Cologix Qualified for Data Center Tax Break in Minnesota

Provider and customers can get tax exemption on equipment, power, and software purchases

Data Center Knowledge

January 27, 2015

2 Min Read
Cologix Qualified for Data Center Tax Break in Minnesota
A row of equipment at a Cologix data center.

New 28,000 square foot MIN3 data center of the colocation provider Cologix has qualified for Minnesota’s sales tax incentive program. The data center provider and its customers stand to benefit from tax rebates.

Minnesota is one of the states with more aggressive data center tax breaks. To qualify for the incentives, the requirements are a facility of 25,000 square feet or more and a commitment to investing $30 million in the first four years. The exemption is from sales tax on IT gear, cooling and power equipment, energy use, and software for 20 years.

The state does not tax anyone for personal property, utilities, and Internet access, among other services.

The Department of Employment and Economic Development’s sales tax program recently lowered the threshold to qualify. Compass Data Centers, a wholesale data center provider that focuses on second-tier data center markets, also recently qualified for the DEED tax break. Compass leases its Minnesota data center to CenturyLink.

Minnesota’s data center market has been burgeoning over the past few years. Players besides Compass and Cologix include Stream Data Centers, ViaWest, DataBank, and its planned 20 megawatt data center, Digital Realty, OneNeck IT, and Zayo’s zColo.

Many enterprises in emerging markets like Minnesota are looking to outsource data center infrastructure to colocation providers. The trend has spurred the birth of several new colocation players.

The benefits of colocation include shedding the cost of building and operating companies' own facilities or server closets, leveraging economies of scale, having top-notch floor space and features, and sharing the cost of enterprise-grade security and other capabilities.

In a statement, Mike Hemphill, Minnesota general manager at Cologix, said the data center tax break is further incentive to leverage colocation. These customers regularly spend $50,000 to $100,000 per cabinet to replace legacy equipment.

The qualifying Cologix data center is located in downtown Minneapolis, in one of the state’s most connected building, a carrier hotel known as the 511 Building. The company recently expanded within the building. Cologix acquired the Minnesota Gateway, located in the carrier hotel in 2012. It operates the Meet-Me room in the building.

“Minnesota enterprises are increasingly responding to the benefits of the colocation model to support their IT needs, especially where data centers are close to home, highly connected and highly redundant. We designed our new data center with these customers in mind,” Hemphill said.

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