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26.31.38 101st Legislative Session 1005
2026 South Dakota Legislature
House Bill 1005
Introduced by: Representative Roe
Underscores indicate new language.
Overstrikes indicate deleted language.
An Act to provide a sales and use tax exemption for goods and services related to 1
data center operations. 2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA: 3
Section 1. That a NEW SECTION be added to chapter 10-45: 4
The terms used in this Act mean: 5
(1) "Computer software," programs and other operating information used solely for 6
the maintenance and operation of a qualified data center; 7
(2) "Data center," a centralized repository for the storage, management, 8
dissemination, and processing of electronic data and information, except for that 9
which relates to the mining of digital currency; 10
(3) "Enterprise information technology equipment," the following products used solely 11
for the maintenance and operation of a qualified data center: 12
(a) Computer hardware, servers, storage arrays, backup systems, disaster 13
recovery equipment, routers, cooling systems, temperature control 14
infrastructure, network equipment, switches, load balancers, firewalls, 15
network cabling, edge devices, network monitoring equipment, water 16
treatment systems, chilled water equipment, economizers, cooling towers, 17
and piping and pump equipment for cooling towers; 18
(b) Power infrastructure for the management of electricity, dedicated 19
distribution equipment, backup power generation systems, battery 20
systems, construction materials for structures unique to data centers or 21
other related infrastructure excluding primary electric generation service, 22
transmission, or utility distribution infrastructure; 23
(c) Racking systems, raised flooring, cabling, or trays necessary for the 24
maintenance and operation of a qualified data center; 25
26.31.38 2 1005
Underscores indicate new language.
Overstrikes indicate deleted language.
(d) Security systems, physical access control systems, surveillance systems, 1
biometric scanners, security monitoring equipment, and monitoring 2
systems, environmental monitoring systems, infrastructure management 3
tools, and building management systems; 4
(e) Testing and diagnostic equipment used for maintenance, commissioning, or 5
troubleshooting; 6
(f) Telecommunications and fiber infrastructure, fiber optic cabling, satellite 7
equipment, and internet exchange components; and 8
(g) Air quality systems, specialized HVAC, filtration, and humidity control 9
equipment; 10
(4) "Qualified business," the owner, operator, or tenant of a qualified data center or a 11
proposed data center; 12
(5) "Qualified data center," a facility located in this state: 13
(a) Comprised of one or more buildings containing a data center; 14
(b) Where all buildings that contain a data center qualify as real property 15
subject to taxation pursuant to §§ 10-4-1 and 10-4-2; 16
(c) Where the qualifying date occurs on or after July 1, 2026, and on or before 17
June 30, 2036; and 18
(d) Equipped with fire suppression and prevention systems; and 19
(6) "Qualifying date," the date on which a building permit is issued for the initial 20
construction of the facility. 21
Section 2. That a NEW SECTION be added to chapter 10-45: 22
There are specifically exempted from the provisions of this chapter and from the 23
computation of tax imposed by it, gross receipts from the sale of enterprise information 24
technology equipment or computer software to be used in a qualified data center. A 25
qualified business is exempt for a period of fifty years after the qualifying date. 26
Section 3. That a NEW SECTION be added to chapter 10-45: 27
To be eligible for the exemption provided in section 2 of this Act, a qualified 28
business in a qualified data center, or a qualified business in a proposed qualified data 29
center, shall submit any documentary evidence required by the Department of Revenue 30
to verify the eligibility of the qualified data center or proposed data center. The 31
documentary evidence required by this section is confidential. The secretary of the 32
Department of Revenue shall determine if the qualified business is eligible. 33
26.31.38 3 1005
Underscores indicate new language.
Overstrikes indicate deleted language.
To be eligible for the exemption provided by section 2 of this Act, a qualified 1
business shall: 2
(1) Ensure electric service provided to the qualified business by an electric utility is 3
under a written agreement or rate schedule that avoids the shifting of costs to 4
other customers of the electric utility; and 5
(2) Provide notice to local water providers to ensure that water consumption is 6
compatible for the location in which the qualified data center is situated. 7
Upon determining the eligibility of a future qualified business in a proposed 8
qualified data center, the secretary shall provide an exemption certificate for taxes 9
imposed pursuant to this chapter and chapter 10-46. 10
To retain eligibility for the exemption provided in section 2 of this Act, a qualified 11
business must file an affidavit with the secretary attesting that the data center or the 12
future data center qualifies for the exemption provided in section 2 of this Act, prior to 13
June first of each year. 14
Section 4. That a NEW SECTION be added to chapter 10-46: 15
There are specifically exempted from the provisions of this chapter, gross receipts 16
from the sale of enterprise information technology equipment or computer software to be 17
used in a qualified data center. A qualified business is exempt for a period of fifty years 18
after the qualifying date. 19