Income Taxes

9 Months Ended

Mar. 31, 2021

Note 17. INCOME TAXES

On March 27, 2020, the CARES Act was enacted and signed into law and includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods and alternative minimum tax credit refunds. The Company does not at present expect the provisions of the CARES Act to have a material impact on its tax provision given the amount of net operating losses currently available.

The Company’s income tax expenses for the three and nine months ended March 31, 2021 and 2020 are as follows:

	For the three months Ended March 31					For the nine months Ended March 31
	2021		2020			2021			2020

Current
U.S.	$	-	$	-		$	(3,450	)	$	-
PRC		-		(189,510	)		-			(204,257	)
Total income tax expenses		-		(189,510	)		(3,450	)		(204,257	)

The Company’s deferred tax assets are comprised of the following:

	March 31, 2021			June 30, 2020
Allowance for doubtful accounts
U.S.	$	1,702,000		$	1,329,000
PRC		3,082,000			2,888,000

Net operating loss
U.S.		2,498,000			1,756,000
PRC		1,496,000			1,490,000
Total deferred tax assets		8,778,000			7,463,000
Valuation allowance		(8,778,000	)		(7,463,000	)
Deferred tax assets, net - long-term	$	-		$	-

The Company’s operations in the U.S. incurred a cumulative U.S. federal net operating loss (“NOL”) of approximately $6,456,000 as of June 30, 2020 which may reduce future federal taxable income. During the three and nine months ended March 31, 2021, approximately $1,022,000 and $2,718,000 of additional NOL was generated and the tax benefit derived from such NOL was approximately $215,000 and $571,000, respectively. As of March 31, 2021, the Company’s cumulative NOL amounted to approximately $9,174,000 which may reduce future federal taxable income, of which approximately $1,400,000 will expire in 2037 and the remaining balance carried forward indefinitely.

The Company’s operations in China incurred a cumulative NOL of approximately $5,961,000 as of June 30, 2020 which may reduce future taxable income. During the three and nine months ended March 31, 2021, approximately $18,000 and $25,000 of additional NOL was generated and the tax benefit derived from such NOL was approximately $4,000 and $6,000, respectively. As of March 31, 2021, the Company’s cumulative NOL amounted to approximately $5,986,000 which may reduce future taxable income, of which approximately $700,000 start expiring from 2023 and the remaining balance of NOL will be expired by 2026.

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and reduces the carrying amount of the deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. Management considers new evidence, both positive and negative, that could affect the Company’s future realization of deferred tax assets including its recent cumulative earnings experience, expectation of future income, the carry forward periods available for tax reporting purposes and other relevant factors. The Company determined that it is more likely than not its deferred tax assets could not be realized due to uncertainty on future earnings as a result of the deterioration of trade negotiation between US and China and the outbreak of COVID-19 in 2021. The Company provided a 100% allowance for its DTA as of March 31, 2021. The net increase in valuation for the three and nine months ended March 31, 2021 amounted to approximately $616,000 and $1,315,000, respectively based on management’s reassessment of the amount of the Company’s deferred tax assets that are more likely than not to be realized.

The Company’s taxes payable consists of the following:

	March 31,		June 30,
	2021		2020
VAT tax payable	$	1,103,624	$	1,037,620
Corporate income tax payable		2,344,500		2,180,727
Others		67,314		62,001
Total	$	3,515,438	$	3,280,348

- 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.

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