WA data centers lose tax exemptions starting July 1: What to know

As of Wednesday, Washington data centers no longer qualify for tax exemptions on equipment repairs and refurbishment, including on labor-related costs.

Previously, data centers in the state could qualify for tax exemption certificates covering the purchase and installation of server equipment and power infrastructure. A June 2022 state law had expanded eligibility to include data centers in urban counties.

Now, rural and non-rural data centers, including those which previously had qualified for tax exemptions, are not able to receive or renew those benefits under S.B. 6231, a new law which took effect last month.

This means data centers will be required to pay the state's 6.5% sales tax on structural replacements and repairs, including the labor costs associated with these installations.

Sponsored by Senators Noel Frame, D-Seattle, and Bob Hasegawa, D-Tukwila, the law aims to remove these tax exemptions to help block private interests from leveraging tax benefits, supporters say.

Supporters also said that while tax exemptions were implemented to foster job growth, the outcomes have not justified data centers' electricity usage.

Washington currently waives the sales tax on replacement server equipment and qualifying data centers, which was intended to attract investment in jobs, particularly in rural communities," said Sheri Sawyer, legislative affairs director in the Washington State Office of Financial Management, in a Senate committee hearing. "However, over time, data centers became major users of electricity and created fewer permanent jobs than originally anticipated.

Opponents, including Senator Chris Gildon, R-Puyallup, said that this legislation could stunt economic growth.

"I think it's very shortsighted to do away with this particular tax preference because it is obviously working," Gildon said in a February Senate committee hearing. "It is going to put our state in a competitive disadvantage to other states, particularly Oregon, which is our neighbor."

Before Oregon passed a one-year moratorium on data center tax breaks in March, qualifying facilities in the state were 100% exempt from property taxes, including replacements and repairs to equipment and infrastructure. The new Washington law will prevent the state's over 100 data centers from qualifying for tax exemption benefits.

Unionized electrical workers also expressed concerns about the new policy, saying removal of these exemptions might spur renegotiation around electricians' existing contracts with data centers.

Amid Washington's push to adopt a carbon-free power grid by 2045, Big Tech companies like Microsoft have also doubled down on lobbying this past legislative session.

Lobbyists have targeted legislation on data centers, for instance another bill which proposes tariffs on these facilities, imposes higher electricity rates and institutes a flat fee which would benefit low-income bill assistance; weatherization projects; and artificial intelligence education programs.

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This story was originally published July 1, 2026 at 4:50 PM.