Competition for business is taking place all over the U.S. in the form of tax incentives. Many states are offering highly profitable tax breaks to attract data centers to set up shop within their borders.

The Associated Press analyzed both state revenue and economic development records and found that nearly $1.5 billion in tax incentives had been extended to data center projects all over the country during the past decade.

These incentives typically involve the waiving of sales or property taxes on the expensive equipment that data centers require. South Carolina and Georgia are two states that go the extra mile to solicit the economic benefits that data centers represent. 

South Carolina Data Centers

In 2009, South Carolina established a data center incentive that allowed a 100% exemption of sales tax on computer equipment intended for use in the data center. In 2012, three more enhancements were made that favored SC data centers:

• Lowering minimum number of jobs created from 100 to 25
• Reducing capital investment requirements from $300 million to $50 million
• Supporting the exemption of sales taxes on data center electricity consumption

Over eight years ago, Google selected South Carolina as a data center site, and during that time the facility has doubled in size. Google has confirmed that it intends to invest $1.2 billion in its state data centers.

Georgia Data Centers

In 2005, Georgia became one of the first states to offer a data center incentive. It enacted a program that granted a 100% sales tax exemption on computer equipment acquisitions of $15 million or more in a single year. In 2012, the exemption grew to include sales taxes on construction materials.

This wider exemption, along with an abundance of inexpensive electricity and fiber-optic networks and a geography comparatively free of natural disasters, has made Atlanta, in particular, a leading destination for data center startups.

Last July Google announced that it would be expanding its data center in Atlanta by an extra 500,000 square feet, creating at least 25 new local jobs and making gigabit-speed Internet access available in the area.

Relevant Resources

• South Carolina Passes Data Center Incentives
• Luring Data Centers to Georgia
• State-by-state look at incentives for computer data centers

The Bottom Line

Not all states offer incentives like those enjoyed by GA and SC data centers, but the trend is gradually changing. There is a growing understanding that with data centers come a highly skilled workforce, an infrastructure for other companies to build on, and a host of other important economic benefits.

Does your state offer any incentives to encourage data center startups?  Let us know your thoughts in the Comments box below.

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