Data center sales tax ex.

AN ACT Relating to providing a retail sales and use tax exemption 1
for the construction and equipping of new data centers located in a 2
county east of the Cascades that borders another state and has a 3
population of at least 500,000; amending RCW 82.08.988; adding a new 4
section to chapter 82.08 RCW; adding a new section to chapter 82.12 5
RCW; creating a new section; and providing expiration dates.6
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:7
NEW SECTION. Sec. 1. A new section is added to chapter 82.08 8
RCW to read as follows: 9
(1)(a) An exemption from the tax imposed by RCW 82.08.020 is 10
provided for sales to qualifying businesses and to qualifying tenants 11
of eligible server equipment to be installed, without intervening 12
use, in an eligible computer data center to which a valid exemption 13
certificate applies, and to charges made for labor and services 14
rendered in respect to installing eligible server equipment.15
(b) This exemption also applies to sales to qualifying businesses 16
and to qualifying tenants of eligible power infrastructure, including 17
labor and services rendered in respect to constructing, installing, 18
repairing, altering, or improving eligible power infrastructure at an 19
eligible computer data center for which an exemption certificate has 20
been issued. 21
H-2870.4
HOUSE BILL 2655
State of Washington 69th Legislature 2026 Regular Session
By Representatives Ormsby, Volz, Ybarra, Berg, Springer, and
Gregerson
Read first time 01/26/26. Referred to Committee on Finance.
p. 1 HB 2655
(c) No new exemption certificates may be issued on or after July 1
1, 2036. 2
(d) The exemptions provided in this section expire July 1, 2048.3
(2)(a) In order to obtain an exemption certificate under this 4
section, a qualifying business or a qualifying tenant must submit an 5
application to the department for an exemption certificate. The 6
application must include the information necessary, as required by 7
the department, to determine that a business or tenant qualifies for 8
the exemption under this section. The department must issue exemption 9
certificates to qualifying businesses and qualifying tenants. The 10
department may assign a unique identification number to each 11
exemption certificate issued under this section. 12
(b) A qualifying business or a qualifying tenant claiming the 13
exemption under this section must present the seller with an 14
exemption certificate in a form and manner prescribed by the 15
department. The seller must retain a copy of the certificate for the 16
seller's files. 17
(c) The exemption certificate is effective on the date the 18
application is received by the department, which is deemed to be the 19
date of issuance. Only purchases on or after the date of issuance 20
qualify for the exemption under this section. No tax refunds are 21
authorized for purchases made before the effective date of the 22
exemption certificate. 23
(d) Exemption certificates expire two years after the date of 24
issuance, unless construction has been commenced. 25
(3)(a)(i) Within six years of the date that the department issued 26
an exemption certificate under this section to a qualifying business 27
or a qualifying tenant with respect to an eligible computer data 28
center, the qualifying business or qualifying tenant must establish 29
that net employment assigned to an eligible computer data center has 30
increased by a minimum of: 31
(A) Thirty-five family wage employment positions; or, if lower32
(B) Three family wage employment positions for each 20,000 square 33
feet of space or less that is newly dedicated to housing working 34
servers at the eligible computer data center. For qualifying tenants, 35
the number of family wage employment positions that must be increased 36
under this subsection (3)(a)(i)(B) is based only on the space 37
occupied by the qualifying tenant in the eligible computer data 38
center. 39
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(ii) After the minimum number of family wage employment positions 1
as required under (a)(i) of this subsection (3) is established, a 2
qualifying business or a qualifying tenant must maintain the minimum 3
family wage employment positions required under (a)(i) of this 4
subsection (3) while the exemption certificate is valid.5
(b) In calculating the net increase in family wage employment 6
positions: 7
(i) The owner of an eligible computer data center, in addition to 8
its own net increase in family wage employment positions, may 9
include: 10
(A) The net increase, since the date of issuance of the 11
qualifying business's exemption certificate, in family wage 12
employment positions employed by qualifying tenants; and13
(B) The net increase in family wage employment positions 14
