That Was Fast: Texas Comptroller Takes First Step to Curtail Data Processing Tax
Highlights
- Texas Comptroller Don Huffines has signed an executive order that directs his office to propose amending Rule 3.330 so that marketplace and platform fees are removed from the definition of "taxable data processing services."
- The proposed amendment would end the tax on marketplace fees in several sectors, including online marketplace sellers, food and grocery delivery, short-term lodging, ride-hailing and transportation, vehicle rental and sharing, and pet care, as well as household, personal and errand-running services.
- The proposed amendment will be published in the Texas Register, followed by a 30-day public comment period. Affected businesses should consider submitting comments.
A previous Holland & Knight alert reported that newly appointed Texas Comptroller Don Huffines had signaled he was willing to revisit his office's aggressive data processing tax interpretations. Those interpretations included the 2025 amendments to 34 Texas Administrative Code Section 3.330, which took effect in April 2025. For online marketplace platforms, those amendments asserted that tax applies to fees charged to marketplace sellers. That approach arguably taxes the same fees twice: first as part of the taxable price the customer pays and again as taxable data processing sold by the marketplace.
The Texas Taxpayers and Research Association (TTARA) and other groups opposed the amendments, arguing that they expanded the tax base without authority and could not be put into effect without legislative action. At the time of the earlier alert, the Comptroller had held a small business roundtable on the rules but had not yet proposed specific changes.
The Executive Order
Huffines announced the executive order at the Texas Comptroller of Public Accounts Annual Briefing on September 30, 2026. He described the tax on marketplace fees as a "hidden double tax" that the 2025 interpretation had swept in. The order directs the agency to publish a proposed amendment to Rule 3.330 that removes marketplace and platform fees from the definition of "taxable data processing services."
According to the Comptroller's office, the change would end the tax on marketplace fees tied to:
- sellers offering products on marketplace platforms
- prepared food and grocery delivery through apps
- short-term lodging
- ride-hailing and other transportation services
- vehicle rental or sharing
- pet care and pet-sitting services
- household, personal and errand-running services
The Comptroller also pointed out that the Texas Legislature created the data processing tax in 1987, saying it "was written for a world of mainframes and data-entry workers," not for today's apps and platforms. He called the prior interpretation "tax invention" rather than tax policy. The Comptroller said his office will keep reviewing how the data processing tax is interpreted and may propose more changes in the future. The action is part of his Taxpayer First Project.
Next Steps
The proposed amendment will be filed with the Texas Secretary of State and published in the Texas Register. A 30-day public comment period will follow, during which the public may submit comments to the Comptroller's office. The current rules remain in effect until an amendment is adopted. Marketplace operators, platform providers, and the businesses and gig economy workers who use them should:
- review the proposed amendment when it is published to confirm its scope and effective date
- consider submitting comments during the 30-day window, especially on whether the relief should apply retroactively and on digital services the order does not address
- evaluate refund opportunities and how ongoing audits or disputes involving tax on marketplace fees may be affected
Although the order responds to a key concern raised by the business community, it covers only marketplace and platform fees. The Comptroller's broader positions on software as a service , cloud computing and artificial intelligence-powered services are not addressed.
Holland & Knight's State and Local Tax Team will continue to monitor these developments. For more information about how these changes could affect your business or how Holland & Knight can help you participate in the rulemaking process, contact the authors.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.