9. INCOME TAXES

The provision for income taxes consists of the following:

	Years Ended December 31,
	2019			2018		2017
Income Tax Provision				Restated		Restated
Current provision:
Federal	$	(582,502	)	$	879,822	$	2,999,960
State		7,341			223,156		343,954
Foreign		(10,477	)		356,199		544,495
Interest expense related to UTB		25,640			80,868		45,942
		(559,998	)		1,540,045		3,934,351

Deferred provision (benefit):
Federal		(94,001	)		194,735		(59,918	)
State		(23,559	)		36,629		(52,637	)
Foreign		(12,905	)		42,045		38,036
		(130,465	)		273,409		(74,519	)
Total tax provision (benefit)	$	(690,463	)	$	1,813,454	$	3,859,832

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is evaluating the impact of the CARES Act and expects that the NOL carryback provision of the CARES Act will result in a cash tax benefit to the Company.

On December 22, 2017, 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 35% to 21%, 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 $1.3 million (Restated) of income tax expense in the fourth quarter of 2017 as follows:

Transition tax on deemed repatriation of certain foreign earnings ⁽¹⁾	$	603,976
Foreign withholding taxes ⁽¹⁾		290,128
Remeasuring deferred tax position ⁽²⁾		402,135
	$	1,296,239

(1) classified as part of the Federal current provision in 2017

(2) classified as part of the Federal deferred provision in 2017

The amounts in 2017 were recorded based on estimates and our current interpretation of the Tax Act and Staff Accounting Bulletin (“SAB”) No. 118, which provides guidance related to ASC Topic 740, Income Tax. After completing our accounting for the income tax effects of the Tax Act and taking the filings of our 2017 tax returns across all of our jurisdictions into consideration, we estimated additional income tax expense of approximately $0.1 million primarily related to an increase in the transition tax. Also negatively impacting our effective tax rate in 2018, certain of our international locations incurred operating losses for which no tax benefit was recorded, additional U.S. federal income was recognized related to cross-border intercompany transactions with our Canadian subsidiary, and the Tax Act created new taxes on foreign sourced income while eliminating the domestic manufacturing deduction.

Income (loss) before income taxes was earned in the following tax jurisdictions:

	Years Ended December 31,
Income (Loss) Before Income Taxes	2019			2018			2017
United States	$	(1,960,121	)	$	5,352,088		$	5,811,797
Spain		20,595			66,799			(40,505	)
Canada		(130,878	)		1,166,176			937,655
Australia		(169,718	)		7,124			(115,809	)
United Kingdom		(354,122	)		(380,368	)		(254,862	)
TOTAL	$	(2,594,244	)	$	6,211,819		$	6,338,276

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

Deferred income tax assets:	2019			2018			2017
Inventory	$	468,438		$	578,029		$	542,820
Stock-based compensation		51,430			46,165			29,332
Accounts receivable		3,977			-			3,239
Sales returns		119,404			61,251			52,205
Deferred revenue		-			48,878			67,642
Accrued expenses		-			222,538			227,489
FX gain/loss in OCI		359,078			480,112			240,045
Goodwill and other intangible assets amortization		32,670			-			-
Net operating loss		459,196			344,578			337,904
Change in tax method		-			375,595			631,015
Accrued bonuses		-			250,355			363,710
Leases		144,699			-			-
Other		25			-			-
Total deferred income tax assets	$	1,638,917		$	2,407,501		$	2,495,401
Less: valuation allowance		(381,872	)		(260,313	)		(208,350	)
Total deferred income tax assets, net of valuation allowance	$	1,257,045		$	2,147,188		$	2,287,051

Property and equipment depreciation	$	739,633		$	897,494		$	1,004,163
Goodwill and other intangible assets amortization		-			157,401			151,983
Accrued expenses		90,079			-			-
Total deferred income tax liabilities	$	829,712		$	1,054,895		$	1,156,146

Net deferred tax asset (liability)	$	427,333		$	1,092,293		$	1,130,905

The valuation allowance for deferred income tax assets increased by $0.1 million in each of the years ended December 31, 2019, 2018, and 2017.

Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, the difference in tax rates for loss carryback periods, foreign income/loss positions, expenses that are nondeductible for tax purposes, and differences in tax rates. Below is a reconciliation of our effective tax rate from the statutory rate:

	Years Ended December 31,
	2019		2018		2017
Statutory rate – Federal U.S. income tax		21%		21%		34%
State and local taxes		0%		4%		5%
Impact of Tax Act		0%		0%		20%
Non-U.S. income tax at different rates		0%		3%		(3)%
Permanent book/tax differences		(6)%		0%		1%
Difference in tax rates in loss carryback periods		3%		0%		0%
Change in valuation allowance		(5)%		1%		1%
Rate differential on UTB reversals		13%		0%		0%
Other, net		1%		0%		3%
Effective rate		27%		29%		61%

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 no longer subject to U.S. federal income tax examinations by tax authorities for years prior to the tax year ended December 2016. Depending on the jurisdiction, we are no longer subject to state examinations by tax authorities for years prior to the December 2015 and December 2016 tax years.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (UTB) is as follows:

Fiscal Year	2019			2018			2017
UTB at beginning of the year	$	1,415,714		$	1,197,077		$	937,705
Gross decrease to tax positions in prior periods		(1,145,227	)		(102,236	)		-
Gross increase to tax positions in current period		-			351,304			213,430
Interest expense		25,640			80,869			45,942
Lapses in statute		-			(111,300	)		-
UTB at end of year	$	296,127		$	1,415,714		$	1,197,077

We file tax returns in the U.S. and a limited number of foreign jurisdictions. With few exceptions, we are no longer subject to federal, state and local, or non-U.S. income tax examinations for years before 2015. Included in the balance of UTBs as of December 31, 2019, 2018 and 2017 are $0.1 million, $0.1 million, and $0.2 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balance of UTBs as of December 31, 2019, 2018 and 2017 are $0.2 million, $1.3 million and $1.0 million, respectively, of tax benefits that, if recognized, would result in adjustments primarily to deferred taxes.