(5	)%
Stock grants		(2	)%		0	%		(1	)%
Stock for services		0	%		0	%		(6	)%
Other		1	%		0	%		0	%
Non-deductible meals & entertainment		0	%		0	%		0	%
Contingent consideration fair value		1	%		1	%		0	%
Stock and Warrants on Note Conversion		(5	)%		1	%		(4	)%
Total provision for income taxes	$	(18	)%	$	9	%		0	%

The Company’s effective tax rates was (18%) for the year ended March 31, 2023. During the year ended March 31, 2023, the effective tax rate differed from the U.S. federal statutory rate primarily due to Employee stock awards.

AMMO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the Company’s deferred tax liabilities and assets are as follows:

	2023			2022
Deferred tax assets
Net operating loss carryforward	$	871,331		$	-
Loss on purchase		826,311			879,319
Other		-			-
Total deferred tax assets	$	1,697,642		$	879,319
Deferred tax liabilities
Depreciation expense	$	(2,906,214	)	$	(2,208,361	)
Other		(1,101,020	)		(207,439	)
Total deferred tax liabilities	$	(4,007,234	)	$	(2,415,800	)
Net deferred tax assets/(liabilities)	$	(2,309,592	)	$	(1,536,481	)
Valuation allowance		-			-
Net deferred tax assets/(liabilities)	$	(2,309,592	)	$	(1,536,481	)

The Company accounts for uncertain tax positions in accordance with ASC No. 740-10-25. ASC No. 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC No. 740-10-25, 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 benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC No. 740-10-25 also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities. The Company has evaluated tax positions taken by the Company and has concluded that as of March 31, 2023 and 2022, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure in the financial statements.

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended December 31, 2016, December 31, 2017 and March 31, 2018, 2019, 2020, 2021, 2022, and 2023 are subject to audit.

AMMO, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS