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MANCIL'S TRACTOR SERVICE, INC. Notes to Financial Statements December 31, 2013 NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Company uses the percentage-of-completion method of reporting revenue from long-term construction contracts for financial reporting purposes and uses the cash method of reporting revenue for tax purposes. Non long-term contracts are reported on the accrual method for financial reporting purposes and cash method for tax purposes. The Company has elected to be treated as a Subchapter S-Corporation under the Internal Revenue Code. As an S-Corporation, the Company passes through items of income and deduction to the stockholder each year, and thus pays no federal or state income taxes itself. However, the Company generally distributes funds to the stockholders through capital distributions to pay income taxes attributable to corporate earnings. At December 31 2013, current federal and state income tax liabilitiesp g assed through to the stockholder using an estimated effective tax rate of 31%are summarized as follows: Estimated taxable income $ 235,484 Estimated blended effective tax rate x31% Income tax liability related to pass through income at June 30, : 73,000 Taxes on other income net of deductions - Total estimated tax liability 73,000 Less:Withholdings and estimated taxes paid (73,000) Estimated stockholder's current income tax liability(refund) $ - Uncertain Tax Positions The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009. None of the Company's income tax-returns for years after 2009 are currently under examination by and U.S. federal, state, local, or non-U.S. tax authorities. As such,no income tax provision has been made in respect to any uncertain tax positions. Sales and Other Taxes The Company charges sales tax on some of its revenue and remits all tax collected to the Florida Department of Revenue. Sales tax collected and paid for the year ended December 31, 2013 totaled $ 31,072. The Company is also subject to an excise tax assessed by the Internal Revenue Service on heavy use vehicles. The total assessed and paid for the year ended December 31,2013 was $4,261. No additional amounts are known to be payable to the Internal Revenue Service for this excise tax as of December 31, 2013. - 12-