SALT Report 2937 – The South Carolina Department of Revenue released a revenue ruling to provide guidance regarding legislation that was enacted in 2012 which provides an exemption for computers and electricity used in datacenters. The purpose of the ruling is to address various issues related to the exemption.
Under the provisions of Code Section 12-36-2120(79), computers, computer equipment, computer hardware, and computer software used in a datacenter that meets specific requirements are exempt from sales and use tax. The exemption also applies to electricity used by the datacenter and property used for the generation, transformation, transmission, distribution, or management of electricity located and used at the datacenter.
For purposes of the exemption a “datacenter” is defined as a facility that provides infrastructure for hosting or data processing services and that has power and cooling systems that include redundant capacity components and multiple distribution paths serving the computer equipment at the facility. However, a single distribution path may be used to serve the computer equipment at any one time.
To qualify for the exemption, the datacenter must create a minimum of 25 full-time jobs and maintain these jobs for at least three years. A single taxpayer must commit to investing at least $50 million in real and personal property over a five-year period. However, in the case of multiple taxpayers, the minimum invest is $75 million.
To receive an exemption certificate, the taxpayer must notify both the Department of Revenue and the Department of Commerce in writing of its intent to make the required capital investment, to create and maintain the required number of jobs, and that they are certified by the Department of Commerce.
The notice should include the taxpayer’s name, address, retail license number or use tax registration number, the location of records, a brief description of the qualifying investment and job creation, a brief description of property claimed to be exempt from tax and where it will be used, the name and addresses of each taxpayer investing in the facility, and the name and telephone number of a person to contact in regards to the exemption.
Once the notice is received, the Department of Revenue will issue an exemption certificate for the datacenter. The certificate must be presented to each supplier when making a tax-exempt purchase. If the certificate is used to make purchases that do not qualify for the exemption, the purchaser will be held liable for any taxes, interest, and penalties due.
The sales and use tax exemption only applies to a datacenter that is certified prior to January 1, 2032. However, if a datacenter is certified by December 31, 2031 the exemption will remain in effect until December 31, 2041. On that date, the exemption is repealed and no further exemption will be allowed.
For Further Information