described in (c) of this subsection (3). 15
(ii)(A) Qualifying tenants, in addition to their own net increase 16
in family wage employment positions, may include: 17
(I) A portion of the net increase in family wage employment 18
positions employed by the owner; and 19
(II) A portion of the net increase in family wage employment 20
positions described in (c) of this subsection (3).21
(B) The portion of the net increase in family wage employment 22
positions to be counted under (b)(ii) of this subsection (3) by each 23
qualifying tenant is equal to the net increase in family wage 24
employment positions assigned to an eligible computer data center as 25
described in (b)(ii)(A)(I) and (II) of this subsection (3), 26
multiplied by the percentage of total space within the eligible 27
computer data center occupied by the qualifying tenant. Any 28
combination of qualifying business and qualifying tenant family wage 29
employment positions may meet this requirement. 30
(C) In the instance of an existing data center facility that was 31
ineligible, regardless of the date of commencement of construction, 32
that later obtains an exemption certificate under this section, the 33
data center may count the existing employment positions that are 34
dedicated to the data center toward the new family wage employment 35
position requirements if the employment positions meet the 36
requirements of a family wage employment position, as described in 37
(c)(i)(A) of this subsection (3), other than the requirement that the 38
position did not exist or had not previously been filled as of the 39
date that the department issued an exemption certificate.40
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(c)(i) For purposes of this subsection: 1
(A)(I) "Family wage employment positions" are new permanent 2
employment positions requiring 40 hours of weekly work, or their 3
equivalent, on a full-time basis assigned to an eligible computer 4
data center and receiving a wage equivalent to or greater than 125 5
percent of the per capita personal income of the county in which the 6
qualified project is located as published by the employment security 7
department. The per capita personal income to be used to determine 8
qualification for any year is the amount that was established for the 9
immediate prior year. 10
(II) An employment position may not be counted as a family wage 11
employment position unless the employment position is entitled to 12
health insurance coverage provided by the employer of the employment 13
position. 14
(B) "New permanent employment position" means an employment 15
position that did not exist or that had not previously been filled as 16
of the date that the department issued an exemption certificate to 17
the qualifying business or qualifying tenant of an eligible computer 18
data center, as the case may be, except as provided in (b)(ii)(C) of 19
this subsection (3). 20
(ii)(A) Family wage employment positions include positions filled 21
by employees of the qualifying business and by employees of 22
qualifying tenants. 23
(B) Family wage employment positions also include individuals 24
performing work at an eligible computer data center as an independent 25
contractor hired by the owner of the eligible computer data center or 26
as an employee of an independent contractor hired by the owner of the 27
eligible computer data center, if the work is necessary for the 28
operation of the computer data center, such as security and building 29
maintenance, and provided that all of the applicable requirements in 30
(c) of this subsection (3) are met. 31
(d)(i) For a qualifying business or qualifying tenant that does 32
not meet the requirements of this subsection (3), previously exempted 33
sales and use taxes are immediately due and payable and any exemption 34
certificate issued to that qualifying business or qualifying tenant 35
under this section is canceled, except as described in (d)(iii) of 36
this subsection (3). 37
(ii) The department of labor and industries must, at the request 38
of the department, assist in determining whether the requirements of 39
this subsection (3) have been met. 40
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(iii) If the department, with the assistance of the department of 1
labor and industries, finds that a failure to meet the requirements 2
of this subsection (3) is due to circumstances beyond the control of 3
the qualifying business or qualifying tenant including, but not 4
limited to, a declaration of an economic recession, pandemic, or 5
natural disaster affecting data center operations, the department may 6
provide exceptions or extensions to the requirements of this 7
subsection (3). 8
(iv) Any repayment of taxes triggered by the failure of a 9
