Texas Comptroller Moves to Eliminate Tax on Marketplace and Platform Fees

Texas Comptroller Don Huffines has announced an executive order aimed at eliminating a tax interpretation that many small business owners viewed as a form of double taxation. The change affects marketplace and platform fees associated with online sales, food delivery, ride-sharing, short-term rentals, and other app-based services.

The issue stems from a 2025 interpretation of the state's data processing tax rules that expanded taxable services to include marketplace fees charged by platforms such as Amazon, Etsy, DoorDash, Uber Eats, Airbnb, and similar companies. Under that interpretation, businesses could be required to pay tax on the fees charged by these platforms while customers also paid sales tax on the underlying purchase, creating what critics described as a "double tax" on the same transaction.

According to Huffines, the original data processing tax was created in 1987 to address traditional data entry and processing services, long before today's digital marketplace economy emerged. He argued that applying the tax to modern platform fees extended the rule beyond its original intent and placed an unnecessary burden on Texas businesses and consumers.

The proposed rule change would remove marketplace and platform fees from the definition of taxable data processing services. If adopted, the change would impact a wide range of industries, including:

• Online marketplace sellers using platforms such as Amazon, eBay, and Etsy

• Food and grocery delivery services

• Short-term rental hosts

• Ride-sharing and transportation providers

• Vehicle rental and sharing services

• Pet care and pet-sitting businesses

• Household and personal service providers operating through apps

Earlier this month, Huffines met with Texas business owners who shared concerns about the economic impact of the tax. Many reported that the additional costs made it more difficult to compete with out-of-state businesses, invest in growth, and maintain profitability.

The executive order directs the Comptroller's Office to publish a proposed amendment to Rule 3.330, which will be submitted to the Texas Secretary of State and published in the Texas Register. The proposal will then undergo a 30-day public comment period, allowing Texans and business owners to provide feedback before any final action is taken.

The initiative is part of Huffines' broader "Taxpayer First Project," an effort focused on improving transparency, fairness, and consistency in Texas tax administration. The Comptroller's Office has indicated it may continue reviewing other aspects of the state's data processing tax rules in the future.