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10. Income taxes
 9 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income taxes

Note 10 – Income taxes

 

On December 22, 2017, the U.S. President signed into law H.R.1, formerly known as the Tax Cuts and Jobs Act (the “Tax Legislation”). The Tax Legislation significantly revised the U.S. tax code by (i) lowering the U.S. federal statutory income tax rate from 35% to 21%, (ii) implementing a territorial tax system, (iii) imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries, (iv) requiring a current inclusion of global intangible low taxed income of certain earnings of controlled foreign corporations in U.S. federal taxable income, (v) creating the base erosion anti-abuse tax regime, (vi) implementing bonus depreciation that will allow for full expensing of qualified property, and (vii) limiting deductibility of interest and executive compensation expense, among other changes. The Company has computed its tax expenses using the new statutory rate effective on January 1, 2018 of 21%.

 

Other provisions of the new legislation include, but are not limited to, limiting deductibility of interest and executive compensation expense. These additional items have been considered in the income tax provision for the nine months ended March 31, 2021 and 2020 and the impact was not material to the overall financial statements. For the nine months ended March 31, 2021, the Company recorded deferred tax assets of $52,947, which was resulted from allowance for credit loss of $189,206.

  

The income tax provision for the nine months ended March 31, 2021 and 2020 consisted of the following:

 

   March 31, 2021   March 31, 2020 
         
Current:          
Federal  $555,430   $212,722 
State   258,204    98,316 
Total current income tax provision  $813,634   $311,038 
Deferred:          
Federal   (36,221)   – 
State   (16,726)   – 
Total deferred taxes  $(52,947)  $– 
           
Total provision for income taxes  $760,686   $311,038 

 

The Company is subject to U.S. federal income tax as well as income tax of state tax jurisdictions. The tax years 2018 and 2019 remain open to examination by the major taxing jurisdictions to which the Company is subject. The following is a reconciliation of income tax expenses at the effective rate to income tax at the calculated statutory rates:

 

    March 31, 2021     March 31, 2020  
Statutory tax rate                
Federal     21.00%       21.00%  
State of California     8.84%       8.84%  
Net effect of state income tax deduction and other permanent differences     10.38%       (1.79% ) 
Effective tax rate     40.22%       28.05%  

  

As of March 31, 2021 and June 30, 2020, the income taxes payable was $837,694 and $721,211, respectively.