qualifying business or qualifying tenant to meet the requirements of 10
this subsection (3) must be calculated in proportion to the duration 11
of time for which any applicable requirement was not met.12
(v) If the department is notified that a qualifying business or 13
qualifying tenant fails to meet the requirements of this subsection 14
(3), the department may require a qualifying business or qualifying 15
tenant to submit records necessary to determine whether the 16
requirements have been met. 17
(4) For exemption certificates issued: 18
(a) Within three years after being placed in service, the 19
qualifying business operating a newly constructed data center must 20
certify to the department that it has attained certification under 21
one or more of the following sustainable design or green building 22
standards: 23
(i) BREEAM for new construction or BREEAM in-use;24
(ii) Energy star; 25
(iii) Envision; 26
(iv) ISO 50001-energy management; 27
(v) LEED for building design and construction or LEED for 28
operations and maintenance; 29
(vi) Green globes for new construction or green globes for 30
existing buildings; 31
(vii) UL 3223; or 32
(viii) Other reasonable standards approved by the department.33
(b) The department may require qualifying businesses and 34
qualifying tenants to submit records necessary to verify the 35
requirements under (a) of this subsection have been met.36
(c)(i) For a qualifying business or qualifying tenant that does 37
not meet the requirements of (a) of this subsection (4), all 38
previously exempted sales and use taxes may be immediately due and 39
payable, any exemption certificate issued to that qualifying business 40
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or qualifying tenant under this section is canceled, and an 1
additional 10 percent penalty is assessed, except as described in 2
(c)(ii) of this subsection (4). 3
(ii) If the department finds that a failure to meet the 4
requirements of this subsection (4) is due to circumstances beyond 5
the control of the qualifying business or qualifying tenant 6
including, but not limited to, a declaration of an economic 7
recession, pandemic, or natural disaster affecting data center 8
operations, the department may, at its discretion, provide exceptions 9
or extensions to the requirements of this subsection (4). The 10
department may, at its discretion, coordinate with agencies with 11
relevant expertise to assist in determining whether the requirements 12
have been met. 13
(5) A qualifying business or a qualifying tenant claiming the 14
exemption under this section is encouraged to take direct steps to 15
adopt practices to mitigate negative environmental impacts resulting 16
from expanded use of data centers, including through:17
(a) Coordinating with the industrial waste coordination program 18
established under RCW 43.31.625 to identify and provide technical 19
assistance in implementing industrial symbiosis projects;20
(b) To the extent possible, procuring or contracting for power 21
from renewable sources; 22
(c) Adopting practices to improve the energy efficiency of 23
existing data centers, including through upgrading and consolidating 24
technology, managing data center airflow, and adjusting and improving 25
heating, ventilation, and air conditioning systems; and26
(d) Taking actions to conserve, reuse, and replace water. This 27
includes using water efficient fixtures and practices; treating, 28
infiltrating, and harvesting rainwater; recycling water before 29
discharging; partnering with local water utilities to use discharged 30
water for irrigation and other water conservation purposes; using 31
reclaimed water where possible for data center operations; and 32
supporting water restoration in local watersheds. 33
(6) A qualifying business or a qualifying tenant claiming an 34
exemption under this section or section 2 of this act must complete 35
an annual tax performance report with the department as required 36
under RCW 82.32.534. The report must identify construction firm names 37
and employment levels used for constructing, renovating, or 38
remodeling the data centers. 39
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(7)(a) The certificate holder may not at any time assign or 1
transfer a certificate without the prior written consent of the 2
department. The department must allow certificate transfers if the 3
certificate holder meets the following requirements:4
(i) The certificate assignee or transferee is qualified to do 5
business in the state; 6
(ii) The assignee or transferee acknowledges the transfer of the 7
certificate in writing; 8
(iii) The assignee or transferee agrees to keep and perform all 9
the terms of the certificates; and 10
(iv) An assignment or transfer of the certificate is to an entity 11
that: 12
