Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

5. Income Taxes

The income tax provision consists of the following:

	2013		2012		2011
Current –
Federal	$	1,499,400	$	1,196,926	$	1,450,941
State		77,344		323,302		458,719
		1,576,744		1,520,228		1,909,660
Deferred –
Federal		406,116		346,974		370,710
State		10,568		90,746		36,143
		416,684		437,720		406,853
Income Tax Provision	$	1,993,428	$	1,957,948	$	2,316,513

A reconciliation of the effective rate with the federal statutory rate is as follows:

	2013		2012		2011
Federal statutory rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal benefit	1.1	%	5.5	%	5.6	%
Permanent differences	-0.7	%	0.1	%	0.1	%
Stock based compensation	0.0	%	0.0	%	0.2	%
Effective tax rate	34.4	%	39.6	%	39.9	%

The Company had a significant reduction in the effective state income tax rate from 5.5% to 1.1%. This change was a result of a change in the apportionment methodology in California, where the Company’s primary operation is located. The Company recognized the total impact of this change in the fourth quarter of 2013. The Company expects this to be a permanent rate change. The actual effective rate may change in future periods as the percentage of customers located in California changes in relation to the Company’s total sales. The permanent difference is primarily from research and development tax credits.

The components of the net deferred tax assets included in the accompanying balance sheets are as follows at December 31:

	2013		2012
Deferred tax assets:
Stock-based compensation	$	160,850	$	162,792
Allowance for doubtful accounts		48,578		47,959
Accrued expenses		83,367		55,401
	$	292,795	$	266,152
Deferred tax liabilities:
Prepaid expenses		—	$	(56,275)
Excess of tax over book depreciation and amortization		(1,314,221)		(814,619)
		(1,314,221)		(870,894)
Net deferred tax liabilities	$	(1,021,426)	$	(604,742)

These amounts are shown on the balance sheets as follows:

Deferred tax asset short-term	$	292,795	$	209,877
Deferred tax liability long-term		(1,314,221)		(814,619)
Net deferred tax liabilities	$	(1,021,426)	$	(604,742)

ASC 740 contains a two-step approach to recognizing and measuring uncertain tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on an audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the Company’s tax positions and tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes.

The Company operates within multiple taxing jurisdictions and could be subject to audit in these jurisdictions. These audits may involve complex issues, which may require an extended period of time to resolve. The Company has provided for its estimated taxes payable in the accompanying financial statements. Interest and penalties related to income tax matters are recognized as a general and administrative expense. The Company did not have any unrecognized tax benefits and did not have any interest or penalties accrued as of December 31, 2013 and 2012. The tax years ended December 31, 2010 through December 31, 2013 remain subject to examination by all major taxing authorities.