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1 Jared Walczak, State Taxation of Data Centers 1 (2025)

handle is hein.taxfoundation/stetndat0001 and id is 1 raw text is: TAX FOUNDATION State Taxation of Data Centers Dec. 2025 Jared Walczak Vice President of State Projects Key Findings * Data centers' state and local tax burdens are heavily dependent upon policy choices surrounding sales and property taxation of data center equipment. * Servers and other data center equipment are exempt from sales tax in most states, consistent with the principle of avoiding the taxation of business inputs, but the exemption is often contingent upon meeting economic development targets. * Many states impose tangible personal property taxes on data centers' machinery and equipment, accounting for more than 20 percent of the total federal, state, and local tax burden on data centers across 12 jurisdictions examined in this publication. * Data centers face high tax burdens and are particularly substantial contributors to local coffers, but poor tax structure can drive these operations to other locations and deprive local governments of a major revenue stream. * Tax liability calculations for a model $1 billion data center in 12 representative jurisdictions across the country demonstrate how important tax considerations can be in location decision-making. The Tax Foundation is the worlds leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 1 taxfoundation.org