As part of his “Taxpayer First Project,” Comptroller Don Huffines is moving to eliminate a tax on fees charged by online marketplaces and app-based services.
Huffines signed an executive order directing the Comptroller’s office to remove marketplace and platform fees from the definition of taxable data processing services.
The tax treatment affects fees paid to platforms used for online shopping, food and grocery delivery, short-term rentals, ride-sharing, pet care, and other services.
“For the past year, small business owners across this state have been getting hit by a hidden tax nobody voted for,” said Huffines. “Groceries cost more. Rent costs more. Texans are tightening their belts, and the last thing they need is their own government quietly driving up prices.”
The policy stems from a 2025 interpretation adopted under former Comptroller Glenn Hegar that expanded the application of the state’s tax on data processing services to include certain marketplace fees.
Under that interpretation, a seller using a platform such as Amazon, eBay, or Etsy could be taxed on fees paid to the platform. Similar treatment could apply to fees paid by restaurants using delivery services such as DoorDash, Grubhub, and Uber Eats, as well as fees associated with short-term rentals and other app-based services.
The comptroller’s office argues the interpretation effectively resulted in two layers of taxation in many transactions: a business paying tax on the marketplace fee while the customer also paid applicable sales tax on the underlying purchase.
“When the Legislature created the data processing tax in 1987, it was written for a world of mainframes and data-entry workers entering paper invoices and receipts into a usable database — not for the apps and platforms Texans rely on today,” the Comptroller’s office stated.
Huffines accused the agency’s previous leadership of going beyond what lawmakers authorized.
“That’s not tax policy. That’s tax invention,” said Huffines. “A Comptroller doesn’t get to invent new taxes by rulemaking any more than a judge gets to invent new crimes that aren’t on the books.”
The proposed change would remove marketplace fees associated with online retail, food and grocery delivery, short-term lodging, ride-hailing, vehicle rentals, pet care, and household and personal services from the agency’s interpretation of taxable data processing services.
The change will still have to go through the rulemaking process. A 30-day public comment period will follow.
