Washington State Incentive Bill Advances

quincy-aerial

An aerial view of Quincy, Washington showing the cluster of major data centers, including a visualization of a planned site for Sabey Corp. and existing sites for Microsoft, Yahoo and Intuit. A bill would extend the tax breaks in Washington state that helped develop the Quincy cluster. (Image: Sabey Corp.).

A bill in Washington state extending a sales tax exemption deadline to spur data center construction passed with a 41-1 vote in the Senate this week, and now goes to the house. If it is approved, data centers have until April 1, 2021, to take advantage of the sales tax exemption. The original incentive is scheduled to expire on July 1.

The measure’s backers are hoping for an extension, citing the level of development activity since the passage of the incentives. Microsoft, Yahoo, and Sabey have all announced new phases of data center construction, while Dell has outlined plans for a large facility in Quincy.

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.

Dave Johnson, executive secretary of the Washington State Building and Construction Trades Council, told the Columbia Basin Herald that he bill is an important one for the construction industry, based on the activity generated by the original, one-year tax exemption.

"From last year's bill, we've seen over 200,000 work hours put into data center projects and our understanding is, there's other major data center facilities that would like to move into the area if the tax exemption were extended," Johnson said.

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.