2026 tax preference review: Data Centers in Urban Counties
July 2026
Eric Whitaker, research analyst
Pete van Moorsel, tax review coordinator; Eric Thomas, legislative auditor
Contact information
Legislative auditor's conclusion
Fewer than 10 businesses have used the preference, and only for refurbishment projects. No new urban data centers were built using the preference.
Read the full reportKey points
- The preference is a sales and use tax exemption for computer servers and the equipment used to manage electricity. It is available to data centers in King, Pierce, and Snohomish counties.
- Urban data center owners claimed four exemption certificates. Their tenants claimed six. Beneficiaries saved an estimated $42.4 million (2023-26).
- Beneficiaries report adding 53 family-wage jobs and supporting nearly 300 temporary construction jobs.
- Data centers paid more in property tax after refurbishment. They likely paid more public utility tax, too.
- At least 38 states offer tax incentives that specifically target data centers. This preference reflects common practices.
Legislative auditor’s recommendations
State law requires the legislative auditor to recommend legislative action for each tax preference.
The legislative auditor makes one recommendation.
Recommendation #1
The Legislature should allow the urban data center tax preference to expire because no new data centers were built with it.
As amended, the exemption is now limited to new data center construction in urban counties.
Use of the preference has been limited to a few qualifying businesses and qualifying tenants since 2022. It has been used only for refurbishment projects, not new construction. The 2026 Legislature narrowed the preference to apply only to new construction. By eliminating refurbishments and removing replacement server equipment, it is increasingly unlikely that new construction will occur under the preference.
Implementing the recommendation would have these estimated impacts. Impacts do not account for changes in taxpayer behavior.
If this preference were allowed to expire, beneficiaries would no longer have tax savings. Because the expiration date is in law, the state's revenue forecast already accounts for that change.
The Economic and Revenue Forecast Council (ERFC) forecasts state revenue. Its forecast reflects tax preference limits, actual use, and expiration dates.
Not applicable
Responses from the Office of Financial Management (OFM) and the Department of Revenue (DOR) will be included with the proposed final report.
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Data Centers in Urban Counties (HTML)
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