What are the key criteria for a data center to qualify for the tax exemption?

A data center must be in Massachusetts, span at least 100,000 square feet, cost $50 million+ in construction and equipment within 10 years, and create 100+ jobs.

What features must a data center have to qualify for this exemption?

Essential features include uninterruptible power supplies, advanced fire suppression systems, and enhanced security measures like biometric access or video surveillance.

Can the certificate for tax exemption be revoked?

Yes, the certificate may be revoked if the data center fails to meet the ongoing requirements or eligibility criteria outlined by the Massachusetts EOED.

Massachusetts Sales & Use Tax Exemption for Qualified Data Centers – Key Rules & Benefits

Q: What is the sales and use tax exemption for qualified data centers in Massachusetts?

It is a 20-year tax exemption for eligible data centers on equipment, software, electricity, and construction costs.

Q: How can data centers apply for the sales and use tax exemption?

Data centers must obtain a certificate from the Massachusetts Executive Office of Economic Development by meeting all the eligibility requirements.

Q: Which purchases are exempt under this tax incentive?

Qualified purchases include data center equipment, specified computer software, electricity, and construction costs related to building or refurbishing the center.

The Executive Office of Economic Development of the US State of Massachusetts released a public notice explaining the rules governing the sales and use tax exemption for qualified data centers. The notice is based on the rules established in Bill H.2792 (Bill) relevant to qualified data centers.

The notice and the Bill provide information on which centers are qualified, what purchases are exempt from sales and use tax, how to apply certificates obtained from the Executive Office of Economic Development (EOED), and in which situation can revoke the certificates.

Sales and Use Exemption Rules

A data center must be designed to house computer equipment, networking, processing, or storage data to be eligible for sales and use tax exemption. Three features are vital for determining the status of a qualified data center: uninterruptible power supplies or backup generators, advanced fire suppression and prevention systems, and enhanced security measures such as restricted access, permanent security guards, video surveillance, or systems requiring passcodes, key cards, or biometric scans.

In addition to these features, data centers must meet other specified criteria, such as being located in the State of Massachusetts, operated by their owner or lessor, spanning at least 100,000 square feet across one or more buildings on a single or contiguous parcels, and involving at least USD 50 million in costs for construction, refurbishment, and equipment within 10 years after certification. Furthermore, the data center must create and maintain at least 100 jobs in the state.

Data centers that meet set criteria and obtain the necessary certificate from EOED will be exempt from sales and use tax in Massachusetts for purchasing eligible data center equipment, specified computer software, electricity, and construction costs for 20 years.

Conclusion

The decision to exempt sales and use tax for qualified data centers is a strategic application of state legislation to foster economic growth and innovation and to attract data center owners to consider moving to Massachusetts.

This long-term relief tax incentive provides a significant opportunity to design, build, or reconstruct data centers and benefit from 20 years of tax exemption on data center equipment, software, electricity, and construction costs. Moreover, this is a substantial competitive advantage as data centers that qualify for these exemptions can allocate resources toward innovation, expansion, and enhanced services.

Source: Commonwealth of Massachusetts - Executive Office of Economic Development, Commonwealth of Massachusetts - Bill H.2792