Texas
Texas is home to 3.3 million small businesses that power the state’s economy and employ nearly half its workforce. As these businesses navigate a rapidly evolving digital economy, policymakers must ensure that new regulations protect, rather than jeopardize, the state’s small businesses.
Key Policy Issues
Double Taxation for Online Marketplace Sellers
Data Processing Tax
Background
Texas established a sales tax on data processing services in 1987, long before modern online marketplaces existed. These platforms have revolutionized commerce, but a recent reinterpretation of outdated tax rules now threatens to unfairly burden Texas small businesses selling on online marketplaces like Amazon, eBay, and Walmart.
The Problem
The Texas Comptroller’s office has proposed updates to Rule 3.330 that would tax consumers when they purchase a product through an online marketplace and tax sellers on the “data processing services” fees they pay digital marketplaces to help facilitate the product’s sale.
The Impact: A Double Tax
This creates a double tax that would inflate small businesses’ expenses and, in turn, force them to raise the prices they charge consumers.
- Higher Costs for Texas Sellers: Marketplace sellers will be hit with an additional tax on the fees they pay to online marketplaces like Amazon.
- Competitive Disadvantage: Sellers with a Texas billing address will face higher costs compared to out-of-state competitors selling to Texas consumers, who won’t need to pay the second tax.
- Online Business Penalty: Unlike brick-and-mortar stores that pay sales tax once, online sellers will be unfairly penalized for embracing digital tools that expand their reach.
Status: The final rule will be published in 2025. The Comptroller may delay implementation should the issue be considered during the upcoming legislative session.
Key Officials
Send a letter to your representatives in Texas urging them to veto harmful legislation.
Take Action: Make Your Voice Heard
The Texas Comptroller must reconsider the harmful consequences of this expanded “digital services tax” in its final ruling. Sign up for our Public Policy Newsletter here to stay current on this issue and track its status in 2025.
