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PA tax exemption could save data center operators and tenants as much as 8 percent

Posted by ebartlett in PA, Tax Incentives | 0 comments

14.07.15

Pennsylvania is offering tax breaks to data centers, with a view to getting more business in the state. With paired bills moving through the Pennsylvania House of Representatives (Bill 1120) and State Senate (Bill 798) legislators in PA look to make the state as attractive to potential data center construction or expansion as neighboring states, many of which already offer similar tax advantages to data center operations.

If approved the exemption would make data center operators and tenants who meet the investment levels exempt from state and local sales tax on the equipment and software necessary to run a data center and operate an IT organization within. The investment required is a minimum of $25 million in a county with a population under 250,000, and $50 million in a county with a population over 250,000, plus a guaranteed annual payroll of at least $1 million regardless of investment size.

Pennsylvania effectively has a three-tiered state sales tax system. The overall state tax is 6 percent. Certain municipalities considered cities of the second class (population based) have an additional local tax of 1 percent, while cities of the first class (only Philadelphia) have an additional 2 percent added. The bills explicitly exempt qualified applicants from both state and local taxes, which may raise a bit of a ruckus with Philadelphia, which tends to oppose the state on anything that can potentially cost the city money. Both bills, however, have made it through committee unopposed and are currently being considered by the full House and Senate. If approved, the tax relief would go into effect immediately and be valid through 2029.