A torrent of states are repealing data center tax exemptions but it could increase costs by upwards of 7%

Date:
Mon, 03 Aug 2026 17:10:00 +0000

Description:
Multiple states are repealing or modifying sales tax exemptions, and it could cause the cost of data centers to skyrocket.

FULL STORY ======================================================================Copy link Facebook X Whatsapp Reddit Pinterest Flipboard Threads Email Share this article 0 Join the conversation Follow us Add us as a preferred source on Google Newsletter Subscribe to our newsletter Multiple US states are
repealing or enacting moratoriums on sales tax exemptions for data centers Estimates on lost tax revenue are far below the billions of dollars some states have missed out on Ongoing data center constructions may not be subject, but costs are expected to increase for new or planned projects In a blow to US firms trying to expand AI compute capacity by building more data centers, multiple states are now repealing tax exemptions for equipment
costs.

According to exclusive The Information reporting, the estimated costs could rise by upwards of 7%, as the exemptions previously allowed data centers to
be kitted out with equipment without having to pay sales tax. But as soon as Ohio Governor Mike DeWine revealed that the lost tax revenue amounted to $1.6 billion, instead of the projected $136 million, other states have started following suit. Latest Videos From TechRadar Watch full video here: States repeal data center tax exemptions Ohio repealed its tax exemptions for data centers in June 2026 , and since July, Illinois and Arizona have both paused their own exemptions. Illinois program has been paused indefinitely, and Arizona has enacted a 3-year moratorium.

A further nine states are also considering halting their own exemptions, and
a further 28 states have introduced bills to limit the effects of their own exemptions. You may like Ohio suspends data center tax breaks after losing $1.5 billion in revenue but ongoing projects will still get the benefits
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new buildings

Per Avalra data, the sales tax in Ohio sits at almost 6%, with Illinois just over the same figure. These sales taxes will immediately increase the costs
of new data center projects, but some projects already under way could be subject to indefinite exemptions. Are data center costs already
unsustainable? The costs of data center construction have already been rising due to the sudden expansion in capacity. Electricity costs have skyrocketed
as more data centers join grids without suitable additions in energy sources. Are you a pro? Subscribe to our newsletter Sign up to the TechRadar Pro newsletter to get all the top news, opinion, features and guidance your business needs to succeed! Contact me with news and offers from other Future brands Receive email from us on behalf of our trusted partners or sponsors By submitting your information you agree to the Terms & Conditions and Privacy Policy and are aged 16 or over.

In an attempt to combat this, President Donald Trump has rolled back regulations on fossil-fuel burning power stations, with multiple data centers being built with on-site natural gas turbine electricity generation. This has caused a string of issues with local residents complaining of sickness caused by infra-sound , and deafening noise levels similar to that of an international airport.

Funding and incentives for renewable wind and solar sources have also been scrapped by Trump, which ironically are some of the cheapest energy sources
in the US. This has compounded consumer electricity price rises, acting as a catalyst for data center opposition in the US. AI companies have been urged
by the UN to disclose the full environmental damage of the technology .

Additionally, a study by Nikkei has found that numerous big tech firms
looking to expand data center capacity have almost $1.65 trillion in hidden debt, where contracts are signed between subsidiary companies and data center operators. This means the debt does not appear on the companys balance sheet, and will only show up as annotations in quarterly financial statements.

This hidden debt at big tech companies has exploded eightfold in the last
four years, alongside the visible balance sheet debt for big tech companies which stands at $1.35 trillion. Many businesses are still struggling to justify the ROI on adopting AI technologies , especially as token costs increase.

Sales exemptions are an attractive benefit for data center construction projects, and states that keep or enact sales exemptions will likely see an explosion in new project applications. Follow TechRadar on Google News and
add us as a preferred source to get our expert news, reviews, and opinion in your feeds.



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Link to news story: https://www.techradar.com/pro/torrent-of-states-repeal-data-center-tax-exempti ons-but-it-could-increase-costs-by-upwards-of-7-percent


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