(A) Controls, is controlled by, or under common control with, the 13
certificate holder; 14
(B) Acquires all or substantially all of the stock or assets of 15
the certificate holder; or 16
(C) Is the resulting entity of a merger or consolidation with the 17
certificate holder. 18
(b) In the event the assignee or transferee acquires eligible 19
server equipment in a qualifying asset sale under (a)(iv)(B) of this 20
subsection, the purchaser shall be deemed to purchase the eligible 21
server equipment pursuant to the transferred certificate.22
(8)(a) Each emerging large energy use facility must sign a 23
contractual service commitment for at least 10 years with the 24
appropriate investor-owned utility or consumer-owned utility.25
(b) An emerging large energy use facility may meet their supply 26
demands through purchasing electricity from an entity that is not a 27
utility or by generating its own electricity. 28
(9) The definitions in this subsection apply throughout this 29
section unless the context clearly requires otherwise.30
(a) "Affiliated" means that one person has a direct or indirect 31
ownership interest of at least 20 percent in another person.32
(b) "Building" means a fully enclosed structure with a weather 33
resistant exterior wall envelope or concrete or masonry walls 34
designed in accordance with the requirements for structures under 35
chapter 19.27 RCW. 36
(c) "Certificate of occupancy" means the certificate of occupancy 37
issued by a local governing authority for the structure or structures 38
which comprise the newly constructed eligible computer data center.39
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(d) "Consumer-owned utility" means a municipal electric utility 1
formed under Title 35 RCW, a public utility district formed under 2
Title 54 RCW, an irrigation district formed under chapter 87.03 RCW, 3
a cooperative formed under chapter 23.86 RCW, a mutual corporation or 4
association formed under chapter 24.06 RCW, or a port district formed 5
under Title 53 RCW, that is engaged in the business of distributing 6
electricity to at least one retail electric customer in the state.7
(e)(i) "Computer data center" means a facility comprised of one 8
or more buildings, which may be comprised of multiple businesses, 9
constructed specifically, and used primarily, to house working 10
servers, where the facility has the following characteristics: (A) 11
Uninterruptible power supplies, generator backup power, or both; (B) 12
sophisticated fire suppression and prevention systems; and (C) 13
enhanced physical security, such as: Restricted access to the 14
facility to selected personnel; permanent security guards; video 15
camera surveillance; an electronic system requiring passcodes, 16
keycards, or biometric scans, such as hand scans and retinal or 17
fingerprint recognition; or similar security features.18
(ii) For a computer data center comprised of multiple buildings, 19
each separate building constructed specifically, and used primarily, 20
to house working servers is considered a computer data center if it 21
has all of the characteristics listed in (d)(i)(A) through (C) of 22
this subsection (9). 23
(iii) A facility comprised of one building or more than one 24
building must have a combined square footage of at least 100,000 25
square feet. 26
(f) "Electronic data storage and data management services" 27
include, but are not limited to: Providing data storage and backup 28
services, providing computer processing power, hosting enterprise 29
software applications, and hosting websites. The term also includes 30
providing services such as email, web browsing and searching, media 31
applications, and other online services, regardless of whether a 32
charge is made for such services. 33
(g)(i) "Eligible computer data center" means a computer data 34
center: 35
(A) Located in a county east of the Cascades that borders another 36
state and has a population of at least 500,000 persons;37
(B) Having at least 20,000 square feet dedicated to housing 38
working servers; and 39
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(C) For which the commencement of construction occurs after June 1
30, 2026, and before July 1, 2035. 2
(ii) For purposes of this section, "commencement of construction" 3
means the date that a building permit is issued under the building 4
code adopted under RCW 19.27.031 for construction of the computer 5
data center. "Commencement of construction" does not include soil 6
testing, site clearing and grading, site preparation, or any other 7
related activities that are initiated before the issuance of a 8
building permit for the construction of the foundation of a computer 9
data center. 10
(h) "Eligible power infrastructure" means all fixtures and 11
