. INCOME TAXES

The provision for income taxes consists of the following:

	201 8			201 7			201 6
Current provision:
Federal	$	1,607,117		$	3,090,997		$	3,108,894
State		223,749			309,249			486,565
		1,830,866			3,400,246			3,595,459

Deferred provision (benefit):
Federal		(76,438	)		(665,181	)		183,520
State		(14,559	)		(23,692	)		21,591
		(90,997	)		(688,873	)		205,111

	$	1,739,869		$	2,711,373		$	3,800,570

December 22, 2017,

Tax Cuts and Jobs Act (the “Tax Act”) was enacted which included a number of changes to U.S. tax laws that impact the Company, including beginning in calendar

2018,

a reduction of the U.S. corporate tax rate from

percent to

percent, the repeal of the domestic production activities deduction, new taxes on certain foreign sourced income, and new limitations on certain business deductions. The Tax Act also provided for a

one

-time transition tax on certain foreign earnings. Because the Tax Act was enacted in

2017,

we recorded an estimated

$340,782

of net income tax expense in the

fourth

quarter of

2017

as follows:

Transition tax on deemed repatriation of certain foreign earnings*	$	514,454
Foreign withholding taxes*		290,128
Remeasuring deferred tax position at the lowered income tax rate^		(463,800	)
	$	340,782

*classified as part of the Federal current provision in

2017

^classified as part of the Federal deferred benefit in

2017

The amounts in

2017

were recorded based on reasonable estimates and our current interpretation of the Tax Act and Staff Accounting Bulletin (SAB)

No.

118,

which provides SEC staff guidance related to ASC Topic

740,

Income Tax

. In

October 2018,

we completed our accounting for the income tax effects of the Tax Act, as well as completed the filings of our

2017

tax returns across all of our jurisdictions. This resulted in approximately

$401,000

of additional tax primarily related to an increase in transitional tax as certain of our international net operating losses were subjected to federal limitation rules, additional U. S. federal income recognized related to cross-border intercompany transactions with our Canadian subsidiary, and for certain discrete items that were determined

not

deductible for tax. Also negatively impacting our effective tax rate in

2018,

certain of our international locations incurred operating losses for which

tax benefit was recorded and the Tax Act created new taxes on foreign sourced income while eliminating the domestic manufacturing deduction.

Income before income taxes is earned in the following tax jurisdictions:

	201 8			201 7			201 6
United States	$	3,347,690		$	6,372,585		$	9,070,894
United Kingdom		(385,573	)		(171,608	)		(81,987	)
Canada		680,388			1,055,783			1,034,027
Australia		(2,454	)		(88,096	)		82,622
Spain		63,646			(5,540	)		97,273
	$	3,703,697		$	7,163,124		$	10,202,829

The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows:

	201 8		201 7
Deferred income tax assets:
Capitalized inventory costs	$	179,535	$	198,616
Warrants and share-based compensation		29,047		29,047
Accrued expenses, reserves, and other		39,646		44,075
Total deferred income tax assets	$	248,228	$	271,738

Deferred income tax liabilities:
Property and equipment depreciation	$	889,719	$	1,008,485
Goodwill and other intangible assets amortization		159,435		155,175
Transition tax on deemed repatriation of foreign earnings		507,339		473,298
Total deferred income tax liabilities	$	1,556,493	$	1,636,958

Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, foreign income/loss positions, and the new global intangible low-taxed income tax (“GILTI”) for our estimated foreign earnings that was established as part of the Tax Act. Below is a reconciliation of our effective tax rate from the statutory rate:

	201 8			201 7			201 6
Statutory rate – Federal U.S. income tax		21	%		34	%		34	%
State and local taxes		5	%		6	%		6	%
Impact of Tax Act		5	%		4	%		-
Non-U.S. income tax at different rates		17	%		(1	%)		-
Domestic production activities deduction		-			(2	%)		(1	%)
Other, net		-			(3	%)		(2	%)
Effective rate		47	%		38	%		37	%

We file a consolidated U.S. income tax return as well as state tax returns on a consolidated, combined, or stand-alone basis, depending on the jurisdiction. We are

longer subject to U.S. federal income tax examinations by tax authorities for years prior to the tax year ended

December 2015.

Depending on the jurisdiction, we are

longer subject to state examinations by tax authorities for years prior to the

December 2014

and

December 2015

tax years.