Virginia – Switchgear Equipment Used to Provide Power to Data Center Qualifies for Exemption (Rulings of the Tax Commissioner 10/18/13 – Doc No 13-183)

SALT Report 3133 – Virginia Tax Commissioner ruled on Oct. 18, 2013 in response to a request made by an out-of-state dealer in regards to the application of retail sales and use tax on switchgear equipment sold to a Contractor for use at a data center.  According to the Ruling, “Virginia Code 58.1-609-3 (18) provides an exemption from the retail sales and use tax for the following:

Beginning July 1, 2010, and ending June 30, 2020, computer equipment or enabling software purchased or leased for the processing, storage, retrieval, or communication of data, including but not limited to servers, routers, connections, and other enabling hardware, including chillers and backup generators used or to be used in the operation of the equipment exempted in this paragraph, provided that such computer equipment or enabling software is purchased or leased for use in a data center that (i) is located in a Virginia locality, (ii) results in a new capital investment on or after January 1, 2009, of at least $150 million, and (iii) results in the creation on or after July 1, 2009, of at least 50 new jobs by the data center operator and the tenants of the data center, collectively, associated with the operation or maintenance of the data center provided that such jobs pay at least one and one-half times the prevailing average wage in that locality. ….[Emphasis added.]

By distributing power to the data center, the switchgear equipment supplies the means of operation for servers, routers and other computer equipment used in an exempt manner in the data center.  Accordingly, I conclude that the switchgear equipment is enabling hardware that qualifies for exemption from the retail sales and use tax either in whole or in part…”

For Further Information:

Rulings of the Tax Commissioner:  Document Number 13-183 (Out-of-state dealer and registered to collect the Virginia use tax)

Rulings of the Tax Commissioner – Document Number 10-121 (Application of tax to equipment purchased and leased for use in a data center)

Virginia Code 58.1-609-3 Commercial and Industrial Exemptions