Enterprise Data Center Sales & Use Tax Exemption
This exemption significantly reduces the tax burden for qualified entities that receive certification.OVERVIEW
Signed into law by Governor Gretchen Whitmer, the new Enterprise Data Center Sales & Use Tax Exemptions took effect in Michigan on April 2, 2025 (use tax), and April 17, 2025 (sales tax).
WHAT IT DOES
This exemption eliminates Michigan’s 6% sales and use tax on eligible data center construction and equipment purchases. It significantly reduces the tax burden for qualified entities that receive certification from the Michigan Strategic Fund (MSF). Both the qualified entity and any businesses involved in the construction, alteration, or improvement of the enterprise data center may claim the exemption, provided the purchases are for eligible data center equipment used at the site.
REQUIREMENTS TO QUALIFY
- Located in Michigan
- One (1) or more buildings, designed and intended to house data center equipment to centralize the storage and processing of data
- Required capital investment of at least $250 million
- Job creation of at least 30 qualified new jobs with an annual wage of at least 150% of the prosperity region median wage. Those jobs must be maintained through December 31, 2050 (December 31, 2065, for brownfield sites or former power plant sites)
- Facility does not receive, and will not receive through the sunset, state or local property tax benefits, including Renaissance Zone and PA 198 of 1974, unless the local government approves by resolution
- Facility may not take electric service under the following rates: » Long-term industrial load rate
- An economic development tariff rate approved by the Michigan Public Service Commission
- A rate that causes residential customers to subsidize infrastructure and costs required to service the facility
ADDITIONAL ENVIRONMENTAL REQUIREMENTS
- No later than three (3) years after being placed in service, the facility will need to certify with MSF they have attained certification under one or more green building standards, including: BREEAM (new construction or in-use), Energy Star®, Envision, ISO 50001 (energy management), LEED (building design or operations and maintenance), Green Globes (new or existing buildings), or UL 3223
- Use of municipal water at the time the facility is placed in service (certified with MSF at the time the exemption is claimed)
- Procurement of clean energy
- Participation in a voluntary green pricing program
HOW IT WORKS
Qualified entities will be required to submit an application to the MSF, which will provide certification upon verification that all statutory criteria and MSF considerations are met. Qualified entities must receive the certification before qualified purchases are made in order to claim the exemption. Upon issuing a certification, MSF will provide Treasury with a copy of the certification. The qualified entity will be required to provide annual reporting to the MSF to determine that it continues to meet all qualifications for certification. No new certifications will be issued after December 31, 2029.
FEE STRUCTURE
The MSF will charge and collect reasonable administrative fees to effectuate the certification and compliance processes. Those fees are as follows:
- Application fee: $50,000
- Annual administrative fee: 0.25% of the minimum investment required, divided annually until the end of the term
- Amendment or transfer fee: $7,000 per occurrence
- Late reporting fee: $5,000 per occurrence
- Late annual administrative fee payment: $5,000 per occurrence
MEDC is Here and Ready to Help
When it comes to your business, we’re always open. Give us a call to learn more about the Enterprise Data Center Sales and Use Tax Exemption.
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