Florida Introduces New Sales Tax Exemption Rules for Data Centers

Florida, August 21, 2025

News Summary

The Florida Legislature has approved HB 7031, establishing new sales tax exemption rules for data centers. Effective August 1, data centers must have an IT load of 100 MW or more to qualify for tax exemptions. This shift significantly impacts smaller facilities, likely increasing costs and complicating lease terms. Moving forward, owners of sub-100 MW data centers will face compliance challenges, including potential audits and back taxes. The legislative change aims to attract larger data center projects while leaving smaller ones to grapple with unfavorable market conditions.

Florida to Change Sales Tax Exemption Rules for Data Centers in 2025

The Florida Legislature recently approved a significant amendment to the state’s sales tax exemption rules concerning data centers, a sector that has seen explosive growth in recent years. Under the newly passed tax reform package known as HB 7031, only data centers with an IT load of 100 megawatts (MW) or more will qualify for sales tax exemption starting August 1, 2025. This decision will bring about notable changes for many operators and developers in Florida’s data center market.

Details of the New Tax Law

The current sales tax exemption allows data centers to purchase essential items such as construction materials, servers, software, equipment, and electricity without incurring state sales tax. However, as of the effective date, data centers with an IT load below 100 MW will completely lose access to this beneficial exemption. This shift is expected to wield profound effects on existing owners, tenants, and developers who run facilities under the 100 MW threshold.

Impact on Mid-Sized Facilities

The amendment poses a challenge for data center operators who may find themselves at a disadvantage. Facilities operating with an IT load of less than 100 MW are likely to experience inflated costs as they will no longer enjoy the tax benefits previously available. This scenario could impact their construction budgets and lead to renegotiations in lease agreements, causing financial strain for both operators and their tenants.

Landlords may find it increasingly difficult to attract new tenants or retain current ones as higher operational costs start taking a toll. The loss of the sales tax exemption may erode the competitive edge of Florida’s mid-sized data centers, particularly when compared to states that continue to offer more inclusive tax incentives. In time, this may lead to a shift in business operations toward states with more favorable conditions.

Legislative Intent and Strategic Focus

The Florida legislature’s strategy appears centered around luring large-scale data center projects to the state. By tightening the sales tax exemption criteria, lawmakers express a focused attempt to allocate resources and support toward mega-scale operators. They believe larger data centers can foster improved infrastructure, job growth, and more sustainable long-term investments within the state’s economy.

Five-Year Review Process and Compliance Risks

Owners of data centers under the new 100 MW threshold will be compelled to undergo a review process every five years if they wish to maintain any existing sales tax exemptions. However, if their IT load stays below 100 MW post-implementation, they will not qualify for the exemption. This change brings about significant compliance risks, as failure to adhere to the new regulations may result in liability for back taxes, interest, and penalties on previously tax-free purchases.

Potential for Future Adjustments

The amendment came forth just before the passage of the broader tax reform package on June 16, 2025. While there are no grandfather clauses protecting existing sub-100 MW data centers, there may be opportunities for legislative adjustments in the future. If widespread concerns arise regarding the anticipated adverse effects on smaller facilities, lawmakers may explore options to delay enforcement of the new rules until further evaluations can be conducted next year.

The Bigger Picture: Commercial Lease Tax Repeal

Despite the tightening of sales tax exemptions for smaller data centers, the Florida legislature did repeal the sales tax on commercial leases. This action might be perceived as a rationale for modifying or eliminating the data center sales tax exemption. Overall, business owners and tenants in the data center market will need to brace for these upcoming changes and reassess their operational strategies.

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Frequently Asked Questions (FAQ)

Key Features of the New Tax Exemption Rules

Feature	Details
Effective Date	August 1, 2025
New Exemption Criteria	Only data centers with IT load of 100 MW or more qualify
Impacted Entities	Existing sub-100 MW data centers, tenants, developers
Review Requirement	Every five years for data centers wishing to maintain exemption
Sales Tax Audit Risks	Back taxes, penalties, and interest for non-compliance
Commercial Lease Tax Status	Sales tax on commercial leases has been repealed

Deeper Dive: News & Info About This Topic

Additional Resources

• Keat Tax: Florida Ends Sales Tax Exemption for Data Centers under 100 MW
• National Law Review: Florida Legislature Passes Bill to End Sales Tax Exemption for Sub-100 MW Data Centers
• The Center Square: Florida to End Sales Tax Exemption for Data Centers
• Encyclopedia Britannica: Sales Tax
• Google Search: Data Centers Sales Tax