PRICESMART INCPSMT
PRICESMART INC Income Taxes Disclosure
INCOME TAXES
Income from continuing operations before provision for income taxes and loss of unconsolidated affiliates includes the following components (in thousands):
| Years Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 99,516 | $ | 60,697 | $ | 57,941 | |||||||||||
| Foreign | 106,982 | 140,730 | 111,270 | ||||||||||||||
Income from continuing operations before provision for income taxes and income (loss) of unconsolidated affiliates | $ | 206,498 | $ | 201,427 | $ | 169,211 | |||||||||||
Significant components of the income tax provision are as follows (in thousands):
| Years Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. tax expense | $ | 20,236 | $ | 23,213 | $ | 21,604 | |||||||||||
| Foreign tax expense | 42,564 | 43,488 | 41,639 | ||||||||||||||
| Total | $ | 62,800 | $ | 66,701 | $ | 63,243 | |||||||||||
| Deferred: | |||||||||||||||||
| U.S. tax benefit | $ | (7,886) | $ | (15,389) | $ | (11,958) | |||||||||||
| U.S. valuation allowance change | 6,966 | 12,532 | 12,598 | ||||||||||||||
| Foreign tax benefit | (3,556) | (1,904) | (3,935) | ||||||||||||||
| Foreign valuation allowance change | 293 | 678 | 3 | ||||||||||||||
| Total | $ | (4,183) | $ | (4,083) | $ | (3,292) | |||||||||||
| Provision for income taxes | $ | 58,617 | $ | 62,618 | $ | 59,951 | |||||||||||
The reconciliation of income tax computed at the Federal statutory tax rate to the provision for income taxes is as follows (in percentages):
| Years Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal tax provision at statutory rates | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State taxes, net of federal benefit | 0.4 | 0.2 | 0.3 | ||||||||||||||
| Differences in foreign tax rates | 7.3 | 2.1 | 6.8 | ||||||||||||||
| Permanent items and other adjustments | (3.4) | 0.6 | (0.1) | ||||||||||||||
| Increase in valuation allowance | 3.1 | 7.2 | 7.4 | ||||||||||||||
| Provision for income taxes | 28.4 | % | 31.1 | % | 35.4 | % | |||||||||||
Significant components of the Company’s deferred tax assets as of August 31, 2025 and 2024 are shown below (in thousands):
| August 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Foreign tax credits | $ | 59,286 | $ | 54,451 | |||||||
| Deferred compensation | 2,826 | 2,819 | |||||||||
| U.S. timing differences | 10,635 | 7,992 | |||||||||
| Foreign net operating losses | 4,692 | 4,590 | |||||||||
| Foreign timing differences: | |||||||||||
| Accrued expenses and other timing differences | 10,100 | 8,765 | |||||||||
| Depreciation and amortization | 18,059 | 16,944 | |||||||||
| Deferred income | 9,869 | 9,120 | |||||||||
| Gross deferred tax assets | 115,467 | 104,680 | |||||||||
| U.S. deferred tax liabilities (depreciation and other timing differences) | (877) | (1,199) | |||||||||
| Foreign deferred tax liabilities netted against deferred tax assets | (6,629) | (5,883) | |||||||||
| U.S. valuation allowance | (61,478) | (55,871) | |||||||||
| Foreign valuation allowance | (5,254) | (5,110) | |||||||||
| Net deferred tax assets | $ | 41,229 | $ | 36,618 | |||||||
For fiscal year 2025, the effective tax rate was 28.4%. The decrease in the effective rate versus the prior year was primarily attributable to our implementation of certain tax optimization initiatives implemented at the beginning of fiscal year 2025.
For fiscal year 2025, management concluded that a valuation allowance continues to be necessary for certain U.S. and foreign deferred tax assets primarily because of the existence of negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, and the determination that certain net operating loss carryforward periods are not sufficient to realize the related deferred tax assets. The Company factored into its analysis the inherent risk of forecasting revenue and expenses over an extended period of time and also considered the potential risks associated with its business. The Company had net foreign deferred tax assets of $30.8 million and $28.4 million as of August 31, 2025 and 2024, respectively.
The Company does not provide for income taxes which would be payable if undistributed earnings of its foreign subsidiaries were remitted to the U.S. The Company considers earnings to be permanently reinvested for any jurisdiction where distribution from a foreign affiliate would cause additional tax cost, and management has no plans to repatriate the
related undistributed earnings and profits from these foreign affiliates. As of August 31, 2025 and 2024 the undistributed earnings of these foreign subsidiaries are approximately $544.3 million and $461.5 million, respectively.
