Cettire says officials in the United States questioned the...

Cettire says officials in the United States questioned the company about unpaid taxes, but that it did not update its tax status in Texas because an anonymous blogger questioned whether it was appropriately registered in the state.

The ASX-listed luxury fashion marketplace has been under intense investor scrutiny since The Australian Financial Review last month questioned its duties arrangements in Australia and the US. Since then, bloggers have also raised doubts about whether the company has been properly registered to pay tax in Texas and in California.

Despite previously denying there were any issues relating to its tax status in those states, Cettire’s authorisation was quietly re-activated in Texas this week. The blogger, known as TaxLoss, had previously noted the company was not in good standing there.

Cettire’s largest market is the US, and the luxury retailer makes a significant number of sales in Texas. Bloomberg

A Cettire spokesman told the Financial Review that Texas had sent the company a notice for approximately $US10,000 ($15,200) in unpaid taxes – but not sales tax – in February.

“The company believed the amount was incorrectly assessed and, through the normal channels of engagement with the government, sought to resolve the matter,” a spokesman said. Irrespective of Cettire’s interpretation of the amount due, and without complete clarity on the issue, Cettire paid the full amount on March 21.”

RELATED QUOTES

CTTCettire

$3.355 -0.45%

1 year1 day

Apr 23Jul 23Oct 23Apr 241.0002.0003.0004.0005.000

Updated: Apr 4, 2024 – 2.59pm. Data is 20 mins delayed.

View CTT related articles

“The inactive status on the website did not impact Cettire’s ability to collect and remit sales taxes in the state, and this has been collected and remitted as per usual,” he added.

Cettire’s shares were trading 1.4 per cent higher at $3.36 on Thursday, but remain some 17 per cent lower this week amid broker downgrades and increased scrutiny over its business model. In a lengthy blog post, TaxLoss revealed that Cettire was not in good standing for Franchise Tax in Texas while its sales tax status was inactive.

The blogger, is a self-described trader that has advised readers to “assume I have positions in any stocks mentioned, and will actively deal in these stocks.”

Within days of the posts being published, however its status in Texas was restored.

The company has refuted any suggestion that it is not paying sales tax in these states. “We confirm that we are registered for sales tax in California and Texas and have been collecting and remitting sales taxes in the states as normal,” the company said in a statement provided to the Financial Review on Friday.

But one of Cettire’s largest competitors in the US, Italist, has warned that nonpayment of tax is an industry-wide issue that has been left unresolved.

“We have reasonable certainty that many international operators have not collected sales tax for a long time from US customers, outside of the law, in order to sell at a lower final price,” Italist’s long-running chief executive, Diego Abba, said.

Since 2017 all operators were liable to pay sales tax regardless of their physical presence, he added. “A 2017 ruling stated that exemptions to payment no longer applied in cases where there was no physical presence of the e-commerce operator in a single state, but that it should be applied upon reaching certain revenue thresholds, regardless of whether the company was American or foreign.”

Earlier this week, Bell Potter cut its rating on Cettire from a buy to a hold as it lowered its target multiple from 15 times next year’s earnings to 13.5 times. That triggered a sharp correction in the share price given the broker’s previous support.

But Bell Potter’s Chami Ratnapala is expecting the company to report strong growth in third quarter sales when it next updates the market, expected next month.

The company is expected to provide a second quarter sales update, forecasting a 66 per cent increase “driven by both core and emerging markets.” The online retailer has reported impressive sales growth and market-beating profit margins as more buyers around the world flock to its website to buy discounted branded clothes.

Apologies for the formatting, I believe this is the full article.