(7) INCOME TAXES

Income tax (benefit) expense consists of the following for the years ended December 31, 2013 and 2012:

	2013			2012
Current tax (benefit) expense:
Federal	$	(1,835	)	$	784
State		(79	)		117
Penalties and interest		55			55
		(1,859	)		956
Deferred tax (benefit) expense:
Federal		(806	)		(156	)
State		(60	)		(12	)
Valuation allowance		1,935			—
		1,069			(168	)
	$	(790	)	$	788

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

	2013			2012
Statutory rate		(34	)%		34	%
State taxes		(3	)		3
Permanent differences and other		3			(4	)
Change in valuation allowance		24			—
Effective rate		(10	)%		34	%

(7) INCOME TAXES (continued)

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) at December 31, 2013 and 2012 are as follows:

	2013			2012
Current deferred tax assets (liabilities):
Accrued expenses	$	65		$	130
Deferred rent		-			27
Accounts receivable		671			673
Inventory		970			1,113
Amortization		135			(21	)
Prepaid expenses		(99	)		(67	)
Stock based compensation		23			—
Tax Credits and NOL Carryforward		233			—
Other		9			—
		2,007
Less: Valuation allowance		(1,935	)		—
Net current deferred tax assets	$	72		$	1,855
Long-term deferred tax assets (liabilities):
Property and equipment	$	(969	)	$	(1,182	)
Deferred rent		897			396
Net long-term deferred tax liabilities	$	(72	)	$	(786	)
Net deferred tax liabilities	$			$	(786	)

The Company generated a net loss for income tax purposes of approximately $5,200 for 2013, which will be utilized as an income tax carryback for years 2010 through 2012. As a result, the Company reduced its income tax payable by $768 and is expecting a net income tax refund of $893, which is recorded as a current asset on the balance sheet. As a result, as of December 31, 2013, the Company has no available NOL carryforwards for federal tax purposes and approximately $3,500 for State purposes, which expire at various dates ranging from five to seven years.

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. 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. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2013		2012
Unrecognized tax benefits at the beginning of the period	$	67	$	60
Gross increases for State income tax liabilities		127		7
Unrecognized tax benefits at the end of the period	$	194	$	67