Florida Introduces New Sales Tax Exemption Rules for Data Centers

Florida, August 21, 2025

News Summary

The Florida Legislature has approved HB 7031, establishing new sales tax exemption rules for data centers. Effective August 1, data centers must have an IT load of 100 MW or more to qualify for tax exemptions. This shift significantly impacts smaller facilities, likely increasing costs and complicating lease terms. Moving forward, owners of sub-100 MW data centers will face compliance challenges, including potential audits and back taxes. The legislative change aims to attract larger data center projects while leaving smaller ones to grapple with unfavorable market conditions.

Florida New Sales Tax Rules for Data Centers Effective August 2025

The Florida Legislature has recently approved HB 7031, a significant tax reform package that will take effect on August 1, 2025. Under the new legislation, only data centers with an IT load of 100 megawatts (MW) or greater will be eligible for sales tax exemptions. This change is expected to have a profound impact on existing sub-100 MW data center owners, tenants, and developers throughout the state.

Currently, data centers benefit from a sales tax exemption on purchases of construction materials, equipment, servers, software, and electricity. This tax exemption helps to reduce operational costs significantly. However, under the new law, facilities that do not meet the threshold of 100 MW will lose access to this exemption entirely.

Additionally, the new rules will not feature a grandfather clause for existing sub-100 MW data centers, meaning that those who fall below the threshold after the effective date will no longer receive the benefits that come with the exemption. Existing data center owners must also undergo a review process every five years to maintain their eligibility if they wish to continue benefitting from any tax exemptions.

Implications for Existing Facilities

The loss of sales tax exemptions is likely to lead to increased direct costs for mid-sized data centers. This could have a knock-on effect on construction budgets and lease agreements, as landlords may struggle to retain current tenants or attract new ones. The inability to purchase materials tax-free will particularly hinder contractors working on related construction projects.

The new legislation also raises concerns over the competitive landscape for Florida data centers. Facilities operating under the 100 MW threshold may find it challenging to compete with states that offer more inclusive incentives. With the Florida legislature aiming to attract more mega-scale data center projects, this shift is seen as a resource allocation strategy designed to boost infrastructure, job creation, and long-term investments.

It should be noted that once the new rules are in effect, landlords and tenants will be liable for back taxes, penalties, and interest on previous tax-free purchases if they fail a sales tax audit after losing their eligibility. This could undermine the financial viability of many smaller data centers, particularly those already operating with tight budgets.

Future Prospects

Amid potential backlash from the data center community, there may be efforts to delay the enforcement of these new rules. This would allow stakeholders time to address concerns and lobby for amendments to the legislation. The imminent repeal of Florida’s sales tax on commercial leases has raised questions about the timing and fairness of eliminating the data center exemption.

Overall, the adjustments in sales tax exemptions signal a definitive shift in Florida’s approach to its data center industry. Key decisions made by legislators now may shape the competitive landscape for years to come, as larger facilities are prioritized, possibly stunting the growth of smaller operations.

Key Features of the New Tax Changes

Key Feature	Description
Eligibility Requirement	Only data centers with an IT load of 100 MW or more qualify for sales tax exemption.
Exemption Loss	Data centers with an IT load under 100 MW will lose access to sales tax exemption entirely.
Review Process	Owners must undergo a review process every five years to maintain exemption eligibility.
Competitive Implications	Loss of exemption could weaken the competitive edge of smaller data centers against other states.
Increased Costs	Higher direct costs for mid-sized facilities could affect budgeting and leasing agreements.
Potential Delays	Possible legislative attempts to postpone enforcement of new rules for further discussion.

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Additional Resources

• Keat Tax: Florida Ends Sales Tax Exemption for Data Centers under 100 MW
• National Law Review: Florida Legislature Passes Bill to End Sales Tax Exemption for Sub-100 MW Data Centers
• The Center Square: Florida to End Sales Tax Exemption for Data Centers
• Encyclopedia Britannica: Sales Tax
• Google Search: Data Centers Sales Tax