US Data Center Tax Exemptions Repealed, Costs Rise for AI Compute Capacity
Multiple US states are repealing data center tax exemptions, potentially increasing costs by up to 7% for new or planned projects. This move affects US firms trying to expand AI compute capacity. Nine states are considering halting exemptions, and 28 have introduced bills to limit their effects. Estimated lost tax revenue is $1.6 billion, not the projected $136 million.
Key points
- US states Ohio, Illinois, and Arizona have repealed or enacted moratoriums on data center tax exemptions.
- Estimated costs for new or planned projects may rise by up to 7% due to the loss of exemptions.
- Ohio lost $1.6 billion in tax revenue, exceeding the projected $136 million.
- Nine states are considering halting their exemptions, and 28 have introduced bills to limit their effects.
- The move affects US firms trying to expand AI compute capacity by building more data centers.
The US data center industry is facing a significant shift as multiple states repeal or enact moratoriums on sales tax exemptions for data centers. This move is expected to increase costs for new or planned projects by up to 7%. The exemptions previously allowed data centers to be equipped without paying sales tax, but states are now reevaluating their tax policies.
Ohio was the first to repeal its tax exemptions in June 2026, followed by Illinois and Arizona in July. The estimated lost tax revenue in Ohio is $1.6 billion, far exceeding the projected $136 million. This has sparked other states to reconsider their exemptions, with nine considering halting them and 28 introducing bills to limit their effects.
The impact of this move will be felt by US firms trying to expand AI compute capacity by building more data centers. The increased costs may deter investment in the sector, potentially slowing down the growth of AI technology in the US.
Sources
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