In an official press release on September 30, 2026, Texas Comptroller Don Huffines announced that fees charged by marketplaces will no longer be subject to sales tax as data processing. This development is welcome news to marketplaces that were challenging the Comptroller’s prior controversial position.
Background
In 2025, the Comptroller overhauled its data processing regulation (Rule 3.330), adopting a position that arguably exceeded the scope of the statutory definition of data processing for sales tax purposes in Texas Tax Code section 151.0035. The Comptroller amended Rule 3.330 to expand the scope of services treated as taxable data processing services to include, among other services, marketplace provider 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.”
The 2025 amendments also added twelve detailed examples applying the revised rule to a variety of services including marketplace platform services, internet hosting, website design and development, search engine optimization, social media marketing, lead generation, and computerized rendering services.
Fixing a Bad Position
Comptroller Huffines, who was sworn in as Comptroller on August 1, 2026, raised concerns that the 2025 change improperly expanded the Texas sales tax to cover fees paid by businesses to online marketplace platforms. Huffines stated that the Comptroller’s prior interpretation effectively increased costs for businesses and consumers by imposing sales tax on marketplace fees in addition to any tax a purchaser pays on the underlying transaction.
Following Comptroller Huffines’s executive order, taxpayers will see a proposed amendment to Rule 3.330 published in the Texas Register in the coming weeks, followed by a 30-day public comment period.
It is worth noting that while today’s announcement focuses on changing Rule 3.330’s marketplace and platform fee provisions, at least for now, the rule continues to apply to other services included within the scope of data processing by virtue of the 2025 amendments. Before proposing its amendments to Rule 3.330, the Texas Comptroller had increasingly taken the position on audit and in rulings that generally treated technology enabled services, such as providing access to an online dashboard, as taxable data processing services. It is unclear based on the Comptroller’s announcement whether its treatment of these types of services will also be changing.
Essence of the Transaction Test
In addition, the 2025 amendments to Rule 3.330 effectively “repealed” Texas’ judicially created essence of the transaction (true object) test for determining the taxability of bundled transactions. Based on the premise that purchases of data processing are often combined with other services, the Comptroller rejected the Texas courts’ essence of the transaction test in favor of an “ancillary” test, thereby expanding the taxability of bundled transactions. In so doing, the Comptroller shifted the taxability determination from focusing on the buyer’s intent to focusing on the seller’s activities. According to the Comptroller’s “ancillary” test example in Rule 3.330, inserting data into title or loan documents is taxable data processing, whereas preparing a title opinion is not. While the “ultimate goal” of both services is closing a real estate deal, the Comptroller’s “ancillary” test treats the taxability of these services differently.
The Comptroller’s September 30, 2026 announcement does not address the future of the ancillary test.
Next Steps
For taxpayers that provide services that may have qualified as data processing subject to Texas sales tax, this change presents a potential refund opportunity. Given the language in the Comptroller’s announcement, and the Comptroller’s prior data processing interpretation, a marketplace provider that has paid tax on its marketplace provider fees may have a refund claim opportunity. Claims for refund of Texas sales tax overpayments generally must be made within the later of four years from the date the tax was due and payable or six months after a deficiency determination becomes final.
Eversheds Sutherland’s SALT team will continue to monitor developments in Texas’s taxing of data processing services, and will provide further updates when the Comptroller releases the draft of its revised Rule 3.330.