Minnesota – Exemption for Qualified Data Centers

SALT Report 1904 – The Minnesota Department of Revenue updated their guidance regarding the sales tax exemption for qualified data centers that was enacted during the 2011 Special Session. Minnesota Statutes, section 297A.68, subdivision 42, paragraph (c)(1) defines a qualified data center as one in which the “total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $50,000,000 within a 24-month period.”

In addition to the financial investment, qualified data centers must also meet the following conditions:

  • The facility must have uninterruptible power supplies, generator backup power, or both,
  • The facility must have a sophisticated fire suppression and prevention system,
  • The facility must have enhanced security,
  • The facility must have a minimum of 30,000 square feet, and
  • Construction or substantial refurbishment must have started after June 30, 2012

Once a facility qualifies, the exemption can be used for purchases of enterprise information technology equipment and computer software that will be used in the qualified data center. This also applies to enterprise information technology equipment and computer software that is purchased to replace or upgrade existing equipment or software.

This portion of the exemption requires that the purchaser pay the sales tax on the equipment and software and then, after June 30, 2013, the business owner can apply for a refund of the sales tax. All sales or purchases must be made after June 30, 2012. The exemption expires either 20 years from the date of the first purchase of qualified information technology equipment or computer software, or on July 1, 2042 whichever is earlier.

The exemption has been extended to purchases of electricity that are used or consumed in the operation of a qualified data center. The electricity must be used to operate enterprise information technology equipment, in office and meeting spaces, or in mechanical and support facilities that are located in the data center. The business entity that pays for the electricity used or consumed in the data center may purchase it exempt.

The Department notes that the use of separate meters to measure the electricity that will be used for qualified purposes and spaces is preferable; however the Department will accept an energy audit conducted by an energy audit engineer to determine the portion of the electricity that was used for exempt purposes. All exempt sales and purchases of the electricity must be made after June 30, 2012, and by July 1, 2042.

For Further Information:

Minnesota Department of Revenue – Revenue Notice 12-11