Florida Introduces New Sales Tax Exemption Rules for Data Centers

Florida, August 21, 2025

News Summary

The Florida Legislature has approved HB 7031, establishing new sales tax exemption rules for data centers. Effective August 1, data centers must have an IT load of 100 MW or more to qualify for tax exemptions. This shift significantly impacts smaller facilities, likely increasing costs and complicating lease terms. Moving forward, owners of sub-100 MW data centers will face compliance challenges, including potential audits and back taxes. The legislative change aims to attract larger data center projects while leaving smaller ones to grapple with unfavorable market conditions.

Florida narrows sales tax exemption for data centers to facilities of 100 MW or more; change takes effect August 1, 2025

The Florida Legislature has approved a rule change that will limit the state’s sales tax exemption for data centers only to facilities with an IT load of 100 megawatts (MW) or more, effective August 1, 2025. The change, enacted as part of the broader tax reform package HB 7031 passed June 16, 2025, removes eligibility for all data centers that fall below the 100 MW threshold.

Who is immediately affected

Owners, tenants, developers and contractors tied to sub-100 MW data centers will see direct impacts. Those facilities will no longer be able to buy construction materials, equipment, servers, software, or electricity free of state sales tax. The amendment does not include a grandfather clause, meaning existing mid-sized facilities cannot preserve the exemption simply because they were built or contracted before the change.

Immediate financial and contractual consequences

The loss of the exemption will raise direct costs for mid-sized data centers and their construction projects. Construction budgets and lease-cost calculations that previously relied on tax-free treatment will need revision. Landlords may find it harder to retain tenants or attract new ones because tenants will face higher operating and capital costs. Contractors working on any eligible new or ongoing projects for sub-100 MW facilities will also lose the ability to procure items tax-free, increasing overhead and bid prices.

Tax compliance and audit risk

The amendment increases compliance risk for owners and tenants. If a sales tax audit occurs after a facility loses eligibility, parties may be on the hook for back taxes, penalties, and interest for prior purchases that were made tax-free under the old rules. Owners and tenants who relied on past exemptions should review purchase records and contracts now to assess potential liabilities.

Longer-term market and investment effects

Policymakers designed the rule to steer incentives toward mega-scale data center projects, encouraging developers to pursue 100 MW-plus deployments. The legislature framed this as concentrating resources on larger operators believed to deliver infrastructure benefits, job creation, and long-term investment. However, smaller and mid-sized operators could lose competitive ground to other states that keep more inclusive incentives in place.

Regulatory mechanics and review process

Under the new rules, owners of sub-100 MW facilities face a review cycle every five years to determine ongoing eligibility. Practically, after August 1, 2025, facilities that fall below 100 MW will not meet the statutory criteria and will lose the exemption. The state also repealed the sales tax on commercial leases as part of the same bill package, a change that lawmakers cited as a reason for narrowing the data center exemption.

Practical steps for the construction and real estate community

• Recompute construction budgets and cash-flow projections to include state sales tax on materials, equipment, and electricity where applicable.
• Review lease and purchase agreements now; expect renegotiations between landlords and tenants where tax savings were a material term.
• Request tax counsel or accounting reviews to estimate exposure from potential audits tied to prior tax-free purchases.
• Contractors should update bids and change orders to reflect lost tax exemptions and communicate changes to owners and subcontractors.
• Developers considering new projects should assess whether designing for 100 MW or more is feasible to preserve incentive access.

Political and industry follow-up

There may be legislative or administrative efforts to slow enforcement or seek clarifications next year if concerns surface. Stakeholders could pursue temporary delays, technical amendments, or other remedies during the next session, but no formal delay mechanism is included in the current amendment.

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FAQ

Key features at a glance

Feature	Details
Law	HB 7031 — tax reform package passed June 16, 2025
Effective date	August 1, 2025
Eligibility threshold	Data centers with IT load of 100 MW or more
Items previously exempt	Construction materials, equipment, servers, software, electricity
Grandfathering	No grandfather clause for existing sub-100 MW facilities
Review cycle	Five-year review for owners, but sub-100 MW facilities will not meet criteria after effective date
Potential impacts	Higher construction costs, lease renegotiations, audit liabilities, competitive disadvantage for mid-sized centers
Policy goal	Attract and prioritize mega-scale data center projects and larger operators

Deeper Dive: News & Info About This Topic

Additional Resources

• Keat Tax: Florida Ends Sales Tax Exemption for Data Centers under 100 MW
• National Law Review: Florida Legislature Passes Bill to End Sales Tax Exemption for Sub-100 MW Data Centers
• The Center Square: Florida to End Sales Tax Exemption for Data Centers
• Encyclopedia Britannica: Sales Tax
• Google Search: Data Centers Sales Tax