Texas – Temporary Exemption for Property Used in Qualified Data Centers

SALT Report 2599 – Recently enacted legislation in Texas provides a temporary sales and use tax exemption for purchases of qualified tangible personal property used in data centers. To qualify for the exemption, the data center must meet certain capital investment and new employment requirements. In addition, the purchased property must be necessary to the operation of the data center and must be purchased for installation at, for incorporation into, or for use in a qualified data center by a qualified owner, operator, or occupant.

Examples of property that may qualify for the exemption include:

  • Electricity and electrical systems
  • Cooling systems,
  • Emergency generators,
  • Hardware,
  • Distributed mainframe computers or servers,
  • Data storage devices,
  • Network connectivity equipment,
  • Racks, cabinets, and raised floor systems,
  • Peripheral components or systems,
  • Software,
  • Mechanical, electrical, or plumbing systems necessary to operate the qualified tangible personal,
  • Other items of equipment or systems necessary to operate the qualified tangible personal property, and
  • Component parts for the qualified tangible personal property

Exemption Period

The exemption will be effective on the date the data center is certified by the Comptroller as a qualified data center and will expire on:

  • The 10th anniversary of the date that the qualified occupant, owner, or operator independently or jointly makes a capital investment of at least $200million but less than $250 million, or
  • The 15th anniversary of that date if the capital investment is more than $250 million
  • Registration Number

A registration number must be obtained from the Comptroller for each person claiming the exemption. The registration number must be clearly stated on the exemption certificate provided by the purchaser to the seller of the qualified exempt property. Additionally, registration numbers are subject to revocation if the Comptroller determines that certain eligibility requirements are not met. If this occurs, the person would be held liable for all taxes, including penalties and interest for property purchased under the exemption.

This exemption is effective September 1, 2013.

For Further Information

Texas State Legislature – House Bill 1223, Laws 2013