National Taxpayers Union says state taxes unfairly burden data centers
The National Taxpayers Union released a study on Nov. 10, 2026 stating that state and local tangible personal property taxes on data‑center equipment put the industry at a financial disadvantage.
Data centers power cloud computing and artificial‑intelligence services used by businesses and consumers nationwide, so tax burdens on the hardware can ripple through the economy and raise prices for end users.
The union described the tax as an “international anomaly,” noting that only seven of the 38 OECD countries levy tangible personal property taxes at all, and Japan is the only one that taxes them as broadly as the United States.
Like a car tax that assesses an annual fee based on a vehicle’s value, a tangible personal property tax is applied each year to equipment such as servers and networking gear, often using assessed values that differ from market prices.
“Suppose the government thinks, ‘Well, your car is only two years old. It’s this make and model. You pay this much tax,’” NTU President Pete Sepp said. “But you say, ‘I’ve had to replace part of the suspension, it’s not in as good shape as you think.’ The same mismatch happens with data‑center technology.
Depreciation schedules further skew valuations. In Florida, a three‑year‑old server is valued at 56 % of its original cost, while a handful of other states would rate the same server at only 40 % of cost.
NTU recommends that states refrain from introducing new tangible personal property taxes, avoid raising existing ones elsewhere, and reform the laws to be uniform, neutral, simple and stable.
The study also examined sales‑and‑use tax exemptions. Thirty‑three states offer a conditional exemption for data‑center hardware, but eight states have recently suspended or eliminated those benefits, according to S&P Global Market Intelligence.
“Most incentives are a special treatment, and this is an incentive that gets you ordinary treatment,” senior fellow Jared Walczak said. “They’re providing the same exemption that every other industry gets by right because the sales tax is not supposed to tax equipment.”
When data centers pay sales tax on servers, they may pass the cost to business customers, who in turn pass it to consumers, creating a tax‑pyramiding effect that inflates final prices.
NTU urges lawmakers to adopt uniform tax rules that eliminate discriminatory treatment of technology‑heavy industries and to protect the sector’s ability to support the nation’s digital infrastructure.
