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.