INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2019

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

Income Tax Expense from Enacted Tax Act

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

Income (Loss) Before Income Taxes

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

Income Tax Effects of Temporary Differences Impacting Deferred Income Tax Assets and Liabilities

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

Reconciliation of Effective Tax Rate from Statutory Rate

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%

Reconciliation of Unrecognized Tax Benefits

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