For several years, we wrote about the prior Texas comptroller’s position that the commissions marketplace providers charge sellers are taxable “data processing services.” The practical result was a tax on both the full price paid by the customer and the share of that price retained by the marketplace as its commission – a result we have described as taxing as much as 130% of a marketplace sale. The prior comptroller, without any public notice, began asserting this position in audits after revoking a contrary 2012 ruling in 2020, then incorporated the position into 34 Tex. Admin. Code § 3.330(b)(5), effective October 1, 2025.
On September 30, 2026, the new comptroller, Don Huffines, signed Executive Order DH-2026-01 directing his office to reverse course. Comptroller Huffines filed the proposed amendments to 34 Tex. Admin. Code § 3.330 with the secretary of state on October 5, 2026, and they were published in the Texas Register on October 16, 2026. The earliest possible adoption date is November 15, 2026. This is a significant and welcome taxpayer-friendly development as the proposal also provides an opportunity to clarify several related questions, including the treatment of earlier periods.
What the proposal does
The proposal makes two principal changes. First, it deletes 34 Tex. Admin. Code § 3.330(b)(5), the 2025 provision that stated that marketplace provider services “may be included in taxable data processing services” and identified as taxable examples services that store product listings and photographs, maintain transaction records, and compile analytics.
Second, it adds 34 Tex. Admin. Code § 3.330(j), “Platforms and Platform Provider facilitation fees.” Proposed paragraph (j)(2) provides that a “fee, commission, or other charge imposed by a platform provider, upon a platform seller for listing, offering, or facilitating sales through the platform, is not a taxable data processing service or a taxable information service under §3.342 of this title (relating to Information Services).” The exclusion applies “without regard to how the charge is calculated, whether a sale occurs, or whether the charge is collected directly or netted against amounts owed to the platform seller.”
The definition of “platform provider” is intentionally broader than the statutory definition of “marketplace provider” in Tex. Tax Code § 151.0242 because it reaches platforms that facilitate sales of nontaxable items. The proposal identifies a wide range of industries, including e-commerce marketplaces, food and grocery delivery, short-term lodging, ride-hailing, vehicle sharing, pet care, gig and freelance platforms, and equipment and parking rentals. A platform provider must own or operate a platform and directly or indirectly process sales or payments for platform sellers. Processing payments is not independently required when the platform processes sales.
The preamble states: “The transaction fees charged by the marketplace providers are commissions, not data processing services.” The executive order describes the prior treatment as “a hidden, duplicative tax on ordinary Texas commerce” and characterizes the double-tax result as one “the Legislature never authorized and that no statute compels.” The fiscal note estimates general revenue losses of approximately $17.9 million in fiscal year 2027, increasing to approximately $25.2 million in fiscal year 2032, and annual local-government revenue losses ranging from approximately $5.2 million to $7.3 million.
What the proposal does not solve
Treatment of prior periods
The proposal expressly applies the new interpretation prospectively. Its preamble states that 34 Tex. Admin. Code § 3.330(j) “becomes effective on the date this amendment is adopted.” It does not address tax periods before adoption, including audit assessments arising under the interpretation asserted before the 2025 amendments and the period beginning October 1, 2025, when subsection (b)(5) was in effect. The executive order states that ending the tax reflects the Texas Legislature’s original intent. Given that reasoning, it would be helpful for the comptroller to clarify how his office intends to address open audits, pending disputes, and timely refund claims relating to earlier periods, consistent with applicable procedural requirements.
The issue is already before the courts. In Domino’s Pizza Distribution LLC v. Office of the Comptroller of Public Accounts, No. D-1-GN-25-004940 (455th Dist. Ct., Travis Cnty., filed July 11, 2025), Domino’s challenged the treatment of transaction fees for its online ordering services and included claims under the discriminatory tax prong of the federal Internet Tax Freedom Act (ITFA) and the statutory limits on the data processing tax. The proposed rule provides an important new development for taxpayers pursuing similar disputes but does not expressly determine their resolution.
Bundled charges and related platform services
Many platforms provide seller-facing services alongside their facilitation services, including analytics and reporting, listing and inventory-management tools, and seller-software subscriptions. Deleted subsection (b)(5) specifically identified product-listing storage, transaction records, and analytics as examples of taxable data processing. Although proposed 34 Tex. Admin. Code § 3.330(j) broadly excludes fees for listing, offering, or facilitating sales, some separately charged services may continue to raise questions under the general definition of data processing.
The existing rule includes protections relevant to mixed transactions. Under 34 Tex. Admin. Code § 3.330(a)(1)(C), data processing that lacks separate value and is ancillary to another service may be excluded from the definition of data processing. Under 34 Tex. Admin. Code § 3.330(e)(2), a single charge combining taxable and nontaxable services may be presumed taxable when the taxable portion exceeds 5%, but that presumption may be rebutted, including through documentary evidence. Clarification about the interaction of these provisions with new subsection (j) – particularly where incidental platform functionality is included in a facilitation fee – would be useful. Separately charged, standalone analytics or software services may warrant their own analysis.
Customer-side fees
Proposed 34 Tex. Admin. Code § 3.330(j)(2) addresses charges imposed on platform sellers, not fees imposed on customers. Many platforms also charge customer-side service, booking, or convenience fees. The tax treatment of those amounts may depend on whether they are included in the sales price of the underlying taxable item or constitute a separate taxable or nontaxable service. Although such charges may be outside the focus of this proposal, additional guidance could help platforms distinguish them from the seller-side fees addressed in subsection (j).
Longer-term certainty
Comptroller Huffines’s proposal would provide substantial administrative clarity. Legislative confirmation of the treatment of platform facilitation fees could provide additional durability and reduce the likelihood of future disputes. As we discussed in 2024, imposing a tax on online marketplace commissions while comparable offline commissions remain untaxed also raises potential ITFA discrimination concerns. The proposed amendment would substantially alleviate that concern going forward, although the tax treatment of earlier periods remains a separate question.
What taxpayers should do now
Public comments must be received within 30 days of publication, by November 15, 2026. They may be submitted to Robin Robinson, associate deputy comptroller for tax, at Robin.Robinson@cpa.texas.gov or P.O. Box 13528, Austin, Texas 78711. Marketplace providers, platform sellers, and industry groups may wish to request:
- Guidance on the agency’s treatment of pre-adoption periods, open assessments, pending cases, and timely refund claims.
- Clarification of the scope of platform facilitation fees and the interaction of proposed 34 Tex. Admin. Code § 3.330(j) with the ancillary-service and bundling provisions.
- Guidance, whether in this rulemaking or separately, on customer-side fees and the distinction between platform facilitation charges and standalone taxable services.
Until the amendment is adopted, the existing regulation remains in effect. Taxpayers that paid tax on marketplace commissions should evaluate available refund and procedural avenues for open periods, while taxpayers in audit or litigation should carefully preserve their positions and applicable deadlines.
Texas has taken an important step toward ending the tax on 130% of marketplace sales. The job will not be finished until the state stops collecting and starts refunding a tax its own comptroller now says the legislature never authorized.
