Cettire's statements; Cettire's actions - an analysis

With added memes and a buried lede

Housekeeping (updated)

In the finest of traditions of disclaimers and fine print I’ve moved this section to the footnotes¹, and added a part which mandates that by reading this you agree to click on each linked heading to enjoy the references and my encyclopaedic knowledge of global comedy and meme culture generally².

Briefing Capitally

With increased scrutiny on Cettire recently, the company has given various quotes to the press, though nothing to the ASX since its 19 March statement.

From the Capital Brief article ($) we can extract the following direct quotes and what we can presume the author has written from direct conversations with the company.

Don’t Tell him Pike!

“The matter with Texas was an administrative matter and in no way related to the collection or remittance of sales tax”

This is straight confirmation from the company that they weren’t actively registered due to some form of non-compliance in Texas, and as such had no right to charge sales tax. Given that they had a legal obligation to register for and pay sales tax, they therefore had no right to do business in Texas. As a reminder, Cettire did not charge sales tax on our order.

You wouldn’t know her, she goes to a different school

Cettire told Capital Brief that the company operated under another entity name [in California] but refused to provide its name or supporting documentation.

Maybe she will fly out from Oklahoma?

As previously explained, we contacted the CDTFA to ask if any of the entities listed in the annual report were actively registered for sales/use tax. At the time, none were active, but maybe the CDTFA made a mistake or something?

A word so cunning, you could put a tail on it and call it a weasel

Two Cettire investors yesterday, possibly

“Cettire is registered for sales tax and remits sales tax in the states where it believes it has registration obligations”

That word “believes” changes the meaning from being a clear statement of tax compliance to into a question of what its belief was at the time, whilst the use of the present tense ignores compliance before that precise moment the statement was given. Fixing a registration after the fact doesn’t change whether the registration was active prior.

We will be restoring normality just as soon as we are sure what is normal anyway

The company added it had been “collecting and remitting sales taxes in the [two] states as normal”.

I “have been” going to the gym, once per year “as normal”. This statement falls short of confirming continuous compliance with tax obligations over any meaningful period of time.

Please disperse

Cettire declined to answer related questions from Capital Brief but rejected the notion it hadn’t met its tax obligations in the US.

Cettire’s tax and duties compliance has been called into question with direct evidence of multiple cases showing one or more of

• charging duties but declaring the item’s value under the de minimis threshold

• split consignments

• charging customers duties on the full sales price but declaring a lower value at customs

• charging the incorrect amount of sales tax - or even not charging sales tax at all as in our case

There’s also clear evidence of inactive sales tax registrations in the two largest states by population and economy in the US, so declining to answer specific related questions is a bold strategy. Let’s see if it pays off for them.

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Cettire’s actions

As a reminder, this is how Texas’s sales tax payer search function looked when searching for “ark international” on 20 March:

Ark International was still inactive on 29th March (Good Friday!) for sales tax, however the previously inactive franchise tax registration was now active!

Until finally on 2 April Ark International’s sales tax registration sprung back into life showing that this was the same entity that was initially registered in Texas in October 2021!

Whilst we congratulate Cettire on curing their delinquency in Texas, this just goes to confirm that they were not in good standing prior and we had the right entity. For a drop-shipping business where the only services provided are shipping, customs and taxes, and returns logistics it’s extraordinary that sales and franchise tax registrations were allowed to lapse in the 2nd largest state in Cettire’s largest market. Cettire have also failed to make any statement about for how long they have not been in good standing in Texas, along with their failure to explain why sales tax was not charged on our order. It’s also unclear why the only sellers permit we have found related to Cettire or Ark was only granted well into FY22 when by my previous analysis they were surely over the de minimis thresholds long before. It’s also unclear why Cettire’s terms and conditions STILL say they don’t collect Sales or Use Tax in all states or Use tax for international purchases, and that the customer may be left with a use tax liability. Do Cettire abide by their Sales tax obligations or not?

Californ-eye-yay?

After our prior enquiries in California uncovered no active sales/use tax paying entity under Ark International - but hey maybe it was under a different name not in their accounts or they made a mistake right?

click to embiggen

Despite Cettire’s bizarre refusal to furnish Capital Brief with the name of the entity used in California or any details of its registration, subsequent further queries to the CDTFA yesterday revealed a valid Sellers Permit in the name of Ark International in California, with a start date of 18 October 2021!!!

I can think of no reasonable explanation why if the Californian permit was valid at the time Capital Brief made the enquiry the company refused to provide these simple details, nor why according to Capital Brief Cettire suggested it was registered under a different name. If anyone (especially Cettire!) has a good explanation then please do get in touch using the message button below or on the bird app at the usual address - after all the truth is out there and I want to believe.

Keeping House

1. For the avoidance of doubt I am making no suggestion of any deliberate tax evasion by Cettire or any of its officers. Whilst every care has been taken to ensure accuracy I make no warranty that there are no errors. Nothing in this article is to be taken as advice or an inducement to deal in securities. I’m a trader and you should assume I have positions in any stocks mentioned, and will actively deal in these stocks.

2. You don’t have to click them but they are good