34 Tex. Admin. Code § 3.335 - Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption
(a) Definitions. The following words and
terms, when used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1)
Capital investment--The amount paid to acquire capital or fixed assets that are
purchased for use in the operation of a qualifying data center or qualifying
large data center projects, and that, for U.S. federal income tax purposes,
qualify as Section 179, Section 1245, or Section 1250 property, as those terms
are defined in Internal Revenue Code, §§179(d)(1), 1245(a)(3), and
1250(c), respectively. Examples include, but are not limited to, land,
buildings, furniture, machinery, and equipment used for the processing,
storage, and distribution of data, and labor used specifically to construct or
refurbish such property. The term does not include:
(A) property purchased before September 1,
2013, for a qualifying data center;
(B) property purchased before May 1, 2015,
for a qualifying large data center project;
(C) property purchased by a qualifying owner,
qualifying operator, or qualifying occupant from persons or legal entities
related to the purchaser by ownership or common control;
(D) property that is leased under an
operating lease; or
(E)
expenditures for routine and planned maintenance required to maintain regular
business operations.
(2)
County average weekly wage--The average weekly wage in a county for all jobs
during the most recent four quarterly periods for which data is available, as
computed by the Texas Workforce Commission, at the time a qualifying owner,
qualifying operator, or qualifying occupant creates a job used to qualify under
this section.
(3) Data center--A
facility that:
(A) is or will be located in
this state;
(B) is or will be
specifically constructed or refurbished for use primarily to house servers,
related equipment, and support staff for the processing, storage, and
distribution of data;
(C) will be
used by a single qualifying occupant for the processing, storage, and
distribution of data;
(D) will not
be used primarily by a telecommunications provider to house tangible personal
property that is used to deliver telecommunications services; and
(E) has or will have an uninterruptible power
source, generator backup power, a sophisticated fire suppression and prevention
system, and enhanced physical security that includes restricted access, video
surveillance, and electronic systems.
(4) Permanent job--An employment position for
which an Internal Revenue Service Form W-2 must be issued, that will exist for
at least five years after the date the job is created. A permanent job will be
considered to exist for at least five years after the date the job is created
if during the five-year period any vacancy which occurs is filled within 120
days of the date of vacancy.
(5)
Primarily--More than 50% of the time.
(6) Qualifying data center--A data center
that the comptroller certifies as meeting each of the requirements in
subsection (d) of this section.
(7)
Qualifying job--
(A) A new, full-time job
created by a qualifying owner, qualifying operator, or qualifying occupant of a
qualifying data center or qualifying large data center project that:
(i) is a permanent job;
(ii) is located in the same county in Texas
in which the associated qualifying data center or qualifying large data center
project is located;
(iii) will
provide at least 1,820 hours of employment a year to a single
employee;
(iv) pays at least 120%
of the county average weekly wage, as defined by paragraph (2) of this
subsection, for the county in which the job is located;
(v) is not transferred from one county in
Texas to another county in Texas; and
(vi) is not created to replace a qualifying
job that was previously held by another employee.
(B) The term includes a new employment
position staffed by a third party employer if the employment position meets the
requirements of subparagraph (A) of this paragraph and if a written contract
exists between the third-party employer and a qualifying owner, qualifying
operator, or qualifying occupant that provides that the employment position is
permanently assigned to an associated qualifying data center or qualifying
large data center project.
(8) Qualifying large data center project--A
data center that the comptroller certifies as meeting each of the requirements
in subsection (e) of this section.
(9) Qualifying operator--A person who
controls access to a qualifying data center or qualifying large data center
project, regardless of whether that person owns each item of tangible personal
property located at the qualifying data center or qualifying large data center
project. A qualifying operator may also be the qualifying owner.
(10) Qualifying owner--A person who owns the
building in which a qualifying data center or qualifying large data center
project is located. A qualifying owner may also be the qualifying
operator.
(11) Qualifying
occupant--A person who:
(A) contracts with
either a qualifying owner or qualifying operator to place, or cause to be
placed, tangible personal property at the qualifying data center or qualifying
large data center project for use by the occupant. The qualifying occupant may
also be the qualifying owner or the qualifying operator of the same data
center; and
(B) is the sole
occupant of the qualifying data center or qualifying large data center project.
