Bid to Extend Washington State Tax Break Fails

A bill in Washington state that would have extended a key sales tax exemption for data center construction has died, meaning the tax break will expire at the end of this month. The bill passed the Senate 41-1 and moved out of the House Ways Committee via a unanimous vote, but never came up for a vote in the House.

In March 2010 the Washington legislature passed a targeted tax break to allow a temporary sales tax exemption on the purchase and installation of computers and energy for new data centers in 32 rural counties. To qualify for the incentives, companies must commence construction by July 1, 2011.

Microsoft and Yahoo took advantage of the temporary incentive, building new phases on their respective facilities in the data center hub of Quincy, Washington. The projects each featured cutting-edge designs – featuring Microsoft’s modular approach and Yahoo’s “Computing Coop” – that make Quincy home to two of the world’s most efficient data centers.

Meanwhile, Sabey Corp. and Dell have each begun construction on new projects in Quincy, ensuring that they will qualify for the tax incentive.

But what about future projects?  It looks like they will need to pay a 7.9 percent tax on data center construction and equipment.

What’s less clear is why the bill never advanced in the house. Pat Boss, the Port of Quincy’s government affairs director, told the Columbia Basin Herald that “House leadership apparently decided they didn’t want it to come up for a vote.” Boss said many believed the bill would have passed had it been brought up for a vote in House.

The tax issue dates back to 2007, when the state of Washington said Yahoo was not eligible for  a state sales tax break for manufacturing enterprises in rural counties, and thus must pay a 7.9 percent tax on data center construction and equipment.  The state ruled that data centers did not qualify for the breaks, which are targeted for manufacturing facilities.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. If anything I suspect (and honestly hope) this will seriously hurt Rob McKenna's ambitions to be Washington's next Governor. This whole thing started with him, and killing a nascent growth industry in rural eastern counties is not a wise move for a politically ambitious Republican. Washington is tough enough on business as it is with punitive revenue and B&O taxes on top of a high sales tax. Even the "conservatives" in Olympia are damaging business, which is sad because the Pacific Northwest truly is the ideal location for this industry. Oregon seems to be wising up, while British Columbia is obviously missing the whole plot.

  2. One of the issues here is whether the failure to extend the tax breaks will prompt data center projects considering Washington to shift their focus to Oregon, which as we recently noted, has gained momentum from the publicity around the opening of the Facebook facility.

  3. Scott Simmons

    Rich and DCN is right about Oregon. Washington's loss is just adding to the gains that Oregon was already seeing based on their own favorable DC sighting merits. More to report on that front soon I'm quite sure.

  4. Jim Hampson

    Sabey provides data centers for large software companies generating jobs and clean industry in EA WA. They loose their tax breaks. Seattle developers building 1 bedroom apartments on Queen Anne Hill gets 12 tax break. The political leadership in this city and state will drive good economic growth and prosperity away in order to secure political power and benefits for themselves. Socialism at its best...