INCOME TAXES

12 Months Ended

Sep. 30, 2021

INCOME TAXES

INCOME TAXES

8. INCOME TAXES:

The components of income tax expense from operations for fiscal 2021 and fiscal 2020 consisted of the following:

	2021		2020
Current: Federal	$	3,631,619	$	1,690,956
Current: State		1,144,728		468,842
		4,776,347		2,159,798
Deferred: Federal		(233,907)		(14,270)
Deferred: State		(41,440)		(2,528)
		(275,347)		(16,798)
Income tax expense	$	4,501,000	$	2,143,000

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 21% for both fiscal 2021 and fiscal 2020 on income before income taxes is as follows:

	2021		2020
Tax at statutory rate	$	3,504,540	$	1,575,422
Nondeductible business expenses		232,684		230,571
State income taxes, net of federal tax benefit		867,567		376,262
Other		(103,791)		(39,255)
	$	4,501,000	$	2,143,000

Temporary differences between the financial statement carrying balances and tax basis of assets and liabilities giving rise to net deferred tax assets (liabilities) at September 2021 and September 2020 relates to the following:

	2021		2020
Deferred tax assets:
Allowance for doubtful accounts	$	223,094	$	210,734
Accrued expenses		1,369,467		1,243,132
Inventory		362,466		365,417
Intangible assets		—		15,803
Other		114,206		—
Net operating loss carry forwards - federal		7,108		35,545
Net operating loss carry forwards - state		697,013		716,241
Total gross deferred tax assets		2,773,354		2,586,872
Less: Valuation allowance		(697,013)		(716,241)
Total net deferred tax assets		2,076,341		1,870,631
Deferred tax liabilities:
Trade discounts		356,901		318,070
Property and equipment		2,101,463		2,437,337
Goodwill		921,799		921,799
Other		187,164		—
Intangible assets		40,242		—
Total deferred tax liabilities		3,607,569		3,677,206
Total net deferred income tax liability	$	1,531,228	$	1,806,575

At September 2021, the Company had noncurrent deferred tax assets related to federal net operating loss carryforwards in an amount less than $0.1 million. These federal net operating loss carryforwards totaled an amount less than $0.1 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.

The Company had a valuation allowance of approximately $0.7 million at both September 2021 and September 2020, 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 fiscal 2021 or fiscal 2020, 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 2018 and forward remain open under U.S. and state statutes.