A qualifying occupant may provide data storage and processing services, but may
not sublease to a third party any real or tangible personal property located
within the area of a building designated by the qualifying occupant, qualifying
owner, or qualifying operator as part of the qualifying data center or
qualifying large data center project. For example, a qualifying occupant may
not sell or lease excess servers or server space, including the provision of
dedicated servers, at the qualifying data center to third parties. If a single
occupant leases 150,000 square feet of space in a building for use as a
qualifying data center, that occupant may not use 100,000 square feet for its
own qualifying use and sublease the remaining 50,000 square feet to a third
party, even if the third party will also use the space as a data center. An
occupant may, however, lease 150,000 square feet of space in a building and,
during the certification process, formally designate 100,000 square feet or
more of the space as the area to be used as its qualifying data center. The
occupant could then sublease the space not designated for use as the qualifying
data center to a third party without causing the qualifying data center to lose
its certification as a qualifying data center. Tangible personal property
purchased for use in the space outside the area designated for use as a
qualifying data center would not qualify for exemption under this
section.
(b)
Exemption.
(1) The exemption under this
subsection for qualifying data centers only applies to Texas state sales and
use taxes. See Tax Code, §
151.359 (Property Used in
Certain Data Centers; Temporary Exemption). The exemption under this subsection
for qualifying large data center projects applies to Texas state and local
sales and use taxes. See Tax Code, §
151.3595 (Property Used in
Certain Large Data Center Projects; Temporary Exemption).
(2) Tangible personal property purchased by a
qualifying owner, qualifying operator, or qualifying occupant for installation
at, incorporation into, or in the case of subparagraph (A) of this paragraph,
use in a qualifying data center or qualifying large data center project is
exempted from the applicable taxes as specified in paragraph (1) of this
subsection if the tangible personal property is necessary and essential to the
operation of the qualifying data center or qualifying large data center project
and is:
(A) electricity. A predominant use
study is required to differentiate between taxable and nontaxable use of
electricity from a single meter unless the qualifying data center or qualifying
large data center project is a stand-alone facility of which the qualifying
occupant is the sole inhabitant. For more information regarding predominant use
studies, refer to §
3.295 of this title (relating to
Natural Gas and Electricity). The qualifying owner, qualifying operator, or
qualifying occupant of a stand-alone qualifying data center or qualifying large
data center project is not required to perform a predominant use study and may,
in lieu of tax, supply its utility provider with a properly completed Exemption
Certificate for Qualifying Data Centers or Qualifying Large Data Center
Projects, Form 01-929. Refer to subsection (h) of this section regarding
exemption certificates;
(B) an
electrical system;
(C) a cooling
system;
(D) an emergency
generator;
(E) hardware or a
distributed mainframe computer or server;
(F) a data storage device;
(G) network connectivity equipment;
(H) a rack, cabinet, and raised floor
system;
(I) a peripheral component
or system;
(J) software;
(K) a mechanical, electrical, or plumbing
system that is necessary to operate any tangible personal property described in
this subsection;
(L) any other item
of equipment or system necessary to operate any tangible personal property
described in this subsection, including a fixture; or
(M) a component part of any tangible personal
property described in this subsection.
(3) The purchase price of qualifying tangible
personal property, including building materials, electricity, and other items,
jointly procured by a qualifying owner, qualifying operator, or qualifying
occupant for installation at, incorporation into, or use in one or more
qualifying data centers or qualifying large data center projects is to be
apportioned among the purchasers for purposes of subsection (i)(2) of this
section, concerning liability in the event of revocation.
(c) Exclusion from exemption. The exemption
in subsection (b) of this section does not apply to:
(1) office equipment or supplies;
(2) maintenance or janitorial supplies or
equipment;
(3) equipment or
supplies used primarily in sales activities or transportation
activities;
(4) tangible personal
property on which the purchaser has received or has a pending application for a
refund under Tax Code, §
151.429 (Tax Refunds for
Enterprise Projects);
(5) tangible
personal property that is rented or leased for a term of one year or
less;
(6) tangible personal
property not otherwise exempted under subsection (b) of this section that is
incorporated into real estate or into an improvement of real estate;
or
(7) notwithstanding Tax Code,
§
151.3111 (Services on
Certain Exempted Personal Property), a taxable service that is performed on
tangible personal property exempted under this section.