equipment owned by a qualifying business or qualifying tenant and 12
necessary for the transformation, distribution, or management of 13
electricity that is required to operate eligible server equipment 14
within an eligible computer data center. The term includes wiring; 15
cogeneration equipment; and associated fixtures and equipment, such 16
as electrical switches, batteries, and distribution, testing, and 17
monitoring equipment. "Eligible power infrastructure" does not 18
include substations or backup generators that use diesel fuel.19
(i) "Eligible server equipment" means: 20
(i) For a qualifying business whose computer data center 21
qualifies as an eligible computer data center, "eligible server 22
equipment" means the original server equipment installed in a 23
building within an eligible computer data center on or after July 1, 24
2026. Server equipment installed in movable or fixed stand-alone, 25
prefabricated, or modular units, including intermodal shipping 26
containers, is not "directly installed in a building."27
(ii) For a qualifying tenant who leases space within an eligible 28
computer data center, "eligible server equipment" means the original 29
server equipment installed within the space it leases from an 30
eligible computer data center with an exemption certificate on or 31
after July 1, 2026. 32
(j) "Emerging large energy use facility" means a data center that 33
has a maximum aggregate contract demand of 20 megawatts or more and 34
is primarily engaged in providing a service described under code 35
518210 of the 2022 North American industry classification system.36
(k) "Investor-owned utility" means a company owned by investors 37
that meets the definition of electrical company in RCW 80.04.010 and 38
is engaged in distributing electricity to one or more retail electric 39
customers in the state. 40
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(l) "Qualifying business" means a business entity that exists for 1
the primary purpose of engaging in commercial activity for profit and 2
that is the owner of an eligible computer data center. "Qualifying 3
business" does not include the state or federal government or any of 4
their departments, agencies, and institutions; tribal governments; 5
political subdivisions of this state; or any municipal, quasi-6
municipal, public, or other corporation created by the state or 7
federal government, tribal government, municipality, or political 8
subdivision of the state. 9
(m) "Qualifying tenant" means a business entity that exists for 10
the primary purpose of engaging in commercial activity for profit and 11
that leases space from a qualifying business within an eligible 12
computer data center. "Qualifying tenant" does not include the state 13
or federal government or any of their departments, agencies, and 14
institutions; tribal governments; political subdivisions of this 15
state; or any municipal, quasi-municipal, public, or other 16
corporation created by the state or federal government, tribal 17
government, municipality, or political subdivision of the state. The 18
term also does not include a lessee of space in an eligible computer 19
data center if the lessee and lessor are affiliated and that space 20
will be used by the lessee to house server equipment that replaces 21
server equipment previously installed and operated in that eligible 22
computer data center by the lessor or another person affiliated with 23
the lessee. 24
(n) "Server equipment" means the computer hardware located in an 25
eligible computer data center and used exclusively to provide 26
electronic data storage and data management services, including cloud 27
services, for internal use by the owner or lessee of the computer 28
data center, for clients of the owner or lessee of the computer data 29
center, or both. "Server equipment" also includes computer software 30
necessary to operate the computer hardware. "Server equipment" does 31
not include personal computers, the racks upon which the server 32
equipment is installed, and computer peripherals such as keyboards, 33
monitors, printers, and mice. 34
(10) This section expires July 1, 2048. 35
NEW SECTION. Sec. 2. A new section is added to chapter 82.12 36
RCW to read as follows: 37
(1)(a) An exemption from the tax imposed by RCW 82.12.020 is 38
provided for the use by qualifying businesses or qualifying tenants 39
p. 10 HB 2655
of eligible server equipment to be installed, without intervening 1
use, in an eligible computer data center for which an exemption 2
certificate under section 1 of this act has been issued, and to the 3
use of labor and services rendered in respect to installing such 4
server equipment. 5
(b) Until July 1, 2048, this exemption also applies to the use by 6
a qualifying business or qualifying tenant of eligible power 7
