Florida: HB 7031 Eliminates Sales Tax Exemption for Data Centers Under 100 Megawatts

On July 1, 2017, Florida enacted a data center sales tax exemption (“the exemption”) to attract data center investment to the state. The exemption is a state-level incentive that offers data centers significant sales tax relief on qualifying purchases such as construction material, equipment, computers, servers, software, and electricity used at the data center.

Prior to June 30, 2025, a data center must have invested $150 million within five years of construction start and have a critical IT load of at least 15 megawatts (MW), with at least 1 MW per tenant for colocations to qualify for the exemption. In addition, the data center must have been constructed after July 1, 2017.

Update to Florida Data Center Sales Tax Exemption

On June 30, 2025, the Florida Legislature passed HB 7031, a tax reform package that significantly affects the data center sales tax exemption in Florida. Starting August 1, 2025, data centers with less than 100 MW of IT load will no longer qualify for the existing sales tax exemptions. The Legislature passed this change to redirect state benefits toward larger-scale data center projects. They expect the change will reshape Florida’s competitiveness in the data center sector.

The change has immediate implications for both current and planned facilities under 100 MW. It can potentially increase capital and operational costs for developers, owners, and tenants.

Key Changes

• Elimination of Sales Tax Exemption for Sub-100 MW Data Centers

  • Effective August 1, 2025, purchases of equipment, electricity, and construction materials by data centers under 100 MW will become taxable.

  • Applies to both existing and future facilities.

  • The law does not contain a grandfather clause. The exemption is lost for all projects, regardless of prior certification.

• New Qualification Threshold

  • Only data centers with IT loads of 100 MW or greater will continue to receive the sales tax exemption.

• Retroactive Tax Risk

  • Audits may assess taxes on purchases made after the effective date. Data centers, tenants, or contractors who purchased items tax free may be required to repay.

• Potential Lease and Construction Impact

  • Developers and contractors may face unexpected cost increases and contract renegotiations.

  • Tenants could violate lease terms if their agreements assumed ongoing tax exemptions, which are no longer available for data centers under 100 MW.

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals.