WA data centers to lose tax exemptions starting today
A new Washington state law, S.B. 6231, has repealed tax exemptions for data centers on equipment repairs and refurbishment, effective immediately. This means data centers will now be required to pay the state's 6.5% sales tax on these costs. Supporters argue the exemptions did not justify electricity usage and job growth, while opponents express concerns about economic disadvantage.
Effective Wednesday, Washington state data centers are no longer eligible for tax exemptions on equipment repairs and refurbishment, including associated labor costs, following the enactment of S.B. 6231. This new law, which took effect last month, repeals previous exemptions that covered the purchase and installation of server and power infrastructure, even for facilities in urban counties which had expanded eligibility in June 2022. Now, all data centers in the state, regardless of location, must pay Washington’s 6.5% sales tax on these expenses.
Senators Noel Frame (D-Seattle) and Bob Hasegawa (D-Tukwila) sponsored the bill, with supporters arguing that the exemptions failed to generate sufficient job growth to justify the data centers' high electricity consumption. Sheri Sawyer, legislative affairs director in the Washington State Office of Financial Management, highlighted that while the exemptions aimed to attract investment and jobs, particularly in rural areas, data centers ultimately became significant electricity users with fewer permanent jobs than anticipated.
Conversely, opponents like Senator Chris Gildon (R-Puyallup) expressed concerns that the legislation is "very shortsighted" and will create a competitive disadvantage for Washington compared to neighboring states like Oregon, which previously offered similar tax breaks. Unionized electrical workers also voiced worries that the removal of these exemptions could lead to renegotiations of existing contracts with data centers. The policy change coincides with Washington's broader initiative to achieve a carbon-free power grid by 2045, amid increased lobbying by "Big Tech" companies, including Microsoft, on data center-related legislation.