The Texas Comptroller has signed an executive order adopting a narrower interpretation of the controversial data processing tax than previously applied by prior administrations to certain electronic commerce items, such as marketplace and platform fees. Under Comptroller Huffines' interpretation, taxes on marketplace fees, such as those paid for selling products on online platforms, app-driven food delivery services, and short-term rentals, will no longer be swept up in the over-broad net of “data processing.” The Comptroller's Office is directed by the Order to amend Rule 3.330 to reflect this change in policy. Although this is a positive step, all interested parties should review the proposed amendments to the Rule, and comment as appropriate.

In many cases, the result was that a business paid tax on the marketplace fee and the customer also paid tax on the item — the same transaction, taxed twice.

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