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INCOME TAXES | 12 Months Ended
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Dec. 31, 2012
INCOME TAXES |
INCOME TAXES | 9. INCOME TAXES The provision for income taxes consists of the following:
|  | For the Years Ended December 31, |
|  | 2012 |  | 2011 |  | 2010 |
Current tax provision (benefit) |  |  |  |  |  |  |
Federal |  | $ | 1,785 |  | (29,070 | ) | $ | (204,507 | )
State |  | 8,033 |  | 42,867 |  | 28,450 |
Total current provision (benefit) |  | 9,818 |  | 13,797 |  | (176,057 | )
Deferred tax provision (benefit) |  |  |  |  |  |  |
Federal |  | — |  | — |  | — |
State |  | — |  | — |  | — |
Total deferred tax provision (benefit) |  | — |  | — |  | — |
|  | 2012 |  | 2011 |  | 2010 |
Total income tax provision (benefit) |  | $ | 9,818 |  | $ | 13,797 |  | $ | (176,057 | )
The Company recognized a net tax benefit due to an additional refund for net operating losses in 2009 mitigated by Alternative Minimum Tax in 2010. The Company has $12,850,183 in tax benefits attributable to carryback losses for federal tax purposes. The loss carryforwards will begin to expire in 2027 for federal tax purposes and will begin to expire for state tax purposes in 2013. Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
|  | December 31,
|  |  | 2012 |  |  | 2011 |
Deferred tax assets |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 4,873,433 |  | $ | 3,372,994 |
Accrued expenses and reserves |  |  | 1,165,658 |  |  | 1,118,679 |
Employee stock option expense |  |  | 295,696 |  |  | 682,810 |
Inventory |  |  | 319,830 |  |  | 397,449 |
Non-employee stock option expense |  |  | 15,546 |  |  | 79,939 |
Deferred tax assets |  |  | 6,670,163 |  |  | 5,651,871 |
Deferred tax liabilities |  |  |  |  |  |  |
Property and equipment |  |  | (631,109 | ) |  | (768,455 | )
Deferred tax liabilities |  |  | (631,109 | ) |  | (768,455 | )
Net deferred assets |  |  | 6,039,054 |  |  | 4,883,416 |
Valuation allowance |  |  | (6,039,054 | ) |  | (4,883,416 | )
Net deferred tax assets |  | $ | — |  | $ | — |
The valuation allowance increased $1,155,638 for 2012 and decreased $559,266 for 2011. A reconciliation of income taxes based on the federal statutory rate and the provision (benefit) for income taxes is summarized as follows:
|  | December 31, |
|  | 2012 |  | 2011 |  | 2010 |
Income tax (benefit) at the federal statutory rate |  | 35.0 | % | 35.0 | % | 35.0 | %
State tax (benefit), net of federal (benefit) |  | 2.9 |  | 2.9 |  | 2.9 |
Increase in valuation allowance |  | (28.0 | ) | — |  | — |
Permanent differences |  | 1.2 |  | 2.0 |  | 9.1 |
Return to accrual adjustments |  | — |  | (2.8 | ) | (15.0 | )
Alternative minimum tax |  | — |  | 3.4 |  | 5.8 |
Adjustment to temporary differences for stock options |  | (11.0 | ) | — |  | — |
Release of valuation allowance – Net operating loss carryforward |  | — |  | (39.0 | ) | (45.2 | )
Other |  | (0.3 | ) | (0.5 | ) | (0.5 | )
Effective tax (benefit) rate |  | (0.2 | )% | 1.0 | % | (7.9 | )%
The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. The Company’s federal income tax returns for all tax years ended on or after December 31, 2009, remain subject to examination by the Internal Revenue Service. The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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