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INCOME TAXES
 12 Months Ended
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.