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INCOME TAXES
12 Months Ended
Sep. 30, 2016
INCOME TAXES  
INCOME TAXES

7. INCOME TAXES:

The components of income tax expense from operations for fiscal 2016 and fiscal 2015 consisted of the following:

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Current: Federal

 

$

3,355,335

 

$

3,650,491

 

Current: State

 

 

482,387

 

 

486,173

 

 

 

 

3,837,722

 

 

4,136,664

 

Deferred: Federal

 

 

401,159

 

 

242,502

 

Deferred: State

 

 

36,119

 

 

21,834

 

 

 

 

437,278

 

 

264,336

 

Income tax expense

 

$

4,275,000

 

$

4,401,000

 

 

The difference between the Company’s income tax expense in the accompanying consolidated financial statements and that which would be calculated using the statutory income tax rate of 35% for both fiscal 2016 and fiscal 2015 on income before income taxes is as follows:

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Tax at statutory rate

 

$

3,589,485

 

$

3,766,798

 

Nondeductible business expenses

 

 

368,002

 

 

355,710

 

State income taxes, net of federal tax benefit

 

 

345,323

 

 

347,157

 

Other

 

 

(27,810)

 

 

(68,665)

 

 

 

$

4,275,000

 

$

4,401,000

 

 

Temporary differences between the financial statement carrying balances and tax basis of assets and liabilities giving rise to the net deferred tax asset (liabilities) at fiscal year ends 2016 and 2015 relate to the following:

 

 

 

 

 

 

 

 

 

    

2016

    

2015

 

Deferred tax assets:

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

246,178

 

$

319,818

 

Accrued expenses

 

 

1,084,140

 

 

1,076,222

 

Inventory

 

 

464,648

 

 

523,396

 

 

 

 

1,794,966

 

 

1,919,436

 

Noncurrent:

 

 

 

 

 

 

 

Property and equipment

 

$

21,087

 

$

180,285

 

Net operating loss carry forwards—federal

 

 

241,717

 

 

287,759

 

Net operating loss carry forwards—state

 

 

592,559

 

 

596,545

 

 

 

 

855,363

 

 

1,064,589

 

Total deferred tax assets

 

 

2,650,329

 

 

2,984,025

 

Valuation allowance

 

 

(592,559)

 

 

(586,299)

 

Net deferred tax assets

 

$

2,057,770

 

$

2,397,726

 

Deferred tax liabilities:

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

Trade discounts

 

$

353,047

 

$

365,710

 

 

 

 

 

 

 

 

 

Noncurrent:

 

 

 

 

 

 

 

Property and equipment

 

 

1,618,875

 

 

1,531,346

 

Goodwill

 

 

1,308,729

 

 

1,246,782

 

Intangible assets

 

 

1,356,769

 

 

1,396,260

 

 

 

 

4,284,373

 

 

4,174,388

 

Total deferred tax liabilities

 

$

4,637,420

 

$

4,540,098

 

Net deferred tax assets (liabilities):

 

 

 

 

 

 

 

Current

 

$

1,441,919

 

$

1,553,726

 

Noncurrent

 

 

(4,021,569)

 

 

(3,696,098)

 

 

 

$

(2,579,650)

 

$

(2,142,372)

 

At September 2016, the Company had a $0.2 million noncurrent deferred tax asset related to federal net operating loss carryforwards. These federal net operating loss carryforwards totaled approximately $0.7 million and were primarily attributable to the Company’s fiscal 2002 purchase of Hawaiian Natural Water Company, Inc. (“HNWC”), a wholly owned subsidiary of the Company. The utilization of HNWC’s net operating losses is limited by Internal Revenue Code Section 382 to approximately $0.1 million per year through 2022.

At September 2016, the Company had a valuation allowance of approximately $0.6 million against certain state net operating losses, which more likely than not will not be utilized. The Company had no material unrecognized tax benefits, interest, or penalties during either fiscal 2016 or fiscal 2015, and the Company does not anticipate any such items during the next twelve months. The Company’s policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. The Company files income tax returns in the U.S. and various states and the tax years 2013 and forward remain open under U.S. and state statutes.