About Face? Texas Comptroller Signals Willingness To Walk Back Data Processing Tax Positions

Highlights

• New Texas Comptroller Don Huffines has confirmed the need to revisit the state's aggressive data processing tax interpretations, which have drawn significant criticism from the business community.
• The Comptroller recently held a small business roundtable to hear directly from affected taxpayers about the impact of the 2025 rule amendments.
• Businesses subject to the expanded data processing rules should monitor developments closely, as possible changes and relief may be forthcoming.

Texas is one of approximately 15 states that impose sales tax on data processing services. Under Texas Tax Code Section 151.0035, "data processing service" is defined as "word processing, data entry, data retrieval, data search, information compilation, payroll and business accounting data production ... or other computerized data and information storage or manipulation." The Comptroller's office has interpreted this definition and application of tax to services it considers to be data