Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

INCOME TAXES

NOTE 19 —INCOME TAXES

As of December 31, 2022 and 2021, the Company had net operating loss carry forwards of $1,248,630 and $438,209, respectively, that may be available to reduce future years’ taxable income in varying amounts through 2041.

The provision for Federal income tax consists of the following:

The cumulative tax effect at the expected rate of 13.5% and (3.4)% of significant items comprising the Company’s net deferred tax amount is as follows:

The components for the provision of income taxes include:

	December 31, 2022			December 31, 2021
Current Federal and State	$	(206,000	)	$	143,000
Deferred Federal and State		(1,471,000	)		75,300
Total (benefit) provision for income taxes	$	(1,677,000	)	$	218,300

A reconciliation of the statutory US Federal income tax rate to the Company’s effective income tax rate is as follows:

	December 31, 2022			December 31, 2021
Federal tax		21.0	%		21.0	%
State tax		1.1	%		1.7	%
Permanent items		(3.1	)%		(5.0	)%
Measurement Period Adjustment		-			(16.9	)%
Valuation Allowance		-			2.3	%
Other		(5.5	)%		(6.5	)%
Effective income tax rate		13.5	%		(3.4	)%

Deferred income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts used for tax purposes. The Company has a net cumulative current deferred tax asset of $168,000 and a net cumulative long-term deferred tax liability of $769,000. The major components of deferred tax assets and liabilities are as follows:

	December 31, 2022			December 31, 2021
Deferred tax assets
Inventory obsolescence	$	93,000		$	107,000
Sales return reserve		-			-
Business interest limitation		1,707,000			481,000
Lease liability		650,000			712,000
Other		75,000			135,000
Loss carryforward		285,000			153,000
Valuation Allowance		-			-
Total deferred tax assets	$	2,810,000		$	1,588,000
Deferred tax liabilities
Fixed assets	$	(418,000	)	$	(230,000	)
Right of Use Assets		(628,000	)		(706,000	)
Intangibles		(2,363,000	)		(2,722,000	)
Total deferred tax liabilities	$	(3,409,000	)	$	(3,658,000	)
Total net deferred income tax assets (liabilities)	$	(599,000	)	$	(2,070,000	)

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2022 and 2021, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties were $0, respectively. The tax years ended December 31, 2016 through December 31, 2022 are considered to be open under statute and therefore may be subject to examination by the Internal Revenue Service and various state jurisdictions.

The Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2022 and 2021:

	As of December 31,
	2022			2021
Prepaid income taxes (accrued tax liability)	$	122,000		$	(175,000	)
Deferred tax liability	$	(599,000	)	$	(2,070,000	)

	Years Ended December 31,
	2022		2021
Income tax expense	$	1,677,000	$	218,000