Florida lawmakers are set to curtail a tax break for data center companies operating facilities of less than 100MW.

The sales tax exemption is set to go as part of the state’s 2025 tax bill, HB 7031, which has passed both the Florida House and Senate, and has been presented to Governor Ron DeSantis. It must be signed off by July 1 as it is part of Florida’s wider budget legislation, and will come into force on August 1.

Larger data centers will keep the tax break.

The sales tax exemption has been in place since 2017, following an unsuccessful attempt to introduce a similar bill a year before.

It enables data center companies to avoid paying Florida’s 6 percent sales tax on IT equipment and construction materials, as well as exempting them from local county sales taxes, usually between 1-1.5 percent. The exemption also applies to electricity purchases.

Though this exemption was intended to be permanent, data center companies must now submit to a review every five years, where they provide details about their facility. Any site that does not meet the 100MW threshold at review will be liable for taxes.

This is likely to have implications for data center companies, their construction contractors, and their clients, according to Joshua B. Forman, Marvin A. Kirsner, Florida-based lawyers with Greenberg Traurig LLP.

In an article for the National Law Review, the pair said the loss of the electricity exemption was likely to be particularly problematic.

"Whether it was the legislative intent to end the sales tax exemption for existing and under construction sub-100 MW data centers is unclear, but this appears to be the practical effect of HB 7031," they said.

“Since the exemption was meant to be permanent, and the benefit thereof was intended to be passed through to data center tenants, the loss of the exemption for electricity may hinder landlords’ ability to keep existing tenants and attract new ones to their data centers."

Ongoing construction projects would also be impacted if the tax break were to disappear on August 1.

“A contractor on a data center project under construction may have priced their bid on the assumption that no sales tax would be paid on many of the items purchased to fulfill their contract,” Forman and Kirsner wrote. “If this bill is signed into law, contractors may no longer be able to purchase items tax-free after August 1, and new developments may see higher costs.”

While the bill may be amended in next year’s legislative session to restore the tax break, data center companies could find themselves “in limbo” until then, the pair added.

Data Center Map lists 124 data centers in Florida, mainly clustered around the major metropolitan hubs of Miami, Orlando, and Tampa. The state does not currently appear to have any data centers with IT capacity greater than 100MW.