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 narrows data center sales tax exemption to facilities with at least 100 MW starting Aug. 1, 2025
The Florida Legislature approved a wide tax reform bill that changes how the state treats data center projects for sales tax purposes. Under the new law, known as HB 7031, only data centers with an IT load of 100 megawatts (MW) or more will be eligible for the state’s sales tax exemption, effective August 1, 2025. Data centers with an IT load under 100 MW will no longer qualify.
What the exemption covered and what will change
Until this change, the exemption allowed qualifying data centers to buy construction materials, equipment, servers, software and electricity without paying state sales tax. With the new threshold, mid-sized and smaller facilities that previously benefited will face new costs. The change applies to purchases made on or after August 1, 2025.
Immediate impacts to owners, tenants, developers and contractors
The most direct effect will be higher operating and construction costs for facilities under 100 MW. Builders and contractors who supplied materials and equipment tax-free will lose that advantage, pushing up project budgets. Landlords and developers who compete for tenants could lose bargaining power, and existing lease deals may need renegotiation to reflect higher costs. Ongoing electricity purchases for affected data centers will also become taxable at the state level after the date takes effect.
Financial and legal risks for existing projects
The amendment contains no grandfather clause for existing sub-100 MW data centers. Owners and tenants who stop qualifying may face sales tax audits that could trigger assessments of back taxes plus interest and penalties for prior tax-free purchases. In short, losing the exemption could mean unexpected cash liabilities and legal headaches.
Review rule and enforcement timing
The law keeps a rule that requires owners of sub-100 MW data centers to undergo a review process every five years to maintain eligibility. However, after the effective date, facilities that measure under the new 100 MW threshold will not meet the criteria and thus will fail that review. There is some expectation that stakeholders might seek a delay in enforcement or legislative fixes next year, but the law as passed sets the August 1, 2025 start date.
Policy goals and wider effects
Lawmakers intended this change to steer incentives toward very large, or “mega-scale,” data center investments. The shift is framed as a way to concentrate state support where it believes infrastructure, job creation and long-term investment will be largest. Critics point out that mid-sized facilities could lose competitiveness, especially compared to states that keep more inclusive data center incentives.
Context and related tax moves
The amendment to the data center exemption was finalized shortly before the larger tax bill passed on June 16, 2025. Separately, the state has repealed sales tax on commercial leases, a move some say supports the logic for tightening the data center exemption. Even so, the change reduces a commonly used perk — tax-free purchases for construction and equipment — that many data center projects depended on.
What owners and developers should do now
- Review LED and IT load calculations to confirm current and projected MW levels.
- Revisit construction and operational budgets to account for sales tax on purchases and electricity.
- Consult tax and legal advisors about possible audit exposure and risk management for past purchases.
- Renegotiate leases and contracts where necessary, and update future leasing packages to reflect changed incentives.
- Monitor legislative activity in case enforcement is delayed or the rule is modified next session.
Timing and next steps for affected parties
The new rule takes effect August 1, 2025. Developers, owners and tenants should act now: update financial models, talk with lenders and adjust negotiations with contractors and tenants. Contractors should plan for higher equipment and material costs when bidding on projects that will continue past the effective date.
FAQ
Who will qualify for the sales tax exemption after August 1, 2025?
Only data centers with an IT load of 100 MW or more will qualify for the exemption after that date.
What purchases were covered by the exemption?
The exemption applied to construction materials, equipment, servers, software and electricity used by qualifying data centers.
Does the change affect existing projects?
Yes. There is no grandfather clause. Existing sub-100 MW data centers will lose the exemption and may face back taxes and penalties if audited.
What must owners of sub-100 MW centers do now?
Owners should recalculate budgets, review lease and purchase contracts, seek tax advice, and plan for higher costs on future purchases and electricity bills.
Can enforcement be delayed?
Stakeholders may try to delay enforcement or seek legislative fixes next year, but the law as passed lists August 1, 2025 as the effective date.
How often must eligible facilities be reviewed?
Owners of facilities subject to review must undergo a review every five years to maintain eligibility; however, facilities below 100 MW will not meet the new criteria after the effective date.
Key features at a glance
| Feature | Detail |
|---|---|
| Law | HB 7031 (tax reform package) |
| Effective date | August 1, 2025 |
| Eligibility threshold | IT load of 100 MW or more |
| Items covered by exemption (previously) | Construction materials, equipment, servers, software, electricity |
| Grandfathering | No grandfather clause for existing sub-100 MW centers |
| Review | Owners must undergo review every five years; sub-100 MW will fail under new rules |
| Audit risk | Potential back taxes, penalties and interest for prior tax-free purchases if eligibility is lost |
| Policy aim | Attract mega-scale data center projects and focus incentives on larger operators |
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