(d) Eligibility for certification as a
qualifying data center. The comptroller may certify an applicant facility as a
qualifying data center if the following requirements are met:
(1) the applicants declare on the application
for certification that the facility does or will meet all of the requirements
for the definition of the term "data center" set out in subsection (a)(3) of
this section;
(2) the data center
is at least 100,000 square feet of space located in a single building or
portion of a single building;
(3)
the qualifying owner, qualifying operator, or qualifying occupant, jointly or
independently, have agreed to, on or after September 1, 2013:
(A) create at least 20 qualifying jobs on or
before the fifth anniversary of the date that the data center is certified by
the comptroller as a qualifying data center; and
(B) make a capital investment of at least
$200 million in that particular data center over a five-year period beginning
on the date the data center is certified by the comptroller as a qualifying
data center. For purposes of this subparagraph:
(i) an expenditure can only be counted toward
the capital investment requirement if invoiced to the qualifying owner,
qualifying operator, or qualifying occupant on or after the date the
comptroller certifies the data center; and
(ii) purchases by a related corporate entity
on behalf of a qualifying owner, qualifying operator, or qualifying occupant
cannot be included in the capital investment calculation; and
(4) the applicant
facility does not have an agreement under which it receives a limitation on
appraised value of property for ad valorem tax purposes under Tax Code, Chapter
313 (Texas Economic Development Act).
(e) Eligibility for certification as a
qualifying large data center project. The comptroller may certify an applicant
facility as a qualifying large data center project if the following
requirements are met:
(1) the applicants
declare on the application for certification that the facility does or will
meet all of the requirements for the definition of the term "data center" set
out in subsection (a)(3) of this section;
(2) the data center is composed of one or
more buildings totaling at least 250,000 square feet of space located or to be
located on a single parcel of land or on contiguous parcels of land that are
commonly owned or owned by affiliation with the qualifying operator;
(3) the qualifying owner, qualifying
operator, or qualifying occupant, jointly or independently, have agreed to:
(A) on or after June 1, 2015, create at least
40 qualifying jobs on or before the fifth anniversary of the date that the data
center submits the application to the comptroller;
(B) on or after May 1, 2015, make a capital
investment of at least $500 million in that particular data center over a
five-year period beginning on the date the data center submits the application
to the comptroller. For purposes of this subparagraph:
(i) an expenditure can only be counted toward
the capital investment requirement if invoiced to the qualifying owner,
qualifying operator, or qualifying occupant on or after the date the data
center submits the application to the comptroller; and
(ii) purchases by a related corporate entity
on behalf of a qualifying owner, qualifying operator, or qualifying occupant
cannot be included in the capital investment calculation; and
(C) on or after June 1, 2015,
contract for at least 20 megawatts of transmission capacity for operation of
the qualifying large data center project; and
(4) the applicant facility does not have an
agreement under which it receives a limitation on appraised value of property
for ad valorem tax purposes under Tax Code, Chapter 313 (Texas Economic
Development Act).
(f)
Application process.
(1) A facility that is
eligible to be certified under subsection (d) of this section as a qualifying
data center or under subsection (e) of this section as a qualifying large data
center project by the comptroller shall apply for a registration number on the
Texas Application for Certification as a Qualifying Data Center, Form AP-233 or
Texas Application for Certification as a Qualifying Large Data Center Project,
Form AP-236, as applicable. The application must include:
(A) the name, contact information, and
authorized signature for the qualifying occupant and, if applicable, the name,
contact information, and authorized signature for the qualifying owner and the
qualifying operator who will claim the exemption authorized under this
section;
(B) a business proposal
summarizing the plan of the qualifying owner, qualifying operator, or
qualifying occupant, independently or jointly, to meet the requirements in
subsection (d) of this section for qualifying data centers or subsection (e) of
this section for qualifying large data center projects; and
(C) a statement confirming that the
qualifying owner, qualifying operator, and qualifying occupant, as applicable,
agree that the statute of limitation provided in Tax Code, §
111.201 (Assessment
Limitation) on the assessment of tax, penalty, and interest on purchases made
tax-free under this section is tolled from the date of certification until the
fifth anniversary of that date, or until such time as the comptroller is able
to verify that the requirements set out in subsection (d) of this section for
qualifying data centers or subsection (e) of this section for qualifying large
data center projects have been met, whichever is later.
