Jake Iskhakov is the Director of Sales & Marketing at ServerLIFT Corporation.

JAKE ISKHAKOV
ServerLift

Technology is one of a few recession-proof industries, and regardless of the state of any economy, the industry continues to evolve and grow year over year. Some companies choose to take advantage during downturns, while others wait until trends start to make their way into the green. Regardless of the growth strategy, there is a constant need to find the best areas to expand the data center footprint.

In choosing a destination to break ground, there are many things to consider such as real-estate costs, weather patterns, natural disasters and staffing, and now there is a new trend that is becoming a part of the decision making process. To capitalize on the boom of data centers, select states are introducing tax breaks as additional benefits for potential expansion. Several states now offer data center-specific tax breaks, and some offer more appealing benefits than others. While taxes are historically not the top criteria in the scope of a data center build, it may be something to start consider.

1) Virginia
Virginia, over the past few years, has utilized tax breaks and other financial incentive programs to establish itself as one of the premier locations for hosting data center operations on the Eastern seaboard. In particular, Ashburn, Va., and other surrounding municipalities in Loudoun County have become go-to locations for housing data centers, in part due to the county’s proximity to the D.C. Metro area.

In addition, Virginia has a number of unique tax incentives that help to establish the state as one of the best hosting spots in the region. State law exempts qualified data centers and colocation tenants from paying sales or use tax on hardware, software and other pieces of equipment central to data center operations. Plus, Senate Bill 1133 allows municipalities to establish lower property tax rates for data centers.

2) Texas
The Lone Star State has one of the most business-friendly tax codes in the nation, and this is especially true regarding data center operations. Qualifying data centers – the specific standards that need to be met are established in House Bill 1223 – are exempt from paying personal property taxes on anything that is “necessary and essential” to running such a facility. For example, while office supplies would not fall under this clause, critical IT equipment and electricity are covered by the exemption.

Texas’s law is unique in that it only exempts one occupant per facility. However, the measure sets a minimum size requirement at 100,000 square feet, meaning that one large facility could house multiple data centers that qualify for these tax breaks.

3) Arizona
As mentioned on the ServerLIFT TechLIFTblog, Arizona has some of the most data center-friendly tax breaks in the country. For example, House Bill 2488 exempts the transaction privilege tax for data center construction, IT equipment purchases and related energy expenditure. Furthermore, House Bill 2009 provides additional financial incentives for data center owners and operators as well as colocation tenants.

“This makes the state very competitive,” said Sylvia Kang, CyrusOne data center’s vice president of site selection and acquisition, as quoted in the Phoenix Business Journal. “Arizona has great features prior to the bill and is an ideal place for data centers to be located, but this really puts Arizona on a financial level playing field. It helps us to get clients previously looking at neighboring states to come here instead.”

Taxes are just one of the many costs that affect data center operations. However, they are enough of a burden that even a slight difference can affect the decision on where to build your next location.

Industry Perspectives is a content channel at Data Center Knowledge highlighting thought leadership in the data center arena. See our guidelines and submission process for information on participating. View previously published Industry Perspectives in our Knowledge Library.