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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES |
16. | INCOME TAXES
The Company’s net tax provision was approximately $200,000 for the year ended December 31, 2020 and zero for the year ended December 31 2019. The current year tax provision mainly relates to European taxes. The Company has evaluated the global intangible low-taxed income ("GILTI") and the foreign derived intangible income provisions and will treat any U.S. tax on foreign earnings under GILTI as a current period expense when incurred. The Company currently considers the earnings of its foreign entities to be permanently reinvested outside the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. Accordingly, deferred income taxes have not been recorded for the undistributed earnings of the Company's foreign subsidiaries. The domestic and foreign components of the Company's income before provision for income taxes are as follows:
|  | 2020 |  |  | 2019 |
Domestic |  | $ | 8,110,620 |  |  | $ | 9,789,538 |
Foreign |  |  | 529,406 |  |  |  | 181,722 |
Income before provision for income taxes |  | $ | 8,640,026 |  |  | $ | 9,971,260 |
Components of the provision for income taxes are as follows:
Current: |  | 2020 |  |  | 2019 |
Domestic |  | $ | 2,717,564 |  |  | $ | 2,897,092 |
State |  |  | 562,924 |  |  |  | 600,112 |
Foreign |  |  | 382,543 |  |  |  | 50,155 |
|  | $ | 3,663,031 |  |  | $ | 3,547,359 |
Deferred |  |  |  |  |  |
Domestic |  | $ | 471,198 |  |  | $ | - |
State |  |  | 97,605 |  |  |  | - |
Foreign |  |  | 141,577 |  |  |  | - |
|  |  | 710,380 |  |  | $ | - |
Valuation Allowance |  |  | (4,175,734 | ) |  |  | (3,547,359 | )
|  |  |  |  |  |  | - |
Income Tax Expense |  |  | 197,677 |  |  |  | - |
A reconciliation of the total provision for income taxes after applying the U.S. federal statutory rate of 21% to income before provision for income taxes to the reported provision for income taxes are as follows:
|  | 2020 |  |  | 2019 |
U.S. Statutory federal rate |  |  | 21.0 | % |  |  | 21.0 | %
State income tax rate, net of federal benefit |  |  | 4.35 | % |  |  | 4.35 | %
Permanent differences, including stock-based compensation |  |  | 6.72 | % |  |  | 9.25 | %
Change in valuation allowance, including effect of change in tax rates |  |  | (29.77 | )% |  |  | (34.72 | )%
Difference in foreign tax rates |  |  | 0.01 | % |  |  | 0.12 | %
Effective tax rate |  |  | 2.30 | % |  |  | 0.0 | %
|  | December 31, 2020 |  |  | December 31, 2019 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
U.S. federal and state net operating loss carryforwards |  | $ | 5,121,094 |  |  | $ | 8,400,000 |
Foreign net operating loss carryforwards |  |  | 7,000,000 |  |  |  | 7,900,000 |
Stock-based compensation |  |  | 389,816 |  |  |  | - |
Inventory allowance |  |  | 408,829 |  |  |  | 95,000 |
Allowance for doubtful accounts |  |  | 139,289 |  |  |  | 74,000 |
Total deferred tax assets |  |  | 13,059,028 |  |  |  | 16,469,000 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | 50,411 |  |  |  | 19,000 |
|  |  | - |  |  |  | - |
Total deferred tax liabilities |  |  | 50,411 |  |  |  | 19,000 |
Valuation Allowance |  |  | 13,008,617 |  |  |  | 16,450,000 |
Net Deferred Tax Assets |  |  | - |  |  |  | - |
The Company’s valuation allowance decreased by $3.4 million in 2020 and increased by $1.2 million during 2019. Total net operating loss carry forwards in the United States at December 31, 2020 were approximately $20.6 million, of which approximately $19.4 million, will expire between 2029 and 2037 and $1.2 million may be carried forward indefinitely. China has corporate tax rate of 25% with net operating loss carry forwards expiring after 4 years. The Company had $9.7 million of net operating loss carry forwards in China as of December 31, 2020. Hong Kong has a corporate tax rate of 17% with net operating loss carry forwards that do not expire. The Company had $3.5 million of net operating loss carry forwards in Hong Kong as of December 31, 2020. On October 25, 2019, the Company acquired wholly-owned foreign subsidiaries in Finland, Sweden and Norway. The Finland subsidiary had net operating loss carryforwards of $19.5 million as of December 31, 2020. There were no net operating loss carryforwards available in Norway or Sweden. In 2020 our Sweden subsidiary incurred approximately $116,000 of income tax expense due to the inability to fully utilize the NOLs generated from prior periods. The Finland tax rate is 20%. In the Netherlands, timing differences related to interest payments resulted in an uncertain tax position liability of $81,500. Deferred Tax Assets relating to foreign NOLs are being impacted by currency fluctuations.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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