(2) Information provided on and with the
application under this subsection is confidential under Tax Code, §
151.027 (Confidentiality of
Tax Information).
(3) After
certifying the qualifying data center or qualifying large data center project,
the comptroller will issue a separate registration number to the qualifying
owner, the qualifying operator, and the qualifying occupant, as applicable,
based on the registration number of the qualifying data center or qualifying
large data center project.
(g) Temporary exemption dates. The exemption
under this section is temporary. The exemption applies to qualifying purchases
made by a qualifying owner, qualifying operator, or qualifying occupant during
the exemption period applicable to the qualifying data center or qualifying
large data center project.
(1) The exemption
period for a qualifying data center or qualifying large data center project
begins on the date the data center is certified by the comptroller.
(2) A qualifying data center's exemption
period ends 10 or 15 years from the certification date, depending on the amount
of capital investment made.
(A) A qualifying
data center's sales tax exemption expires 10 years from the date of
certification by the comptroller if the qualifying owner, qualifying operator,
or qualifying occupant, independently or jointly, makes a capital investment of
at least $200 million, but less than $250 million, within the first five years
after certification.
(B) A
qualifying data center's sales tax exemption expires 15 years from the date of
certification by the comptroller if the qualifying owner, qualifying operator,
or qualifying occupant, independently or jointly, makes a capital investment of
at least $250 million within the first five years after
certification.
(3) A
qualifying large data center project's exemption period ends 20 years from the
date of certification by the comptroller provided the qualifying owner,
qualifying operator, or qualifying occupant, independently or jointly, makes a
capital investment of at least $500 million within the first five years after
certification.
(4) The comptroller
will audit each qualifying data center and qualifying large data center project
at its five year anniversary to verify the amount of capital investment made
and to verify that the jobs creation requirement has been met. The comptroller
will also verify the contract for transmission capacity for operation of a
qualifying large data center project.
(5) Once all jobs are created, as required
under subsection (d) of this section for qualifying data centers or subsection
(e) of this section for qualifying large data center projects, the qualifying
owner, qualifying operator, or qualifying occupant, either singly or jointly,
must timely notify the comptroller by providing a properly completed Qualifying
Data Center or Qualifying Large Data Center Project Job Creation Report,
01-160.
(h) Exemption
certificate. Each person who is eligible to claim an exemption authorized by
this section must hold a registration number issued by the comptroller.
(1) To claim an exemption under this section
for the purchase of tangible personal property, a qualifying owner, qualifying
operator, or qualifying occupant must provide to the seller of a taxable item
an Exemption Certificate for Qualifying Data Centers or Qualifying Large Data
Center Projects, Form 01-929. The exemption certificate does not apply to local
sales and use tax for qualifying data centers. Refer to subsection (l) of this
section for more information regarding local sales and use tax.
(2) To claim the exemption, a qualifying
owner, qualifying operator, or qualifying occupant must properly complete all
required information on the exemption certificate, including:
(A) the data center registration
number;
(B) the registration number
of the qualifying owner, qualifying operator, or qualifying occupant, as
applicable;
(C) the address of the
qualifying owner, qualifying operator, or qualifying occupant, as
applicable;
(D) a description of
the tangible personal property to be purchased;
(E) the signature of the purchaser;
and
(F) the date of the
purchase.
(3) The
properly completed Exemption Certificate for Qualifying Data Centers or
Qualifying Large Data Center Projects is the seller's documentation that it
made a tax-exempt sale in good faith. The seller is required to keep the
exemption certificate and all other financial records relating to the exempt
sale, including records to document the seller's collection of the local sales
and use tax for qualifying data centers. The seller must be able to match
invoices of tax-exempt sales to the purchaser's exemption certificate. This may
be accomplished by the seller entering the purchaser's registration number on
each invoice.
