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INCOME TAXES
12 Months Ended
Dec. 31, 2014
INCOME TAXES  
INCOME TAXES

NOTE 4 INCOME TAXES

        The income tax expense for the years ended December 31, 2014 and 2013 consists of the following:

                                                                                                                                                                                    

 

 

2014

 

2013

 

Current taxes—Federal

 

$

(106,000

)

$

72,000

 

Current taxes—State

 

 

39,000

 

 

(21,000

)

Current taxes—Foreign

 

 

51,000

 

 

20,000

 

Deferred taxes—Federal

 

 

137,000

 

 

194,000

 

Deferred taxes—State

 

 

(40,000

)

 

35,000

 

​  

​  

​  

​  

Income tax expense

 

$

81,000

 

$

300,000

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        The statutory rate reconciliation for the years ended December 31, 2014 and 2013 is as follows:

                                                                                                                                                                                    

 

 

2014

 

2013

 

Statutory federal tax provision

 

$

327,000

 

$

370,000

 

State income taxes

 

 

45,000

 

 

45,000

 

Effect of foreign operations

 

 

(9,000

)

 

(3,000

)

Uncertain tax positions

 

 

(88,000

)

 

41,000

 

Income tax credits

 

 

(215,000

)

 

(167,000

)

Permanent differences

 

 

21,000

 

 

14,000

 

​  

​  

​  

​  

Income tax expense

 

$

81,000

 

$

300,000

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Income from operations before income taxes was derived from the following sources:

                                                                                                                                                                                    

 

 

2014

 

2013

 

Domestic

 

$

816,840 

 

$

1,074,572 

 

Foreign

 

 

144,177 

 

 

12,804 

 

​  

​  

​  

​  

Total

 

$

961,017 

 

$

1,087,376 

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        Deferred tax assets (liabilities) at December 31, 2014 and 2013, consist of the following:

                                                                                                                                                                                    

 

 

2014

 

2013

 

Allowance for uncollectable accounts

 

$

50,000

 

$

51,000

 

Inventories reserve

 

 

267,000

 

 

404,000

 

Accrued vacation

 

 

334,000

 

 

386,000

 

Non-compete amortization

 

 

222,000

 

 

281,000

 

Stock-based compensation and equity appreciation rights

 

 

148,000

 

 

100,000

 

State Tax NOL

 

 

95,000

 

 

117,000

 

Other

 

 

167,000

 

 

144,000

 

​  

​  

​  

​  

Deferred tax assets

 

 

1,283,000

 

 

1,483,000

 

​  

​  

​  

​  

Prepaid expenses

 

 

(292,000

)

 

(246,000

)

Property and equipment

 

 

(704,000

)

 

(836,000

)

​  

​  

​  

​  

Deferred tax liabilities

 

 

(996,000

)

 

(1,082,000

)

​  

​  

​  

​  

Net deferred tax assets

 

$

287,000

 

$

401,000

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        The net deferred taxes summarized above have been classified on the accompanying consolidated balance sheets as follows:

                                                                                                                                                                                    

Net current deferred tax assets

 

$

436,000

 

$

683,000

 

Net non-current deferred tax liabilities

 

 

(149,000

)

 

(282,000

)

​  

​  

​  

​  

Net deferred tax assets

 

$

287,000

 

$

401,000

 

​  

​  

​  

​  

​  

​  

​  

​  

​  

        We have determined that it is more likely than not that our deferred tax assets will be realized, principally through anticipated taxable income in future tax years. As a result, we have determined that establishing a valuation allowance on our deferred tax assets is not necessary.

        The tax effects from an uncertain tax position can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2014 and 2013:

                                                                                                                                                                                    

Balance as of December 31, 2012

 

$

140,000

 

Tax positions related to 2013:

 

 

 

 

Additions

 

 

53,000

 

Reductions

 

 

—  

 

​  

​  

Balance as of December 31, 2013

 

 

193,000

 

Tax positions related to current year:

 

 


 

 

Additions

 

 

23,000

 

Reductions

 

 

(160,000

)

​  

​  

Balance as of December 31, 2014

 

$

56,000

 

​  

​  

​  

​  

​  

        The $56,000 of unrecognized tax benefits as of December 31, 2014 includes amounts which, if ultimately recognized, will reduce our annual effective tax rate. It is included in Other Long-Term Liabilities on the accompanying consolidated balance sheets.

        Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2014 and 2013 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns.

        We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply.

        With few exceptions, we are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for the years before 2010.