Senate Bill Report SB 6642
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2020-02-04
- Case
- 2020 02 04 A26451 D212853 Bill Report 6642 Sba Fiet 20
Summary
A Washington Senate Bill Report on SB 6642, an act relating to providing a tax preference for rural and nonrural data centers, prepared for the Senate Committee on Financial Institutions, Economic Development & Trade as of February 2, 2020. The report lists committee activity on 2/04/20. Its background section describes the retail sales and use tax and the existing sales and use tax exemption for eligible data centers in rural counties, including building permit windows and hiring requirements. The bill summary states that the bill authorizes a sales and use tax exemption for eligible server equipment, power infrastructure, and related labor and services for qualifying businesses and tenants in nonrural counties. It also sets out a Tax Preference Performance Statement tied to a JLARC review and states the bill takes effect ninety days after adjournment.
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Full text
SENATE BILL REPORT
SB 6642
As of February 2, 2020
Title: An act relating to providing a tax preference for rural and nonrural data centers.
Brief Description: Providing a tax preference for rural and nonrural data centers.
Sponsors: Senators Zeiger, O'Ban, Becker and Darneille.
Brief History:
Committee Activity: Financial Institutions, Economic Development & Trade: 2/04/20.
Brief Summary of Bill
Authorizes a sales and use tax exemption for the purchase of eligible
server equipment, and related labor and services, for eligible data centers
in nonrural counties.
Extends the current sales and use tax exemption for rural county data
centers.
SENATE COMMITTEE ON FINANCIAL INSTITUTIONS, ECONOMIC
DEVELOPMENT & TRADE
Staff: Clint McCarthy (786-7319)
Background: Retail Sales and Use Tax. Retail sales taxes are imposed on retail sales of
most articles of tangible personal property, digital products, and some services. A retail sale
is a sale to the final consumer or end user of the property, digital product, or service. If retail
sales taxes were not collected when the user acquired the property, digital products, or
services, then use tax applies to the value of property, digital product, or service when used in
this state. The state, all counties, and all cities levy retail sales and use taxes. The state sales
and use tax rate is 6.5 percent; local sales and use tax rates vary from 0.5 percent to 3.9
percent, depending on the location.
Data Centers Tax Preference. The owner of an eligible data center with a combined square
footage of at least 100,000 square feet, and the tenants of an eligible data center located in a
rural county, may be eligible for a sales and use tax exemption. A rural county is defined as a
county with a population density of less than 100 persons per square mile or counties smaller
––––––––––––––––––––––
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not a part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 6642
than 225,000 square miles as of April 1, 2018. There are currently 30 counties meeting the
rural county definition.
To qualify, the data center must have a building permit to construct, renovate, or expand the
data center issued between:
April 1, 2010 and June 30, 2011;
April 1, 2012 and June 30, 2015; or
July 1, 2015 and June 30, 2025.
Only 12 data centers that begin construction on or after July 1, 2015, but before July 1, 2025,
can be approved for the exemption. Of the 12, only eight centers can be approved that begin
construction on or after July 1, 2015, but before July 1, 2019.
The sales and use tax exemption is available for purchases of eligible server equipment and
labor and services to install server equipment in an eligible data center. A sales and use tax
exemption is allowed for purchases of eligible power infrastructure and the labor and
services to construct, install, repair, alter, or improve eligible power infrastructure.
A "computer data center" means a facility with one or more buildings, which may be
comprised of multiple businesses, constructed or refurbished specifically, and used primarily,
to house working servers, where the facility has:
uninterruptible power supplies, generator backup power, or both;
sophisticated fire suppression and prevention systems; and
enhanced physical security.
The exemption is available on a first-in-time basis based on the date the application for the
sales and use tax exemption is received by the Department of Revenue. Exemption
certificates expire two years after the date of issuance, unless construction of the data center
has begun.
An eligible taxpayer must file an annual tax performance report by May 31st of the year
following the year the applicant becomes eligible to claim the sales and use tax exemption.
There are hiring requirements for recipients of the sales and use tax exemption. Within six
years of the issue date on the sales and use tax exemption certificate, the qualifying data
center must establish that net employment has increased by a minimum of 35 family-wage
employment positions or three family-wage employment positions for each 20,000 square
feet of space or less that is newly dedicated to housing working servers at the eligible
computer data center.
Tax Preference Performance Statement. State law provides for a range of tax preferences that
confer reduced tax liability upon a designated class of taxpayer. Tax preferences include tax
exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits. Washington
has over 650 tax preferences, including a variety of sales and use tax exemptions.
Legislation establishing or expanding a tax preference must include a Tax Preference
Performance Statement (TPPS) identifying the public policy objective of the preference, as
well as specific metrics the Joint Legislative Audit and Review Committee (JLARC) can use
Senate Bill Report -2- SB 6642
to evaluate the effectiveness of the preference. All new tax preferences automatically expire
after ten years, unless an alternative expiration date is provided.
Summary of Bill: Nonrural County Data Centers. A sales and use tax exemption is
authorized for sales to qualifying businesses and to qualifying tenants of eligible server
equipment to be installed, without intervening use, in an eligible computer data center. The
sales and use tax exemption also applies to the labor and services charges related to the
installation of eligible server equipment.
A sales and use tax exemption is authorized for sales to qualifying businesses and tenants of
eligible power infrastructure and labor, and services rendered related to construction,
installation, repair, alteration, or improvement to eligible power infrastructure.
A qualifying business must be in a nonrural county, demonstrate it possesses sufficient
capacity to meet the minimum tenant take down requirement no less than ten times and in the
12 months prior to applying, and must be in the business of servicing this scale and type of
data center tenant.
The exemption is limited to qualifying businesses or tenants in more than eight computer
data centers.
This exemption is subject to the automatic 10 year exemption.
Tax Preference Performance Statement. It is the specific public policy objective of the tax
exemption to improve industry competitiveness and retain or create jobs in computer data
centers. The Legislature intends to extend the expiration date of the tax preference if the
JLARC review finds the amount of electrical capacity deployed attributable to these projects
increased by at least 10 percent over the capacity deployed in the nonrural data centers in
Washington since 2016, or if the county tax base increased as the result of the construction,
leasing, or other investment of eligible computer data centers.
Appropriation: None.
Fiscal Note: Not requested.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
Senate Bill Report -3- SB 6642
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- app.leg.wa.gov