Starting today, October 1, 2025, Texas has begun collecting sales tax on the fees that online marketplaces charge their sellers. This significant policy shift impacts individuals and businesses selling on platforms like eBay, Poshmark, Etsy, Amazon, and Walmart, potentially increasing their operational costs and reducing net revenue.
New Tax on Marketplace Seller Fees Goes into Effect
Texas sellers operating on major e-commerce platforms will now face an additional tax on the commission and listing fees charged by these marketplaces. While buyers have long paid sales tax on their purchases, this new levy targets the services provided by the platforms to sellers. The Texas Comptroller’s office has reclassified these marketplace services as taxable “data processing services” under state law, specifically citing an update to Rule 3.330. This change means that marketplaces are now responsible for collecting and remitting state sales tax on a portion of the fees they deduct from sellers’ earnings.
The Rationale Behind the Tax News
The implementation of this tax stems from a reinterpretation of existing Texas tax law, particularly a statute originally enacted in 1987 concerning data processing services. Former Texas Comptroller Glenn Hegar had previously delayed the enforcement of this rule, which took effect in April 2025 for some services but was specifically deferred for marketplace providers until October 1, 2025. This delay was intended to give the Texas Legislature time to consider legislative action to amend or clarify the law. However, no such legislation was passed. Hegar argued that current tax law should apply to online businesses in the same manner as traditional businesses and that his office’s role was to ensure fair tax collection.
How the Tax Will Be Applied
The new regulation classifies various services offered by online marketplaces, such as hosting listings, storing product photos, tracking transactions, and compiling analytics, as taxable data processing services. The state sales tax rate in Texas is 6.25%, with local jurisdictions able to add up to 2%, potentially bringing the total tax rate to 8.25% for affected sellers, depending on their location. Crucially, Texas law provides a 20% exemption for data processing services, meaning the sales tax will be applied to 80% of the marketplace fees. For instance, if a marketplace charges a seller a $10 commission fee, and the combined state and local tax rate is 8.25%, the tax would be calculated on $8 (80% of $10), resulting in approximately $0.66 in additional tax.
Implications for Texas Sellers and Small Businesses
This new tax is expected to place additional financial pressure on Texas-based sellers, particularly those who rely heavily on online marketplaces for their sales. Small businesses and individual sellers often operate on thin margins, and an increase in their operating costs can significantly impact their profitability. Experts warn that this could force many sellers to either raise their prices—potentially losing customers to out-of-state competitors who do not face the same tax burden—or absorb the costs, thereby reducing their net income. The Connected Commerce Council and other small business advocates have expressed concerns that this tax could disadvantage Texas businesses and hinder their ability to compete in the digital economy.
Marketplaces Respond and Trending Concerns
Online marketplaces such as Poshmark, Etsy, and eBay are now tasked with implementing these changes. While some, like Poshmark and Faire, have begun notifying their Texas sellers and outlining how the tax will be deducted from payouts, others are still communicating the specifics of their compliance. The complexity of the new rule, particularly the 80% taxable base and varying local tax rates, requires significant adjustments to billing and tax calculation systems. The Texas Comptroller’s office has stated that while marketplaces are responsible for collecting and remitting the tax, sellers are ultimately responsible for ensuring their tax compliance. This development is being closely watched, as some analysts suggest that other states may consider similar measures to tax online marketplace fees, potentially expanding the impact nationwide.
Looking Ahead: The Future of Online Sales Tax
The implementation of this tax highlights the ongoing challenge of adapting 20th-century tax laws to the realities of the 21st-century digital marketplace. While the Texas Comptroller asserts that the move is a fair application of existing law, many sellers feel it represents a new burden on their businesses. As e-commerce continues to grow, the debate over how to fairly and effectively tax online transactions and services is likely to remain a prominent issue for both businesses and state governments across the country.
