A data center user with 1MW of critical power provisioned to a 10,000 sq ft data hall can save as much as US$3.2m in tax dollars in Ohio because of the tax code amendments the state's legislature made last September, according to an estimate by ByteGrid, a data center provider and owner of a massive data center campus called the Cleveland Technology Center.

ByteGrid publicized the estimate to bring attention to the newly expanded tax breaks for data centers it took part in lobbying for. The company said tax-code changes were tied to its acquisition of the technology center in June 2013.

Tax breaks have become a popular economic development tool for state and local governments as they compete to attract data center development dollars as well as high-tech jobs and infrastructure for high-tech businesses that come along with data centers.

The key changes were lowering of the minimum-investment threshold for a data center project to qualify for the tax exemptions from $150m to $100m and a reduction in minimum annual payroll requirement from $5m to $1.5m.

The change that benefits tenants of a data center provider like ByteGrid is that they too can now take advantage of the tax breaks. The exemptions only applied to data center owners before.

In exchange for investment and job creation, the state is giving qualified data center providers and tenants 100% sales tax exemption for IT gear they buy for their data centers.

ByteGrid said its estimate of the resulting savings to tenants were conservative. The calculation included an assumption that a typical 1MW data center tenant would spend between $10m and $40m on IT equipment for that data center.

Based on these numbers and the abated sales tax rate of 8%, the company concluded that the tenant would save between $800,000 and $3.2m in the first year.

Since the tax exemption lasts for 15 years, they would have multiple subsequent opportunities for savings when refreshing hardware. This typically happens every three to five years.

ByteGrid CEO Kenneth Parent said the company was in the process of executing first phase of its multimillion-dollar expansion and renovation plan at the 330,000 sq ft site. “We look forward to serving as the primary provider of capacity and connectivity, as well as an ideal disaster recovery location, for Midwest and East Coast markets, while ByteGrid becomes known as Cleveland's premier digital business address,” he said in a statement.

More than half of the campus is data center space leased to internet and communications service providers as well as government agencies. ByteGrid's phase-one plan is to build out an additional 30,000 sq ft of data center space and expand power capacity by 4MW.