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Yahoo Rethinking Expansion in Quincy

Yahoo may be reconsidering additional expansion in Quincy, Wash. after a state ruling that bars data centers from using a tax break for manufacturers.

Yahoo is rethinking additional expansion in Quincy, the new data center hub in central Washington. On Dec, 3 Yahoo held a grand opening for its new 140,000 square foot facility in Quincy, which has attracted multiple data center projects with its abundant supply of cheap power from dams on the Columbia River. As the company showed off its new facility, Yahoo executives warned that its plans for additional expansion at the site are unclear after Washington State attorney general Rob McKenna ruled that data centers were not covered by a state tax break.

McKenna ruled that data centers don't qualify as manufacturing enterprises, and thus must pay a 7.9 percent tax on data center construction and equipment. McKenna found that data centers "do not produce a product which is sold to the companies' customers or used by the Internet companies as consumers or in manufacturing articles, substances or commodities," the attorney general said in the letter to State Sen. Janea Holmquist.

"We're extremely concerned," Yahoo senior VP Laurence Mann said of the potential impact on Yahoo operations in the region. "It flips the economic picture."

Yahoo vice president of operations Kevin Timmons expressed a similar sentiment in an interview with the Columbia Basin Herald:

"We're slightly concerned about our ability to expand our operations here and to continue to invest in Washington as a whole," he said. "Some of the promise of investing in the rural area, as it was kind of relayed to us when we embarked on this journey, is not necessarily coming through. ... We're having a difficult time making those a reality. We're working closely with state officials to try to make sure it's continually viable for us to continue to expand here; that is a concern."

Holmquist, who represents Moses Lake (where is building a data center) says she will sponsor legislation to reverse the AG's ruling and preserve the manufacturing tax breaks that were apparently invoked in the data center site location decisions for Yahoo and other major companies who have announced projects in the Quincy area.