Income Tax

12 Months Ended

Oct. 31, 2021

Income Tax Disclosure [Abstract]

Income Tax

Note 8 – Income Tax

The Company is subject to federal income taxes and state income tax in the U.S. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and reduced the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limited the deduction of interest expense for certain companies. The Company fulfilled and shipped all of the Products from Florida and, thus, it is subject to the state corporate income tax of Florida with a tax rate of 4.458%. There is no difference from the income tax computed at the combined federal and state statutory rate to the income tax effective rate.

Significant components of the tax expense (benefit) recognized in the accompanying statements of operations for the years ended October 31, 2021 and October 31, 2020 are as follows:

	October 31,
	2021			2020
Current Tax Expense:
Federal	$	(1,301,008	)	$	1,249,525
State		(134,190	)		265,256
Total Current Tax Expense		(1,435,198	)		1,514,781
Deferred Tax Expense:
Federal		—			—
State		—			—
Total Deferred Tax Expense		—			—
Estimated Tax Payments:
Federal		—			—
State		—			182,925
Total Estimated Tax Payment		—			182,925
Net Income Tax Liability/(Benefit)	$	(1,435,198	)	$	1,331,856

Total net deferred taxes are comprised of the following at October 31, 2021 and October 31, 2020:

	October 31,
	2021			2020
Deferred Tax Assets:
Stock Compensation Expense – NQSO	$	384,540		$	—
Other		30,099			—
Net Operating Loss Carryforwards		910,685			—
Total Deferred Tax Asset		1,325,324			—
Deferred Tax Liabilities:
Prepaid Expenses		(69,265	)		—
Total Deferred Tax Liabilities		(69,265	)		—
Less: Valuation Allowance		(1,256,059	)		—
Net Deferred Tax Asset		—			—

The Company has Federal NOL carryforwards of approximately $4,000,000 and state NOL carryforwards of approximately $1,800,000. With the changes instituted by the CARES Act, the Federal NOLs have an indefinite life and will not expire. The Company’s federal and state tax returns for the 2018 and 2019 tax years generally remain subject to examination by U.S. and various state authorities. A valuation allowance is recorded to reduce the deferred tax asset if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a valuation allowance of $1,256,059 for the year ended on October 31, 2021 is necessary to reduce the deferred tax asset to the amount that will more likely than not be realized.

During the year ended October 31, 2021, the Company paid $1,637,102 in combined Federal/State income taxes for taxable income generated in fiscal year 2020. As of October 31, 2021, the Company had a total income tax receivable in the amount of $1,753,594, which was the result of the NOL generated in fiscal year 2021 to be applied against taxable income in fiscal year 2020.

During the year ended October 31, 2020, the Company generated taxable income of $5,950,117 and, thus, accrued $1,249,525 of federal income tax. Estimated state income tax of $182,925 was paid to the state of Florida based on taxable income for the nine months ended July 31, 2020. The accrued expense for state taxes was $82,331 at October 31, 2020. During the year ended October 31, 2020 the Company paid $182,925 in income taxes and reported an income tax accrual of $1,331,856.