What issue did the Oklahoma Tax Commission address in the letter ruling?

The ruling addressed whether an out-of-state online retailer creates a sales tax nexus in Oklahoma by storing inventory in a warehouse owned and operated by a marketplace facilitator.

Does storing inventory in a marketplace facilitator’s Oklahoma warehouse create physical nexus?

No, the Tax Commission concluded that simply storing inventory in a third-party warehouse, without control over the inventory’s location or management, does not create physical nexus under Oklahoma law.

Why did the retailer not have control over its inventory in Oklahoma?

The marketplace facilitator determined where products were stored and shipped based on its own logistics analytics, and the retailer had no ability to direct or manage inventory placement.

How did the Tax Commission evaluate economic nexus for the remote seller?

The Commission found that the seller did not meet Oklahoma’s USD 100,000 economic nexus threshold through its own website sales to in-state consumers.

Are marketplace sales included in the economic nexus threshold calculation?

Marketplace sales are excluded from the seller’s economic nexus calculation as long as the marketplace facilitator properly collects and remits Oklahoma sales tax on those transactions.

When could marketplace sales trigger economic nexus in Oklahoma?

If a marketplace facilitator fails to collect Oklahoma tax on the seller’s behalf, those sales must be included in the threshold calculation and could trigger economic nexus.

Oklahoma Sales Tax Nexus Ruling for Marketplace Inventory

The Oklahoma Tax Commission released a letter ruling for an online retailer selling through its own website and online marketplaces. The ruling was issued in response to a question from an out-of-state company that stored its inventory in Oklahoma in a warehouse owned and operated by a marketplace facilitator. The key question raised by the remote seller was whether storing inventory at a warehouse established a substantial nexus for sales tax purposes.

Tax Commission Rationale and Decision

As stated in the ruling, the remote seller stores its products in a warehouse controlled and managed by the marketplace facilitator, which the seller also uses, along with its own website, to sell its products to consumers in Oklahoma. The remote seller sells through its own websites to in–state consumers below the Oklahoma USD 100,000 annual economic nexus threshold. For marketplace sales, the facilitator collects and remits sales proceeds on its behalf.

Inventory value in the facilitator warehouse was USD 15,000 in 2023 and USD 40,000 in 2024. It is important to note that inventory stored in Oklahoma was first sent to one of the facilitator's distribution centers in one of four states, and the facilitator then shipped the seller's products throughout the US before shipping to the final consumer. Importantly, the remote seller did not control where the products are located or stored, as management and storage are determined by the facilitator based on its own logistics analytics.

The Tax Commission determined that, under Oklahoma law, simply having inventory stored in a third-party warehouse without control does not create physical nexus, so the retailer was not considered to have a taxable presence in the state. Furthemore, the Commission concluded that the online seller did not have an economic nexus with Oklahoma, adding that marketplace sales are excluded from the seller’s economic nexus threshold calculation as long as the marketplace facilitators are properly collecting Oklahoma tax on its behalf.

Conclusion

The letter ruling clarifies the nexus rules in Oklahoma, noting that holding inventory in a marketplace facilitator's warehouse without control does not create a physical nexus. Additionally, the Tax Commission reinforced that if a marketplace facilitator does not collect the tax, those sales must be included in the remote and marketplace sellers threshold calculation and could trigger economic nexus in Oklahoma.

Source: Request for Letter Ruling - No. LR-25-005