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New York Data Centers Tax Exempt?

  • Dec 26, 2012 | Gail Cole

The New York Department of Taxation has issued an Advisory Opinion regarding the taxability of an Internet data center. Advisory Opinions are "[b]ased on the law, regulations, and Department policies in effect" when the Opinion is issued. They do "not cover every situation… ." That said, they can be quite instructive.

TSB-A-12(30)S regards a Petitioner who "owns a condominium interest … and plans to develop the property exclusively for use as an Internet data center facility. The facility would be highly secure and include a "powered shell" space, a "turn-key" data center for tenants, a "carrier equipment room," and a "meet me room" space. Upon completion, the Petitioner would "operate and manage the data center facility as well as the carrier space and network."

Relevant New York Tax Law "imposes sales tax on the receipts from every retail sale of tangible personal property, except as other wise provided." (1105(a)).

However, New York Tax Law exempts from tax:

"Machinery, equipment and other tangible personal property specified herein, sold to a person operating an internet data center located in this state for use in such a center, where such property: (a) will be located or installed in a facility or structure which is an internet data center and (b) is required for and directly related to the provision of internet website services for sale by the operator of the center." (New York Tax Law 1115(a)(37)(i)).

That Tax Law goes on to define the operator of an Internet data center to be a person:

"(a) operating a facility which consists of a data center specifically designed and constructed to provide a high security environment for the location of servers and similar equipment on which reside internet websites; and

(b) providing at such facility the internet website services of: (i) uninterrupted internet access to its customers web pages in a secure environment and (ii) continuous internet traffic management for its customers' web pages."

Both Petitioner and facility meet all of the above requirements, therefore the "Petitioner is entitled to claim the sales and use tax exemption found in Tax Law Section 1115(a)(37)."

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.