Income Taxes

6 Months Ended

Feb. 24, 2024

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

In accordance with ASC 740, Income Taxes (“ASC 740”), each interim period is considered integral to the annual period and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.

Effective tax rate

The Company’s effective tax rate for the thirteen weeks ended February 24, 2024 was 26.2% as compared to 24.6% for the corresponding period in the prior year. The Company’s effective tax rate for the twenty-six weeks ended February 24, 2024 was 24.3% as compared to 25.0% for the corresponding period in the prior year. The increase in the effective tax rate for the thirteen weeks ended February 24, 2024 was due primarily to increases in non-deductible expenses in the current period as compared to the corresponding period in the prior year. The decrease in the effective tax rate for the twenty-six weeks ended February 24, 2024 was due primarily to the release of certain tax reserves and a U.S. state legislative change enacted during the first quarter of fiscal 2024.

Uncertain tax positions

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense, which is consistent with the recognition of these items in prior reporting periods. During the twenty-six weeks ended February 24, 2024, there was a net increase in unrecognized tax position of $0.2 million related to existing reserves.

The Company has a significant portion of its operations in the U.S. and Canada. It is required to file federal income tax returns as well as state income tax returns in a majority of the U.S. states and also in a number of Canadian provinces. At times, the Company is subject to audits in these jurisdictions, which typically are complex and can require several years to resolve. The final resolution of any such tax audits could result in either a reduction in the Company’s accruals or an increase in its income tax provision, both of which could have a material impact on the consolidated results of operations in any given period.

All U.S. and Canadian federal income tax statutes have lapsed for filings up to and including fiscal years 2019 and 2016, respectively. With a few exceptions, the Company is no longer subject to state and local income tax examinations for periods prior to fiscal 2018. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change significantly in the next 12 months.