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Income Taxes

12 Months Ended

Oct. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 - INCOME TAXES:

The Company’s provision for income taxes in 2018 and 2017 consisted of the following:

		2018				2017

Current
Federal		$	219,233			$	392,354
State and local			140,534				35,717
			359,767				428,071
Deferred
Federal			98,400				(199,550	)
State and local			53,365				15,575
			151,765				(183,975	)
Income tax expense		$	511,532			$	244,096

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:

		2018				2017
Tax at the federal statutory rate		$	693,239			$	241,862
Other permanent differences			(59,473	)			(21,289	)
Effect of tax rate change			(224,283	)
State and local tax, net of federal			102,049				23,523

Provision for income taxes		$	511,532			$	244,096

Effective income tax rate			25	%			25	%

The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2018 and 2017 are as follows:

		2018				2017
Deferred tax assets:
Accounts receivable		$	39,561			$	57,904
Unrealized loss			6,057				138,963
Deferred rent			66,524
Deferred compensation			146,356
Net operating loss			96,950
Inventory			84,877				142,881

Total deferred tax asset		$	440,325			$	339,748

Deferred tax liability:
Intangible assets acquired			484,932				387,982
Deferred compensation							(196,443	)
Deferred rent							(96,659	)
Fixed assets			397,090			$	534,800

Total deferred tax liabilities		$	882,022			$	629,680

A valuation allowance was not provided at October 31, 2018 or 2017. 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.

On December 22, 2017, H.R.1, or the Tax Cuts and Jobs Act (the “Act” or “Tax Reform”) was signed into law. The Act made significant changes to the Internal Revenue Code including, but not limited to, reducing the corporate federal tax rate from 35% to 21% effective January 1, 2018. The Company calculated its provision for current federal income tax in foscal 2017 using a rate of 23.2%, which reflects a blend of the former federal tax rate and the new federal tax rate of 21%. As a result of the new federal tax rate, the Company remeasured its deferred tax assets and liabilities. The remeasurement resulted in a provision for income taxes of $10,786.

As of October 31, 2018 and 2017, 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, 2018 and 2017, 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, New York City, Virginia, Texas, Rhode Island, South Carolina, 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 2015. 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 2012. 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 2013.