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Pennsylvania provides refund for data center equipment

  • Jul 19, 2016 | Gail Cole

 A new sales tax refund takes effect in Pennsylvania on July 1, 2017.

Certain certified computer data centers may be eligible for a refund of Pennsylvania sales and use tax paid on certain equipment. The refund is a result of the computer data center equipment incentive program established by the new budget. It takes effect July 1, 2017.

Qualifying data centers

Not all data centers will qualify for the refund. Qualifying data center owners, operators, and tenants must meet one of the following requirements:

  1. On or before the fourth anniversary of certification, the computer data center must create a minimum investment of:
    1. At least $25 million of new investment if the computer data center is located in a county with a population of 250,000 or fewer individuals, or
    2. At least $50 million of new investment if the computer data center is located in a county with a population of more than 250,000 individuals
  2. One or more taxpayers operating or occupying a computer data center, in the aggregate, must pay annual compensation of at least $1 million to employees at the certified computer data center site for each year of the certification after the fourth anniversary of certification.

Eligible for the refund

A variety of tangible personal property is eligible for the refund, including but not limited to the following:

  • Equipment necessary for the distribution, generation, management or transformation or electricity required to operate computer servers or similar data storage equipment
  • Equipment necessary to cool and maintain a controlled environment for the operation of the computer servers or data storage systems and other components of the computer data center
  • Modular data centers and certain preassembled components
  • Monitoring equipment and security systems
  • Software, computer servers and similar data storage equipment, networking equipment, cabling, conduit racks, switches and trays
  • Water conservation systems, including facilities or mechanisms designed to collect, conserve and reuse water.

Ineligible

Computer data center equipment used for the following reasons do not qualify for the tax refund:

  • Generate electricity for resale purposes to a power utility (except for certain incidental sales)
  • Generate, provide or sell more than 5% of its electricity outside of the computer data center.

How

Applications for the refund must be submitted to the Pennsylvania Department of Revenue by July 30, 2017 (and by July 30 of subsequent years). Those found eligible for a refund will receive notice within 60 days and will be eligible for 10 (tenants) to 15 (owners and operators) years. The total amount of tax refunds cannot exceed $5 million per fiscal year, and tax refunds must be rigorously documented. For additional details, please see HB 1198.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
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.