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Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
INCOME TAXES

(5) INCOME TAXES

Income tax expense consists of the following for the years ended December 31, 2011 and 2010:

 

                 
    2011     2010  

Current tax expense:

                

Federal

   $ 1,253     $ 910  

State

     97       99  

Penalties and interest

     25       257  
   

 

 

    

 

 

  
      1,375       1,266  
   

 

 

    

 

 

  

Deferred tax benefit:

                

Federal

     (271 )      (258 ) 

State

     (24 )      (23 ) 
   

 

 

    

 

 

  
      (295 )      (281 ) 
   

 

 

    

 

 

  
    $ 1,080     $ 985  
   

 

 

    

 

 

  

A reconciliation of income tax computed at the U.S. statutory rate of 34% to the effective income tax rate is as follows:

 

                 
    2011     2010  

Statutory rate

     34 %      34 % 

State taxes

     3       3  

Permanent differences

     4       8  

Penalties and interest

     1       19  

Other

     (1 )      10  
   

 

 

    

 

 

  

Effective rate

     41 %      74 % 
   

 

 

    

 

 

  

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) at December 31, 2011 and 2010 are as follows:

 

                 
    2011     2010  

Current deferred tax assets (liabilities):

                

Accrued expenses

   $ 110     $ 68  

Deferred rent

     110       82  

Accounts receivable

     623       468  

Inventory

     612       230  

Amortization

     (17 )      —    

Prepaid expenses

     (54 )      (54 ) 
   

 

 

    

 

 

  

Net current deferred tax assets

   $ 1,384     $ 794  
   

 

 

    

 

 

  

Long-term deferred tax assets (liabilities):

                

Property and equipment

   $ (783 )    $ (598 ) 

Deferred Rent

     300       410  
   

 

 

    

 

 

  

Net deferred tax liabilities

   $ (483 )    $ (188 ) 
   

 

 

    

 

 

  

 

The accounting standard related to income taxes applies to all tax positions and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. This accounting standard requires that the tax effects of a position be recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as of the reporting date. If a tax position is not considered “more-likely-than-not” to be sustained, then no benefits of the position are to be recognized. This accounting standard requires additional disclosures. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows

 

                 
    2011     2010  

Unrecognized tax benefits at the beginning of the period

   $ —       $ —    

Gross increases for tax positions

     60       —    
   

 

 

    

 

 

  

Unrecognized tax benefits at the end of the period

   $ 60     $ —    
   

 

 

    

 

 

  

The Company accounts for uncertain tax positions in accordance with the accounting standard related to income taxes. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of December 31, 2011, we accrued unrecognized tax benefits, interest and penalties of $60. There were no unrecognized tax benefits, interest or penalties at December 31, 2010. The recognition of uncertain tax benefits are not expected to have a material impact on the Company’s effective tax rate or results of operations. The Company files income tax returns in the U.S. and various state jurisdictions, and there are open statutes of limitations for taxing authorities to audit the Company’s tax returns from 2008 through the current period.