If you’re operating SCADA systems, pipeline monitoring, refinery automation, or grid management systems, there’s a new Texas sales tax rule you need to understand. On April 2, 2026, significant changes to Rule 3.330 take effect that could directly impact how data processing services are taxed for energy and industrial operators.

Here’s what changed and why it matters.

What’s New in Rule 3.330

The Texas Comptroller revised Rule 3.330, which governs data processing services under Texas Tax Code §§ 151.0101(a). This isn’t a minor tweak. Data processing services are taxable in Texas, and given that sales and use tax represented 58.3% of the total state and local tax budget in 2025, this rule affects a broad swath of Texas businesses.

The key development is the introduction of the “ancillary” concept. Under the revised rule, data processing that is sold as part of another nontaxable service may be excluded from taxation if two conditions are met:

  1. The data processing service does not have a separate value, and
  2. The data processing service is ancillary to the other service.

This sounds straightforward, but the burden falls entirely on the taxpayer to prove both conditions. Rule 3.330(a)(1)(C) lays out a list of factors the Comptroller will consider when evaluating whether data processing qualifies as ancillary, and the analysis is anything but simple.

Why Energy and Industrial Operators Should Pay Attention

Energy companies run some of the most sophisticated data processing operations in the world. SCADA systems monitor pipeline flow rates, pressure levels, and safety parameters in real time. Refineries rely on automation systems that process massive data streams to optimize production and maintain compliance. Grid operators use complex analytics to balance load, predict demand, and prevent outages.

All of this involves data processing. The question now is whether that data processing is taxable or whether it qualifies as ancillary to the core service your company provides, like energy production, transmission, or distribution.

This is where the real challenge lies. The Comptroller’s guidance doesn’t provide bright line tests. Instead, it requires a fact specific analysis based on factors like:

  • Whether the data processing could be purchased separately
  • Whether it’s marketed or billed separately
  • The relative value of the data processing compared to the overall service
  • Whether the service could function without the data processing component

For energy operators, the argument will likely center on whether data processing is integral to the delivery of energy services or whether it stands alone as a separately identifiable service. That’s not an easy line to draw, especially when you’re dealing with integrated systems where data processing is embedded in nearly every operational function.

The Financial Stakes

Sales tax isn’t trivial. In Texas, it’s the largest single revenue source for the state. For companies processing vast amounts of operational data, even a fraction of that activity being reclassified as taxable could translate into significant liabilities. And with the burden of proof on the taxpayer, there’s risk in getting the analysis wrong.

The Comptroller will be looking at how these services are bundled, billed, and described. If your invoices break out data processing separately, or if you could theoretically offer that processing as a standalone service, you may have a tougher time arguing it’s ancillary. On the other hand, if the data processing is fully integrated into your operational workflow and has no standalone market value, you have a stronger case.

What This Means Moving Forward

The April 2026 effective date gives companies time to evaluate their current operations and make adjustments. This is a good moment to review how your systems are structured, how services are billed, and whether there are opportunities to reframe or reorganize how data processing is delivered and documented.

It’s also a moment to get clarity on what the Comptroller will be looking for. The ancillary analysis isn’t something you can address in a vacuum. It requires understanding both the technical realities of your operations and the legal framework the Comptroller is using to evaluate taxability.

How We Can Help

At KE Andrews, we work with energy and industrial clients on complex state and local tax issues every day. We understand the operational realities of SCADA systems, pipeline monitoring, and refinery automation because we’ve spent decades working alongside companies that run them. We also understand the tax landscape and how to structure arguments that hold up under scrutiny.

If you’re trying to figure out whether your data processing operations will be treated as ancillary under the new rule, or if you need help evaluating your current billing and operational structures, we’re here to walk through it with you. Get in touch with our team.