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Income taxes
 9 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income taxes

Note 13 – Income taxes

 

On December 22, 2017, the President of the United States 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%.

 

In addition, upon completion of the acquisition of Anivia, the Company is subject to corporate income taxes in People’s Republic of China (“PRC”). Anivia and its subsidiaries were subject to BVI or Hong Kong income taxes but did not have any operations for the period ended March 31, 2022. DHS, the operating VIE of Anivia, is considered a Controlled Foreign Corporation (CFC) defined under IRC Sec. 957(a) since the Company indirectly owns more than 50% voting control of DHS as a result of the Transfer Agreement. Therefore, DHS is subject to the GILTI Tax. DHS is subject to 25% tax rate in PRC. The Company made an election to apply the GILTI high-tax exclusion for DHS under the Final Regulations (T.D. 9902). As the result of the election, no GILTI tax was recorded as of March 31, 2022. In addition, as a result of the acquisition the Company booked a $6,094,144 of goodwill. Since the acquisition was a stock acquisition, the Goodwill is not deductible for tax purposes.

 

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, 2022 and 2021. For the three and nine months ended March 31, 2022, the Company recorded deferred tax liabilities of $1,389,113 resulting from intangible assets acquired, and deferred tax assets of $552,784 resulting from other temporary differences, including stock compensation expense, depreciation expenses, lease expenses, etc. For the three and 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 three and nine months ended March 31, 2022 and 2021 consisted of the following:  

                    
   Three Months Ended March 31,   Nine Months Ended March 31, 
   2022   2021   2022   2021 
Current:                    
Federal  $402,373   $198,079   $859,341   $555,430 
State   67,642    92,681    276,364    258,204 
PRC   122,623    –    122,623    – 
Total current income tax provision   592,638    290,760    1,258,328    813,634 
Deferred:                    
Federal   (432,290)    (36,221)    (432,290)    (36,221) 
State   (120,493)    (16,726)    (120,493)    (16,726) 
PRC   –    –     –    – 
Total deferred tax   (552,783)    (52,947)    (552,783)    (52,947) 
Total provision for income taxes  $39,855    $237,813   $705,545   $760,687 

 

The Company is subject to PRC and U.S. federal income tax as well as state income tax in certain jurisdictions. The tax years 2018 to 2020 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:   

                    
    Three Months Ended March 31,    Nine Months Ended March 31, 
    2022    2021    2022    2021 
US calculated statutory tax rate                    
Federal   21.00%    21.00%    21.00%    21.00% 
State (net of federal benefit)   5.45%    8.84%    5.71%    8.84% 
Foreign tax rate difference   (1.59%)   –    (0.54%)    – 
Net effect of state income tax deduction and other                    
Permanent and temporary differences   (21.59%)    737.57%    (6.40%)    10.38% 
Effective tax rate   3.27%     767.41%    19.77%    40.22% 

 

As of March 31, 2022 and June 30, 2021, the income taxes payable were $864,109 and $790,823, respectively.