Texas Marketplace Fee Tax Set for Repeal Under Huffines Order

A year-old tax on seller fees is headed for repeal

Texas has started the process of undoing one of the most disliked e-commerce tax rules in the country. On September 30, Comptroller Don Huffines signed an executive order telling his agency to amend Rule 3.330. That rule has treated certain online marketplace services as taxable "data processing." Under the proposed amendment, the fees platforms charge sellers to list, offer or facilitate sales would no longer count as taxable data processing or information services.11 Sellers on Amazon, eBay and Etsy have been paying this tax for the past year.11

Huffines has not been subtle about why. He called the 2025 interpretation "tax invention" rather than tax policy and said his office had "cast a huge net." He also compared a comptroller creating taxes through rulemaking to a judge inventing crimes that aren't on the books.19 His office now describes the fees as commissions, not data processing services.11

The reversal is welcome news for marketplace sellers. Still, the coverage agrees on one point: nothing has changed yet, and sellers who act as if it has could end up exposed.

How Texas came to tax the middleman

Texas has taxed data processing services since 1987. Under former Comptroller Glenn Hegar, the agency expanded Rule 3.330 in 2025 to name specific marketplace activities.11 The amended text says marketplace provider services can be taxable when they involve computerized entry, retrieval, storage or manipulation of a seller's data. It gives storing product listings and photos, keeping transaction records and compiling analytics as examples.16 The marketplace provisions took effect October 1, 2025.13

Hegar argued that this simply applied existing law to modern commerce. In his view, every marketplace sale involved two buyers and two taxable transactions: the consumer buying a product, and the seller buying the platform's services.16 He also pointed out that lawmakers declined in 2023 to pass a bill exempting marketplace fees, even though his own office had helped draft it.1611 Opponents, including the Texas Taxpayers and Research Association, said the agency had stretched a statute written for mainframe-era data entry far past what the Legislature authorized.15

The money involved is modest per transaction but adds up. Texas exempts 20% of data processing charges, so 80% of a fee is taxable. With the 6.25% state rate plus up to 2% local tax, the maximum works out to roughly 6.6% of each fee.13 One seller newsletter estimated that a business with $1 million in sales and a 15% referral fee would owe about $9,900 a year in new tax.5

Amazon, Walmart, TikTok Shop: one tax, many rollouts

The rule applied to every platform, but each one handled it differently. One compliance guide said Amazon, Walmart and eBay would all have to add sales tax to the commissions they charge sellers.1 Poshmark warned Texas sellers ahead of time that it would start deducting tax on its commissions October 1, 2025.11 Etsy also gave notice but said at first it was still working out which fees were covered. It later broadened its payments policy.11 eBay sent no specific advance notice, so some sellers only found the charges in their transaction records. The company later listed store subscriptions, insertion fees and final value fees as taxable in Texas.11

TikTok Shop came later. It told sellers that starting November 1, 2025, it would add sales tax to referral fees for sellers whose business registration address is in Texas or West Virginia, with the tax added automatically to seller invoices. That detail matters. The fee tax is tied to where the seller is based, not where the buyer is. One analysis noted that eBay, Etsy and Poshmark all applied the charge based on the seller's registered or return address.5 The result was a quirk that put Texas-based merchants at a disadvantage compared with out-of-state competitors on the same platforms. Participants raised exactly this complaint at a September roundtable the comptroller held with businesses.13

This is a different issue from the familiar marketplace facilitator system. TikTok Shop, Amazon and Walmart all collect and remit sales tax from buyers under the same state facilitator laws, including Texas's.23 The 2025 rule added a second layer on top of that: tax on the service the seller buys from the platform. That second layer is what Huffines wants to remove.

How big was the 'double tax'?

Critics agree the rule taxed two charges tied to one sale, but they describe the size differently. A law-firm blog estimated the effect at tax on as much as 130% of a marketplace sale: 100% on the sale itself plus a second tax on the commission the platform keeps.19 A seller newsletter quoted the law firm challenging the rule as calling it a tax on 115% of sales, using a $15 commission on a $100 sale as the example.5 The gap reflects the commission rate each example assumes, not any disagreement about how the tax works. One regional report pushed back on the "double tax" label itself, noting that the state was taxing two different charges, not the same charge twice.13 That is accurate. But for a seller watching margins, the distinction makes little practical difference.

The rule may also have stood on weaker legal ground than it looked. One analysis traced the policy to a 2012 comptroller ruling that treated marketplace commissions as nontaxable brokerage fees. That ruling was reportedly revoked without notice in 2020, the position was then asserted in audits, and only later written into the rule.5 The same analysis pointed to Texas's new Fifteenth Court of Appeals, which said in its first sales tax opinion that it was not bound by earlier appellate precedent of the kind the data processing rule relies on.5 Read this way, Huffines may be giving up a position the state could have struggled to defend in court anyway.

The timeline problem

The executive order only starts the rulemaking process. It does not change Rule 3.330.19 According to the latest reporting, the comptroller planned to publish the proposed amendment in the Texas Register on October 16 and accept comments through November 15. The agency has warned that the final rule may differ from the proposal and has not announced an adoption or effective date.11 Earlier coverage said no comment deadline had been set, so the October 16 date is the newest public timeline.12

Until the rule is final, platforms have to keep following the current version.11 Compliance advisers are blunt about this: don't stop collecting or self-assessing the tax, don't amend past returns, and don't change accounting software settings based on the announcement alone.4 They also recommend that sellers keep detailed records of fee invoices and settlement statements in case refunds become possible.4

Refunds are the biggest open question

The coverage diverges most on refunds. One seller-focused outlet noted that the executive order says nothing about whether money already collected will be returned or whether the change will apply retroactively.11 One analysis cited separate tax reporting suggesting that marketplace providers who paid the tax may be able to file refund claims within four years.12 A law firm has invited companies that accepted the old treatment during audits to discuss possible refund options.19 BDSN's guidance also lists checking for refunds for past periods as a step, but says it depends on the wording of the final rule.17

The sellers who actually bore the cost face the hardest version of this problem. Platforms deducted the tax from seller earnings and sent it to the state themselves. Even if Texas allows refunds, it is unclear how that money would get back to individual sellers.11 Because the four-year window would run from payment dates, and the tax only began in October 2025, any claim would cover about one year of charges.12 In practice, a refund process built around marketplace providers could leave the small sellers who paid the tax waiting on Amazon, eBay or TikTok Shop to pursue and pass along any money.

What this means for marketplace regulation

The amendment covers more than retail. It also applies to platform fees for food delivery, short-term rentals, ride-hailing, vehicle sharing, pet care and household services, which affects restaurants and gig workers as well as merchants.10 It does not touch the broader data processing tax. Web hosting, data storage and similar services remain taxable.3 Huffines has said his office will keep reviewing how the tax is interpreted and could propose more changes.15

The underlying legal question also remains open. Avalara's Scott Peterson pointed out that while the comptroller says the Legislature never expanded the definition of data processing, it also never repealed the data processing tax. Simply withdrawing the rule doesn't resolve whether marketplaces actually provide such services.16 That leaves the door open for a future comptroller to try again.

This is the main lesson from the episode. Whether platform fees are taxed in Texas has now changed twice through agency rulemaking, under two comptrollers with opposite views, while the Legislature stayed out of it. A rule-based fix will help sellers on Amazon, Walmart, Etsy and TikTok Shop, but only a change to the statute would make it permanent. Until the amended rule is adopted, the tax remains on Texas sellers' invoices.