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 Introduces New Sales Tax Exemption Rules for Data Centers

The Florida Legislature has taken significant steps in re-evaluating its tax policy for data centers. Under the new House Bill 7031, effective August 1, 2025, only data centers with an IT load of 100 megawatts (MW) or more will qualify for the state’s sales tax exemption. This adjustment marks a shift that could have serious implications for smaller data center operations across the state.

Impact on Sub-100 MW Data Centers

Data centers with an IT load under 100 MW will lose their access to the sales tax exemption entirely. This change is particularly concerning for existing sub-100 MW data center owners, tenants, and developers, as it eliminates their ability to purchase essential construction materials, equipment, servers, software, and electricity without incurring state sales tax charges. The financial ramifications are likely to be felt immediately, as these exemptions play a critical role in keeping operational costs low.

Under the new guidelines, facilities that fall below the 100 MW threshold may find themselves in a less competitive position compared to other states that maintain broader tax incentives for data centers. As a result, the move could potentially discourage investments in Florida’s data center sector, undermining its capacity to attract both new businesses and job opportunities.

New Review Process and Its Implications

The legislation introduces a new review process set to occur every five years for owners of sub-100 MW data centers aiming to retain their sales tax exemption. However, following the effective date, these centers will not meet the necessary criteria, effectively leaving them with no exemption and increasing their tax burden.

The loss of the sales tax exemption will specifically impact ongoing purchases of electricity for these data centers. This change could affect landlords’ abilities to retain existing tenants and attract new ones, as the cost of operating sub-100 MW data centers will likely rise without the tax relief previously enjoyed. Moreover, construction contractors tied to such facilities may encounter higher expenses, lacking the benefit of tax-free purchasing following the law’s enactment.

Renegotiation of Contracts and Lease Agreements

As a consequence of these impending changes, existing contracts, and lease agreements may need to be revisited to address the new tax implications. Owners, tenants, and contractors will face critical discussions about how to adequately handle their increased operational costs in light of the removal of the sales tax exemption.

Legislative Intent and Future Considerations

The Florida legislature has emphasized its intention to attract mega-scale data center projects through these policy adjustments. The decision reflects a strategic shift towards larger data center operators, whom the state believes will offer greater benefits regarding infrastructure, job creation, and long-term investments.

Notably, there is no grandfather clause included in the amendment, meaning that existing sub-100 MW data centers will not be protected and must comply with the new rules immediately upon their implementation.

Lurking beneath the surface of these regulatory changes lies a potential pushback as stakeholders begin to voice concerns. In the event that issues persist, there may be attempts to delay the enforcement of this new legislation until further legislative action can be taken in the upcoming year.

Conclusion

With this new policy, Florida is attempting to reshape its data center landscape, potentially at the consequence of smaller operations. Whether this approach results in the anticipated influx of mega-scale data centers or stifles the growth of existing facilities remains to be seen.

FAQs

Key Features of the New Legislation

Feature	Description
Effective Date	August 1, 2025
Eligibility	Data centers with an IT load of 100 MW or more
Exemption Loss	Sub-100 MW data centers will lose sales tax exemption entirely
Review Process	Sub-100 MW centers must undergo a review every five years
Impact	Increased costs for existing businesses and potential loss of competitiveness

Deeper Dive: News & Info About This Topic

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