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Pennsylvania Legislators Propose Sales Tax Exemptions for Data Centers

Pennsylvania's server farm, also known as a data center, is bound to potentially earnĀ tens of millions of dollars under the recent state budget proposal. It's a tax exemption bill acting as an incentive for data centers to choose Pennsylvania as the home base of operation.

Pennsylvania boasts of over 40 out of the 2,000 server farms operating in the country. The data centers are put up by small and big tech companies each housing thousands of computers. For a decade, the centers have played the central role of ensuring the internet connectivity of the nation.

In June, Pennsylvania lawmakers passed the HB 952 tax code which was signed by the Governor in July. The centers were awarded a sales and use tax exemption on their data center equipment.

Businesses Targeted by the Tax Break

As a whole, the proposal is a win-win deal for both the state and the data centers. With 40 data centers, the tax break will have a significant impact on the state's economy. Any company that builds in the Keystone state will not pay sales tax on equipment. Tech companies will largely benefit under the tax program in the form of tax refunds approximating $55.3 million.

The state could be the next top business destination for companies such as Google and YouTube, which rely on data centers. This, in turn, will be a great support to other businesses, schools, and health facilities in the state which have integrated technology into their operations.

Expected Impact in the Next Few Years

While data centers are key beneficiaries of the tax break, they will in exchange create jobs for Pennsylvania's workers. To claim the refund, a data center must have an initial investment of between $75 million and $100 million and create a set number of jobs depending on the county it's located. In addition, the center needs to provide compensation of at least $1 million for the employees. State Sen. John Yudichak forecasts that the program will lead to another 33,000 jobs with $2 billion in wages and net revenues of $110 million.

Aside from the data centers generating big tax revenue, there are also environmental impacts to consider. Data centers heavily rely on huge energy consumption to ensure systems run uninterrupted. The U.S. accounts for 25%-34% of the globe's 30 billion watts of power used by data centers. This translates to 0.5% of greenhouse emissions from the country's data centers. However, Facebook and YouTube are focusing on green energy initiatives to minimize the damage to the environment. It will now depend on the state, businesses, communities, and incoming data centers to play their role to ensure they safeguard the ecosystem into the future.

Taking Advantage of the Exemption for Business Owners

As established, the exemption will not just spur the state's technology infrastructure but also other areas of business. Assuming data centers will start looking into sites, businesses in construction, security, and maintenance will start booming in the coming years. Employment agencies will also be busy sourcing labor forces for each data center, improving the lives of thousands of families. For tech companies, they will have reduced barriers to entry in terms of lower startup costs as they will not pay sales tax on costly data center equipment.

Conclusion

The state is optimistic that the tax break could be another great turning point for Pennsylvania's economy. Pennsylvania, being rich in resources, including providing large power generation, serves as an attractive market for data centers. Business owners can choose to see this as a chance to grasp opportunities for the duration in which the tax break will be applicable.

If you're a business owner in Pennsylvania and need help to further review the tax proposal and what it means for your business, we can assist. Please contact us today.

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