Etsy is in trouble over its tax practises

Etsy, the online arts and crafts marketplace, has come under fire from a US tax policy group over allegations that its tax practises do not align with its B Corp status, The Financial Times reports.

The issue, according to a letter from Americans for Tax Fairness, is that Etsy holds B Corp status, meaning that it ascribes to higher ethical aspirations than a regular corporation, defined as a material positive impact on society and the environment, but has been moving money around to avoid taxation.

"Etsy's tax dodge is standard operating procedure among our country's giant multinational corporations. We hope it will not be acceptable as a B Corp standard," the letter states.

For its part, Etsy has defended its tax practises. Chad Dickerson, the company's chief executive, wrote in a blog post that "[w]e pay taxes at the local rate in the US, Canada, Ireland, UK, France, Germany and Australia. We're not offshoring or using a double Irish structure or any other elaborate tax scheme. This is a simple structure."

In its IPO prospectus, Etsy warned that its business could be adversely affected if it lost the B Corp status. The company is currently undergoing a reclassification process that will determine if it can keep its B Corp status after its public offering which includes the question: "Has the company reduced or minimised taxes through the use of corporate shells or structural means."

Since going public the company has never turned a profit. According to The Financial Times, in the six months ending in June, Etsy reported $120 million (£78.5 million) in revenue with a loss of $43 million (£28 million).

Jay Coen Gilbert, who is a cofounder of B Lab, a company that gives out the B Corp status, said that a decision has not yet been reached regarding Etsy's status or whether its tax practises rule it out.

We reached out to Etsy for comment on this story and will update it when we hear back.