Have you been paying attention to the media’s coverage of the accelerating migration of enterprise and internet data center operations into colocation facilities and to the news about the roll out of more and more data centers across the country in service of the internet? If so, you may be up to speed on the exceptional tax “incentives” being offered to data center developers to move into specific states, cities, and counties. Most of the media’s recent attention has been focused on the mega size data center deployments, financed by the large internet and colocation operators in the U.S. But all data center owners, operators, and tenants should be equally mindful of how taxes and “incentives” will affect the tax burden and total cost of ownership (TCO) of a new operating facility, and what all should be considered when developing comprehensive site selection criteria.
The total tax cost of ownership (Tax TCO) calculation represents the tax and incentive component of a TCO calculation and can constitute as much as 8% or 9% of the overall costs of a given data center deployment. And, the variations in tax and legal codes from city to city and state to state can create real challenges for any developer to quickly grasp and compare the costs and benefits of alternate sites. In fact, some have found that opportunistic decisions to quickly select an available site, while failing to fully consider the many variables related to local taxes and incentives, can result in substantial and unnecessary costs in terms of real property, business personal property, and sales tax bills. Sort of like winning the lottery and finding you can’t afford to pay the taxes.