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8. INCOME TAXES

12 Months Ended

Oct. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company’s provision (benefit) for income taxes in 2016 and 2015 consisted of the following:

		2016				2015

Current
Federal		$	219,562			$	(73,407	)
State and local			155,083				36,610
			374,645				(36,797	)

Deferred
Federal			941,150				(657,500	)
State and local			50,125				(69,350	)
			991,275				(726,850	)
Income tax (benefit) expense		$	1,365,920			$	(763,647	)

A reconciliation of the difference between the expected income tax rate using the statutory U.S. federal tax rate and the Company’s effective tax rate is as follows:

		2016				2015
Tax at the federal statutory rate of 34%		$	1,263,427			$	(711,680	)
Other permanent differences			(32,944	)			(30,359	)
State and local tax, net of federal benefit			135,437				(21,608	)

Provision for income taxes		$	1,365,920			$	(763,647	)

Effective income tax rate			37	%			(37	%)

The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2016 and 2015 are as follows:

		2016				2015
Current deferred tax assets:
Accounts receivable		$	67,034			$	53,605
Net operating loss							714,150
Unrealized loss							180,112
Inventory			64,384				49,853

Total current deferred tax asset		$	131,418			$	997,720

Non-current deferred tax assets:
Deferred rent			107,635				82,666
Deferred compensation			227,947				179,614

Total non-current deferred tax asset		$	335,582			$	262,280

Total deferred tax asset		$	467,000			$	1,260,000

Current deferred tax liability:
Unrealized gain		$	49,873			$

Non-current deferred tax liability:
Fixed assets		$	503,052				354,650

Total deferred tax liabilities		$	552,925			$	354,650

A valuation allowance was not provided at October 31, 2016 or 2015. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are expected to be deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

As of October 31, 2016 and 2015, the Company did not have any unrecognized tax benefits or open tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of October 31, 2016 and 2015, the Company had no accrued interest or penalties related to income taxes. The Company currently has no federal or state tax examinations in progress.

The Company files a U.S. federal income tax return and California, Colorado, Connecticut, Idaho, Kansas, Michigan, New Jersey, New York, Texas, Rhode Island, South Carolina, Virginia and Oregon state tax returns. The Company’s federal income tax return is no longer subject to examination by the federal taxing authority for years before fiscal 2013. The Company’s California, Colorado and New Jersey income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2010. The Company’s Oregon, New York, Kansas, South Carolina, Rhode Island, Connecticut and Michigan and Texas income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2011.