infrastructure, including labor and services rendered in respect to 8
installing, repairing, altering, or improving such infrastructure at 9
an eligible computer data center for which an exemption certificate 10
under section 1 of this act has been issued. 11
(c) The exemptions provided in this section expire July 1, 2048.12
(2) A qualifying business or a qualifying tenant is not eligible 13
for the exemption under this section unless the department issued an 14
exemption certificate to the qualifying business or a qualifying 15
tenant for the exemption provided in section 1 of this act.16
(3) The definitions and requirements in section 1 of this act 17
apply to this section. 18
(4) The exemption provided in subsection (1) of this section does 19
not apply to the use of eligible server equipment and eligible power 20
infrastructure, and the labor and services provided in subsection (1) 21
of this section, if first used by qualifying businesses or qualifying 22
tenants on or after July 1, 2048. 23
(5) This section expires July 1, 2053. 24
Sec. 3. RCW 82.08.988 and 2022 c 267 s 7 are each amended to 25
read as follows: 26
From June 9, 2022, in order to obtain the exemption provided in 27
RCW 82.08.986 ((or)), 82.08.9861, or section 1 of this act , a 28
qualifying business or qualifying tenant must certify to the 29
department that, for new construction work to be performed on the 30
site of the computer data center, the computer data center receiving 31
an exemption under RCW 82.08.986 ((or)), 82.08.9861, or section 1 of 32
this act will be constructed by the prime contractor and its 33
subcontractors in a way that includes community workforce agreements 34
or project labor agreements and the payment of area standard 35
prevailing wages and apprenticeship utilization requirements, 36
provided the following apply: 37
(1) The owner and the prime contractor and all of its 38
subcontractors regardless of tier have the absolute right to select 39
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any qualified and responsible bidder for the award of contracts on a 1
specified project without reference to the existence or nonexistence 2
of any agreements between such bidder and any party to such project 3
labor agreement, and only when such bidder is willing, ready, and 4
able to become a party to, signs a letter of assent, and complies 5
with such agreement or agreements, should it be designated the 6
successful bidder; and 7
(2) It is understood that this is a self-contained, stand-alone 8
agreement, and that by virtue of having become bound to such 9
agreement or agreements, neither the project contractor nor the 10
subcontractors are obligated to sign any other local, area, or 11
national agreement. 12
NEW SECTION. Sec. 4. (1) This section is the tax preference 13
performance statement for the tax preferences contained in sections 1 14
and 2, chapter . . ., Laws of 2026 (sections 1 and 2 of this act). 15
This performance statement is only intended to be used for subsequent 16
evaluation of the tax preferences. It is not intended to create a 17
private right of action by any party or be used to determine 18
eligibility for preferential tax treatment.19
(2) The legislature categorizes these sales and use tax 20
exemptions on eligible server equipment and eligible power 21
infrastructure equipment at eligible computer data centers as ones 22
intended to: Induce certain designated behavior by taxpayers, improve 23
industry competitiveness, create or retain jobs, and reduce 24
structural inefficiencies in the tax structure, as indicated in RCW 25
82.32.808(2) (a), (b), (c), and (d). 26
(3) It is the legislature's specific public policy objective to 27
improve industry competitiveness and to increase, create, or retain 28
jobs in computer data centers in counties located east of the 29
Cascades and bordering another state with a population over 500,000, 30
as determined by the April 1, 2025, office of financial management 31
population estimates, thereby increasing family wage jobs.32
(4) The legislature intends to extend the expiration date of the 33
tax preference. The joint legislative audit and review committee 34
shall conduct a review and determine if the tax preference is (a) 35
generating capital investment in new computer data centers, (b) 36
generating state and local tax collections from data center 37
investment and operations, and (c) generating or maintaining 38
construction and trade jobs in the state. 39
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(5) In order to obtain the data necessary to perform the review 1
in subsection (4) of this section, the joint legislative audit and 2
review committee may refer to any available data source.3
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