TLDR
- More than 10 states have paused or canceled tax exemptions for data centers run by Amazon, Meta, and Google.
- Ohio’s data center sales-tax exemption grew to $1.5 billion last year, over 10 times the original estimate.
- State lawmakers want to repeal exemptions and renegotiate long-term contracts with tech giants.
- The backlash is tied to public concerns over power consumption, water use, and AI growth.
- States like Indiana, West Virginia, and Wyoming may benefit as companies look for friendlier tax environments.
Amazon, Meta, and Google are facing a growing threat to the tax deals that have helped fund their data center expansion across the United States. More than 10 states have now paused or canceled tax exemptions that were once handed out freely to attract tech investment.
For years, states saw data centers as an economic win. Ohio passed a sales-tax exemption on servers and computer equipment over a decade ago, hoping to bring jobs and investment to the state. It worked. But the AI boom changed the math.
Ohio’s exemption ballooned to more than $1.5 billion last year. That was more than 10 times what the state originally projected. When the scale of the exemption became public, it triggered a voter backlash that led Republican Governor Mike DeWine to pause new applications in May.
Now some Ohio lawmakers want to go further. Democratic Rep. Tristan Rader has proposed repealing the exemption entirely and reopening contracts that companies like Amazon, Meta, and Google signed with the state for decades-long tax protections.
“They seem to have more money than God and they’re able to build without the need for these types of incentives,” Rader said.
States Rethink Billion-Dollar Deals
Ohio is not alone. Legislators or governors in more than 10 states, including Illinois, New Jersey, and Washington, have pulled back on tax breaks. New Jersey approved a $500 million tax credit for data centers in 2024. Last month, the state canceled the remaining $250 million.
Virginia, the top state for data centers, kept its sales-tax exemption but added a new tax on electricity used by data center operators.
The exemptions cover sales taxes on hardware like chips and servers, which make up a large portion of data center costs. That equipment is replaced every few years, making the tax break worth hundreds of millions of dollars per project.
Amazon says it has invested nearly $40 billion in Ohio data centers since 2015, creating thousands of jobs. The company paid almost $11 million in state property taxes and fees last year. Meta and Google declined to comment.
Public Backlash Drives Political Risk
The tax revolt is part of a wider pushback against AI infrastructure. Concerns about power and water use have made data centers a hot political issue. A city council member in Independence, Missouri was voted out of office after supporting billions in data center tax incentives.
President Trump has pushed back against the trend, urging states to welcome data centers and warning that rejecting them leads to economic decline.
Industry watchers say states still benefit from data centers long-term. Ohio, Arizona, and Illinois are now seen as less attractive, with some operators looking at Indiana, West Virginia, and Wyoming instead.
Some industry observers believe the backlash will fade. “This is a passing fad,” said Ian Boccaccio of tax firm Ryan. “In two years we won’t have these issues with data centers.”
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