The Company accrues for the estimated additional amount of taxes for uncertain income tax positions if the likelihood of sustaining the tax position does not meet the more likely than not standard for recognition of tax benefits. These positions are recorded as unrecognized tax benefits.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Years Ended August 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of fiscal year | $ | 4,294 | $ | 4,745 | $ | 5,041 | |||||||||||
| Gross increase - tax positions in prior period | — | 11 | 35 | ||||||||||||||
| Gross decrease - tax positions in prior period | (3) | — | — | ||||||||||||||
| Additions based on tax positions related to the current year | — | 7 | 143 | ||||||||||||||
| Expiration of the statute of limitations for the assessment of taxes | (1,623) | (469) | (474) | ||||||||||||||
| Balance at end of fiscal year | $ | 2,668 | $ | 4,294 | $ | 4,745 | |||||||||||
As of August 31, 2025, the liability for income taxes associated with unrecognized tax benefits was $2.7 million and can be reduced by $0.1 million of tax benefits recorded as deferred tax assets and liabilities. The net amount of $2.6 million would, if recognized, favorably affect the Company's financial statements and favorably affect the Company's effective income tax rate.
The Company recognizes interest and/or penalties related to unrecognized tax benefits in income tax expense. As of August 31, 2025 and 2024, the Company had accrued an additional $1.8 million and $1.7 million, respectively, for the payment of interest and penalties related to the above-mentioned unrecognized tax benefits.
The Company expects changes in the amount of unrecognized tax benefits in the next 12 months as the result of a lapse in various statutes of limitations. The lapse of statutes of limitations in the twelve-month period ending August 31, 2026 could result in a total income tax benefit amounting up to $2.3 million.
The Company has various appeals pending before tax courts in its subsidiaries' jurisdictions. Any possible settlement could increase or decrease earnings but is not expected to be significant. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.
Minimum tax rules, applicable in some of the countries where the Company operates, require the Company to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). This can result in AMT payments substantially in excess of those the Company would expect to pay based on taxable income. As the Company believes that, in one country where it operates, it should only be ultimately liable for an income-based tax, it has accumulated income tax receivables of $10.5 million and $10.9 million and deferred tax assets of $3.9 million and $3.4 million as of August 31, 2025 and August 31, 2024, respectively, in this country.
In fiscal year 2023, the Company recorded a $7.2 million charge to settle the AMT payment dispute in another one of our markets, $1.0 million of which was a reserve for an income tax receivable for one of the tax years for which the Company sought a refund and the remaining $6.2 million for the unpaid years of the dispute in which the Company made tax payments using the original computation based on taxable income.
While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of the remaining tax receivables, deferred tax assets or amounts that may be deemed under-paid, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests and appeals of these rules.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is generally no longer subject to income tax examinations by tax authorities in its major jurisdictions except for the fiscal years subject to audit as set forth in the table below:
| Tax Jurisdiction | Fiscal Years Subject to Audit | |||||||
| U.S. federal | 2007, 2016* to 2018*, 2022 to the present | |||||||
| California (U.S.) (state return) | 2021 to the present | |||||||
| Florida (U.S.) (state return) | 2012* to 2018*, 2022 to the present | |||||||
| Aruba | 2020 to the present | |||||||
| Barbados | 2019 to the present | |||||||
| Costa Rica | 2011 to 2012, 2015 to 2016, 2019 to the present | |||||||
| Colombia | 2019 to the present | |||||||
| Dominican Republic | 2011 to 2012, 2016, 2021 to the present | |||||||
| El Salvador | 2019, 2022 to the present | |||||||
| Guatemala | 2012 to 2013, 2019, 2021 to the present | |||||||
| Honduras | 2018 to the present | |||||||
| Jamaica | 2019 to the present | |||||||
| Mexico | 2021 to the present | |||||||
| Nicaragua | 2020 to the present | |||||||
| Panama | 2023 to the present | |||||||
| Trinidad | 2016, 2019 to the present | |||||||
| U.S. Virgin Islands | 2001 to the present | |||||||
| Spain | 2022 to the present | |||||||
*Aeropost only
Generally, for U.S. federal and U.S. Virgin Islands tax reporting purposes, the statute of limitations is three years from the date of filing of the income tax return. If and to the extent the tax year resulted in a taxable loss, the statute is extended to three years from the filing date of the income tax return in which the carryforward tax loss was used to offset taxable income in the carryforward year. Given the historical losses in these jurisdictions and the Section 382 change in control limitations on the use of the tax loss carryforwards, there is uncertainty and significant variation as to when a tax year is no longer subject to audit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Oct 30, 2025 | Showing above |
| 2024 | Oct 30, 2024 | |
| 2023 | Oct 30, 2023 | |
| 2022 | Oct 31, 2022 | |
| 2021 | Oct 21, 2021 | |
| 2020 | Oct 30, 2020 | |
| 2019 | Oct 29, 2019 | |
| 2018 | Oct 25, 2018 | |
| 2017 | Oct 26, 2017 | |
| 2016 | Oct 27, 2016 | |
| 2015 | Oct 29, 2015 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.