“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 theFinancial Reviewon 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.
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