Texas Comptroller ends data processing tax on marketplace fees

Many marketplace fees have been considered taxable data processing services in Texas since October 1, 2025. That will likely soon change, because Texas Comptroller Don Huffines has signed an executive order to abolish the sales and use tax on marketplace fees.

• Texas Comptroller to abolish marketplace data processing tax. On September 30, 2026, Texas Comptroller Don Huffines directed agency staff to amend Rule 3.330 and eliminate the sales and use tax on online marketplace and platform fees.
• Broad relief across retail, delivery, and gig platforms. The proposed rule change would eliminate the data processing tax on charges for services provided by ecommerce platforms (e.g., Amazon, eBay, Etsy), food and grocery delivery apps (e.g., DoorDash, Grubhub, Uber Eats), as well as ride-hailing, short-term lodging, pet care, and personal errand services.
• The data processing tax remains in effect during rulemaking. The proposed amendment to Section 3.330 must be published in the Texas Register and undergo a 30-day public comment period before final adoption. The current data processing tax will continue to apply until the amendment officially takes effect.

Before leaving office in June 2025, Former Texas Comptroller Glenn Hegar amended the data processing services rule (Section 3.330), thereby extending the tax on data processing services to marketplace fees.

Amended Rule 3.330 reads, “Effective October 1, 2025, marketplace provider services may be included in taxable data processing services when they involve the computerized entry, retrieval, search, compilation, manipulation, or storage of data or information provided by the purchaser or the purchaser’s designee. For example, services provided by a marketplace provider to its marketplace seller that store product listings and photographs, maintain records of transactions, and compile analytics are taxable data processing services.”

Texas tax law needed to adapt to new technologies, Hegar wrote in September 2024. “When the Legislature imposed the sales tax on data processing services in 1987, the internet as we know it didn’t even exist. Current tax law applies to online marketplaces just as it does to the traditional businesses within our communities, and my job is to collect taxes fairly.”

In Hegar’s view, clarified in Amended Rule 3.330, marketplace transactions involved two purchasers, two sales contracts, and two taxable transactions:

1. The consumer owes sales tax on charges for goods or services purchased
2. The marketplace seller owes sales tax on charges for the marketplace provider’s data processing services

He was sympathetic to opposing opinions: In 2023 his office helped draft legislation to exempt marketplace fees from sales tax. But as he noted the following year, “Legislators have the ability to change the law, and so far, they haven’t changed this one.”

Hegar’s successor takes a different view.

Shortly after Don Huffines was sworn in as Texas Comptroller on August 1, 2026, he invited online marketplace sellers, restaurant owners, and physicians to discuss “how the state’s controversial definition of its data processing services tax is impacting their businesses.” He then launched a comprehensive review of the tax, and on September 30, 2026, Huffines signed an executive order to abolish the data processing services tax on marketplace fees.

Like Hegar, Huffines acknowledges the 1987 data processing tax was not written with online marketplaces in mind. Unlike Hegar, he’s determined the data processing tax should not apply to apps and platforms.

Therefore, Huffines wants to eliminate the data processing tax on marketplace fees tied to:

• Household, personal, and errand-running services
• Marketplace seller services tied to offering products on marketplace platforms
• Pet care and pet-sitting services
• Prepared food and grocery delivery services (e.g., DoorDash, Grubhub, Uber Eats)
• Ride-hailing and other transportation services
• Short-term lodging
• Vehicle rental or sharing

The proposed amendment to Section 3.330 will be published in the Texas Register, after which there will be a 30-day comment period. In the meantime, the Comptroller’s Office will continue to review the state’s interpretation of the data processing tax; it could propose additional changes.

Businesses currently subject to the data processing services tax should keep an ear to the ground in Texas so as not to miss developments. We won’t know exactly what the new policy will be until the Comptroller publishes the proposed rule changes.

“The rule the previous Comptroller promulgated only applied tax to marketplace services that involved data processing,” observes Scott Peterson, VP of Government Relations at Avalara. “The simplest approach now would be to repeal that rule. However, doing that ignores the question of whether marketplaces provide data processing services. The Comptroller says the Legislature did not amend the definition of data processing, but nor did it repeal the tax on data processing in Texas.”

The current rules (i.e., the sales and use tax on a marketplace provider’s data processing services) will remain in effect until the Comptroller’s amendment is adopted.

Note that in Texas, 20% of the charge for data processing services is exempt. However, the full amount is taxable if the data processing service also qualifies as another type of taxable service (i.e., not an information service). When a business performs both taxable and nontaxable services, it should make the nontaxable service distinct and identifiable and bill the customer separately (and reasonably) for the taxable service. See the Texas Comptroller for more details.

Amended Texas Administrative Code Rule 3.330 classifies many services performed by marketplace providers as taxable data processing fees effective October 1, 2025. With the 20% statutory exemption, Texas sales and use tax applies to 80% of the fees for analytics, computerized entry, data retrieval and storage, and similar data processing services.

The proposed amendment removes the data processing tax from fees associated with:

• Ecommerce marketplace seller services (e.g., Amazon, eBay, Etsy)
• Food and grocery delivery platforms (e.g., DoorDash, Grubhub, Uber Eats)
• Pet-sitting, dog-walking, and errand-running gig apps
• Ride-hailing and transportation services
• Short-term lodging and vacation rentals
• Vehicle rental and sharing platforms

The elimination of the tax will take effect after the Comptroller’s proposed amendment to Rule 3.330 is published in the Texas Register, completes a mandatory 30-day public comment period, and is formally adopted. Until final adoption, the Texas data processing tax will continue to apply to covered marketplace fees.