(4) A seller is not
required to accept an exemption certificate from a qualifying data center or
qualifying large data center project. If a seller chooses not to accept an
exemption certificate issued by a purchaser, the purchaser may instead request
a refund of the tax paid from the comptroller. Sellers shall provide an
Assignment of Right to Refund, Form 00-985, when the exemption is not provided
to a qualifying owner, qualifying operator, or qualifying occupant when
qualifying purchases of tangible personal property are made.
(i) Revocation. By filing an
application for certification of a qualifying data center or qualifying large
data center project, the qualifying owner, qualifying operator, and qualifying
occupant, as applicable, commit to meeting the requirements set out in
subsection (d) of this section for qualifying data centers or subsection (e) of
this section for qualifying large data center projects and certify the data
center will be occupied by a single qualifying occupant over the life of the
exemption. For more information, refer to subsection (d) of this section for
qualifying data center requirements, subsection (e) of this section for
qualifying large data center project requirements, and subsection (g) of this
section for the term of the exemption.
(1)
Failure to meet one or more of the certification requirements described in
subsection (d) of this section for qualifying data centers or subsection (e) of
this section for qualifying large data center projects will result in
termination of the certification and the revocation of all related qualifying
owner, qualifying operator, and qualifying occupant exemption registration
numbers.
(2) Each entity that has a
registration number revoked will be liable for unpaid sales or use taxes,
including penalty and interest from the date of purchase, on all items
purchased tax-free under this section, back to the original date of
certification of the data center as a qualifying data center or qualifying
large data center project.
(3) If a
formal waiver of the statute of limitations under Tax Code, §
111.203 (Agreements to
Extend Period of Limitation) is deemed necessary to insure against a loss of
revenue to the state in the event that a data center's certification is
revoked, by allowing the comptroller to verify, prior to the expiration of the
statute of limitations on assessment, that each of the requirements in
subsection (d) of this section for qualifying data centers or subsection (e) of
this section for qualifying large data center projects has been met, then the
failure to execute a timely statutory waiver will also result in the
termination of the data center's certification and the revocation of all
related registration numbers.
(j) Documentation and record retention.
(1) In accordance with Tax Code, §
111.0041 (Records; Burden to
Produce and Substantiate Claims) and §151.025 (Records Required to be
Kept), all qualifying occupants, qualifying owners, and qualifying operators of
a qualifying data center or qualifying large data center project must keep
complete records to document any and all tax-exempt purchases made under this
exemption, and to confirm payment of the local sales and use tax on such
purchases by qualifying data centers. See §
3.281 of this title (relating to
Records Required; Information Required) for additional guidance.
(2) In addition, each qualifying owner,
qualifying operator, and qualifying occupant of a qualifying data center or
qualifying large data center project must keep complete records to document the
applicable capital investment made in the qualifying data center or qualifying
large data center project; the creation of the required number of applicable
qualifying jobs including the retention of those jobs for a period of at least
five years; and documentation of the contract for the applicable transmission
capacity for qualifying large data center projects. These records must be
retained until the data center's certification expires. For example, a
qualifying owner, qualifying operator, or qualifying occupant should keep
comprehensive records of capital investment expenditures, such as contracts,
invoices, and sales receipts, and employment records regarding job creation,
including associated third-party employer positions.
(3) In the event the comptroller revokes the
certification of a qualifying data center or qualifying large data center
project, the records of all qualifying owners, qualifying operators, and
qualifying occupants must be retained until all assessments have been
resolved.
(k) Successor
Liability. A purchaser of a qualifying owner, qualifying operator, or
qualifying occupant's business or stock of goods in a qualifying data center or
qualifying large data center project is subject to Tax Code, §
111.020 (Tax Collection on
Termination of Business).
(l) Local
tax. The state sales and use tax exemption for qualifying owners, qualifying
operators, or qualifying occupant of a qualifying data center does not apply to
local sales and use tax. Local sales and use tax must be paid on the purchase
of any tangible personal property that qualifies for exemption from state sales
and use tax under this section. This subsection is not applicable to qualifying
large data center projects.
(m) An
entity that qualifies for the exemption under this section as a qualifying data
center or qualifying large data center project is not eligible to receive a
limitation on appraised value of property for ad valorem tax purposes under Tax
Code, Chapter 313 (Texas Economic Development Act).
Notes
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