Texas Moves To Reverse Sales Tax On Marketplace Seller Fees
Texas is moving to eliminate sales tax on online marketplace selling fees, reversing a controversial rule that has added costs for sellers on Amazon, eBay, Etsy and other marketplaces over the past year.
Comptroller Don Huffines signed an executive order September 30 directing his office to amend Rule 3.330, which classifies certain online marketplace services as taxable data processing. The proposal would remove that classification and clarify that fees charged to sellers for listing, offering or facilitating sales are not taxable data processing or information services.
Huffines criticized the previous administration's interpretation of the rule, calling it a hidden tax on small businesses that should never have been imposed.
For the past year, small business owners across this state have been getting hit by a hidden tax nobody voted for.
Texas has taxed data processing services since 1987, but former Comptroller Glenn Hegar's administration expanded the rule in 2025 to explicitly include certain activities performed by online marketplaces.
Hegar had defended the interpretation as an application of existing law to modern online marketplaces, arguing that the retail purchase and the marketplace services provided to the seller were two separate taxable transactions.
He also noted that lawmakers had declined to approve legislation exempting marketplace fees in 2023, but Huffines now argues the previous administration went beyond what the Legislature intended.
The transaction fees charged by the marketplace providers are commissions, not data processing services. Therefore, the Comptroller’s office proposes changes to reflect that platform fees are not data processing services.
The proposed change would also affect platform fees charged by food delivery, ride-sharing, short-term rental and other app-based services.
When the rule took effect last October, marketplaces handled the new tax requirements differently, with some warning sellers in advance and others leaving them to discover additional charges in their transaction records.
Poshmark notified Texas sellers that it would begin deducting sales tax on its commissions starting October 1, 2025, explaining that the additional charge was separate from the sales tax buyers paid on their purchases.
Liz Morton
Etsy also warned sellers that it would begin collecting Texas sales tax on certain fees in October, likely including transaction and listing fees, though the company initially said it was still working with the state to determine exactly which charges were taxable. The company later updated its Payments Policy in December to add broader language allowing sales tax to be collected on seller fees where applicable and requiring sellers to keep their location information accurate.
eBay, meanwhile, did not provide a specific advance announcement to Texas sellers, leaving some to discover the additional tax after it began appearing in their transaction records. The company subsequently updated its help documentation to clarify which seller fees were taxable in Texas, including Store subscriptions, insertion fees and Final Value Fees.
Liz Morton
Huffines argues that Texas was never entitled to collect the tax in the first place, saying the money belongs to the families and small businesses that earned it.
Ending this tax isn't a cost to government because this money never belonged to the government. You cannot lose what was never yours. It's going back where it belongs: to the Texans who earned it.
But while Huffines has promised to end the tax, the executive order does not address whether sellers will be able to recover amounts already collected or whether the change will apply retroactively. Even if the state eventually allows refunds, it's unclear how that would work for marketplace sellers whose taxes were deducted from their earnings and remitted by the platforms.
The Comptroller has scheduled publication of the proposed amendment in the Texas Register for October 16, with public comments accepted through November 15. The agency cautions that the final rule may differ from the proposal, and no final adoption or effective date has been announced.
Although the executive order took effect immediately September 30, it only directs the agency to begin the rulemaking process. The order explicitly states that the changes will not take legal effect until that process is complete, so marketplaces must continue following the existing rule for now.
