INCOME TAXES

12 Months Ended

Oct. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7 - INCOME TAXES:

The Company’s provision/(benefit) for income taxes in 2021 and 2020 consisted of the following:

	2021			2020
Current
Federal	$	427,210		$	187,140
State and local		90,771			62,499
		517,981			249,639
Deferred
Federal		(50,451	)		(229,355	)
State and local		(127,350	)		(61,997	)
		(177,801	)		(291,352	)
Income tax expense/(benefit)	$	340,180		$	(41,713	)

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:

	2021			2020
Provision for (Benefit) from tax at the federal statutory rate	$	253,650		$	(79,329	)
Other permanent differences		19,736			52,537
State and local tax, net of federal		66,794			(14,921	)
Provision for (benefit from) income taxes	$	340,180		$	(41,713	)
Effective income tax rate		28	%		11	%

COFFEE HOLDING CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2021 AND 2020

NOTE 7 - INCOME TAXES (cont’d):

The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2021 and 2020 are as follows:

	2021		2020
Deferred tax assets:
Accounts receivable	$	34,203	$	36,468
Unrealized loss		-		140,136
Deferred rent		20,652		36,810
Deferred compensation		74,075		70,035
Net operating loss		57,576		70,275
Stock-based compensation		499,841		340,715
Inventory		77,579		87,736
Total deferred tax asset	$	763,926	$	782,175
Deferred tax liabilities:
Intangible assets acquired		346,892		484,932
Unrealized gain		111,068
Buildings, machinery and equipment		228,572	$	397,650
Total deferred tax liabilities	$	686,532	$	882,582
Net deferred tax assets (liabilities)	$	77,394	$	(100,407	)

A valuation allowance was not provided at October 31, 2021 or 2020. 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.

As of October 31, 2021 and 2020, 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, 2021 and 2020, 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 2018. The Company’s California, Colorado and New Jersey and Texas income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2018. The Company’s Oregon, New York, Kansas, South Carolina, Rhode Island, Connecticut and Michigan income tax returns are no longer subject to examination by their respective taxing authorities for the years before fiscal 2018.

As of October 31, 2021, and 2020, the Company had cumulative net operating loss carryforwards of approximately $274,173 and $334,642 respectively, which begin to expire in 2038. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards is subject to an annual limitation of $60,469. These net operating loss carryforwards may be further limited in the event of a change in ownership.

COFFEE HOLDING CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2021 AND 2020