Small Business Owners Urge Texas Legislators to Stop Possible Tax on Online Marketplace Fees
(April 17, 2025) — Small Texas online sellers today held a press conference urging Texas lawmakers to pass legislation (HB 1681/SB 265) ensuring online sellers won’t have to pay taxes on fees they pay digital marketplaces like Amazon, eBay, and Walmart. The press conference came as the House Ways and Means Committee plans to hold a hearing on HB 1681 on Monday.
Online marketplace fees recently became subject to a 1987 law taxing “data processing services.” Comptroller Glenn Hegar says unless the legislature acts, current Texas law requires taxing fees sellers pay online marketplaces. When a customer buys products through a marketplace, two taxable transactions occur: The customer buys the products, and the seller buys “data processing services” from a marketplace to help fulfill the sale.
The small sellers encouraged legislators to step in, noting the new tax would disadvantage Texas sellers competing with sellers based in other states and citing numerous economic challenges currently facing small businesses.
“In today’s inflationary economy, the last thing small Texas businesses need is a new tax,” said Santiago Gelvez, founder of PetCultures in Dallas. “We’re already dealing with rising business expenses, so we’ll either have to raise our prices — costing us customers — or absorb the tax — hurting our bottom line.”
James Frailey, co-owner of Frailey Woodworks in Fort Worth, echoed Gelvez’s concerns. “My family and I have put everything into our handcrafted-furniture business, and we’re very concerned about this new tax,” Frailey said. “Texas lawmakers should be encouraging small businesses to leverage digital tools, not burdening them with taxes that make it harder to thrive.”
The business owners stressed the importance of online marketplaces in helping them grow, compete, and succeed. Reducing profits by taxing marketplace fees would undermine business owners’ ability to use online marketplaces to scale, and many businesses would likely be forced to pass costs along to consumers.
“If I have to pay a tax on the fees I pay online marketplaces, I’ll be forced to raise my prices, which is the last thing I want to do to my customers,” said Gelvez. “I urge Texas lawmakers to pass HB 1681/SB 265. Taxing online marketplace fees will hurt Texas small online sellers and, ultimately, consumers.”
