INCOME TAXES

12 Months Ended

Oct. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 7 - INCOME TAXES:

The Company’s provision/(benefit) for income taxes in 2022 and 2021 consisted of the following:

	2022			2021
Current
Federal	$	-		$	427,210
State and local		-			90,771
		-			517,981
Deferred
Federal		(933,489	)		(50,451	)
State and local		(62,304	)		(127,350	)
		(995,793	)		(177,801	)
Income tax (benefit)	$	(995,793	)	$	340,180

COFFEE HOLDING CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2022 AND 2021

NOTE 7 - INCOME TAXES (cont’d):

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:

	2022			2021
(Benefit) from provision for tax at the federal statutory rate	$	(1,175,507	)	$	253,650
Goodwill impairment		265,796
Other permanent differences		135,025			19,736
State and local tax, net of federal		(221,107	)		66,794
(Benefit from) provision for income taxes	$	(995,793	)	$	340,180
Effective income tax rate		18	%		28	%

The tax effects of the temporary differences that give rise to the deferred tax assets and liabilities as of October 31, 2022 and 2021 are as follows:

	2022		2021
Deferred tax assets:
Accounts receivable	$	34,547	$	34,203
Unrealized loss		173,058		-
Deferred rent		15,643		20,652
Deferred compensation		58,355		74,075
Net operating loss		547,570		57,576
Stock-based compensation		602,237		499,841
Inventory		107,298		77,579
Total deferred tax asset		1,538,708		763,926
Deferred tax liabilities:
Intangible assets acquired		70,021		346,892
Unrealized gain		-		111,068
Buildings, machinery and equipment		395,500		228,572
Total deferred tax liabilities		465,521		686,532
Net deferred tax asset	$	1,073,187	$	77,394

A valuation allowance was not provided at October 31, 2022 or 2021. 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.

COFFEE HOLDING CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2022 AND 2021

NOTE 7 - INCOME TAXES (cont’d):

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, 2022 and 2021, 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, 2022 and 2021, 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 2019. 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 2019. 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 2019.

As of October 31, 2022, and 2021, the Company had cumulative net operating loss carryforwards of approximately $2,281,518 and $274,173 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.