Note 12. Income Taxes

A reconciliation of the difference between the provision for income taxes computed at statutory rates and the provision for income taxes provided in the Consolidated Statements of Income is as follows:

	2012			2011			2010

Statutory federal rate		35.0	%		34.4	%		34.2	%
State taxes, net of federal benefit		2.6			2.1			1.4
Non-deductible expenses		0.5			1.0			1.1
Other		0.4			(1.9	)		1.3
Effective rate		38.5	%		35.6	%		38.0	%

The provision for income taxes was comprised of the following:

		2012		2011			2010

Federal:	Current	$	8,598,000	$	5,493,000		$	4,216,700
	Deferred		612,500		(581,400	)		914,000
State:	Current		1,007,700		676,100			395,900
	Deferred		55,800		(51,000	)		72,500
Provision for income taxes		$	10,274,000	$	5,536,700		$	5,599,100

Total deferred tax assets and deferred tax liabilities as of April 1, 2012 and March 27, 2011, and the sources of the differences between financial accounting and tax basis of the Company's assets and liabilities which give rise to the deferred tax assets and liabilities are as follows:

	2012		2011
Deferred tax assets:
Deferred compensation	$	1,571,700	$	1,205,800
Accrued vacation		416,600		488,500
Deferred rent		941,700		67,500
Allowance for doubtful accounts		312,800		512,200
Inventory reserves		1,126,200		1,556,200
Sales tax reserves		646,400		602,700
Other assets		546,100		571,500
Total deferred tax assets	$	5,561,500	$	5,004,400

Deferred tax liabilities:
Depreciation and amortization	$	3,773,000	$	2,220,500
Accrued compensation		320,400		643,700
Prepaid expenses		422,500		341,400
Other liabilities		154,000		202,200
Total deferred tax liabilities	$	4,669,900	$	3,407,800

The Company has reviewed its deferred tax assets realization and has determined that no valuation allowance is required as of April 1, 2012 or March 27, 2011.

As of April 1, 2012, the gross amount of unrecognized tax benefits was $895,300 ($607,200 net of indirect tax benefits and including $236,600 associated with interest and penalties). As of March 27, 2011, the Company had gross unrecognized tax benefits of $723,300 ($502,600 net of indirect tax benefits including $269,600 associated with interest and penalties). As of April 1, 2012, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $607,000. The Company does not expect any material changes in unrecognized tax benefits over the next 12 months.

The Company's accounting policy with respect to interest and penalties related to tax uncertainties is to classify these amounts as income taxes. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2012 was $33,500 and the total amount included in the unrecognized tax benefits liability was $236,600. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2011 was $59,000 and the total amount included in the unrecognized tax benefits liability was $203,100. The total amount of interest and penalties related to tax uncertainties recognized in the consolidated statement of income for fiscal year 2010 was $81,100 and the total amount included in the unrecognized tax benefits liability was $220,100.

A reconciliation of the changes in the gross balance of unrecognized tax benefits amounts is as follows:

	2012		2011			2010
Beginning balance of unrecognized tax benefit	$	723,300	$	1,001,600		$	792,000
Increases related to prior period tax positions		172,000		176,700			65,800
Increases related to current period tax positions		--		--			219,600
Reductions as a result of a lapse in the applicable statute of limitations		--		(455,000	)		--
Reductions as a result of settlements		--		--			(75,800	)
Ending balance of unrecognized tax benefits	$	895,300	$	723,300		$	1,001,600

The Company files income tax returns in U.S. federal, state and local jurisdictions. Income tax returns filed for fiscal years 2008 and earlier are no longer subject to examination by U.S. federal, state and local tax authorities. No federal, state and local income tax returns are currently under examination. Certain income tax returns for fiscal years 2009 through 2011 remain open to examination by U.S. federal, state and local tax authorities.