Massachusetts Qualified Data Center Sales and Use Tax Exemption

The Massachusetts Qualified Data Center Sales and Use Tax Exemption supports the development of data centers within Massachusetts by providing an exemption on the sales and use tax that otherwise would be paid on eligible expenditures.

Chapter 238 of the Acts of 2024, the Mass Leads Act, established a sales and use tax exemption for eligible expenditures incurred during the construction and operation of a Qualified Data Center located in Massachusetts. The Executive Office of Economic Development (EOED) administers the certification of applicants for the tax exemption

To be eligible, a data center facility must be comprised of one or more data center buildings  totaling at least 100,000 square feet, maintain or create at least 100 jobs in Massachusetts, and invest at least $50 million in Qualified Data Center Costs. 

Apply for the Tax Exemption 

About the Tax Exemption

Approved qualified data centers are eligible for a 20-year tax exemption commencing either the date a completed application is received by EOED or a prospective date identified in the application, not to exceed five-years (the qualification period).

A qualified data center may use the tax exemption for the following eligible expenditures* during the qualification period:

1. Eligible data center equipment for use in a qualified data center;
2. Computer software for use in a qualified data center;
3. Electricity for use or consumption in the operation of a qualified data center; or
4. Construction costs incurred for the construction, renovation or refurbishment of a qualified data center.

*Note: Definitions of “eligible expenditures,” including eligible data center equipment, computer software and construction costs, are governed by M.G.L. c. 64H § 6(zz) and 400 CMR 9.02. Please consult these legal authorities (see "legal authority" below) for further details on eligible expenditures. 

Eligibility Criteria

To qualify for the tax exemption, an applicant must be certified by EOED as a qualified data center. Applicants seeking certification as a qualified data center must own or operate a data center facility located in Massachusetts and meet the following criteria:

1. The applicant must construct or substantially refurbish a data center facility that is used to house computer information technology equipment, networking, data processing or data storage, including, but not limited to, servers and routers for the storage, management and dissemination of data and information;
2. The total aggregate square footage of the qualified data center buildings must be at least 100,000 square feet comprised of one or more data center buildings on a single parcel or contiguous parcels;
3. The applicant must maintain or create at least 100 jobs located in Massachusetts within five years of certification; and
4. The applicant invests at least $50 million on “qualified data center costs” within 10 years of certification, as defined in M.G.L. c. 64H § 6(zz) and 400 CMR 9.02.

Application Requirements and Certification Process

To apply for certification as a qualified data center, an applicant must complete and submit a qualified data center sales and use tax exemption application to EOED.

A completed application requires the following information:

• Details on the business entity applying for certification;
• Qualified data center facility details (access “MA QDC Attachment A - Buildings Template Spreadsheet” required for the application) – number of buildings, square footage of buildings, construction details, and a narrative description of the data center project;
• Qualified data center costs (access “MA QDC Attachment B - Investment and Expenditure Details” required for the application) - anticipated investments in qualified data center costs that exceed $50 million within a 10-year period from the effective date of the certification;
• Anticipated eligible expenditures (access “MA QDC Attachment B - Investment and Expenditure Details” required for the application) - all anticipated expenditures eligible for exemption under the qualified data center sales and use tax exemption;
• Employment details (access “MA QDC Attachment C - Employment Details” required for the application) – anticipated number, type and hiring schedule of jobs that will support the operation of the data center facility;
• Information regarding anticipated energy demand and consumption;
• Support for the data center – letters of support or endorsement from municipalities, legislators, civic organizations and business associations, including any local or other incentives received for the data center project; and
• Other information necessary to determine the applicant’s eligibility for the tax exemption.

Qualified data centers seeking separate qualification periods for subsequent data center buildings located at the approved data center facility site are required to identify such buildings in the “MA QDC Attachment A - Buildings Template Spreadsheet” as part of the initial application process and submit an additional, separate application prior to commencement of commercial operations. Subsequent data center buildings not identified in the initial application are ineligible for separate qualification periods.

Application Timeline

• Completed application determination - within 15 business days of receiving an application, EOED will notify the applicant if it deems the application to be complete. If EOED determines the application is not complete, the applicant will be notified of the information required to complete the application.
• Approve or deny application – within 60 business days of receiving a completed application, EOED will approve or deny an application for certification.

Approval of Application

If EOED determines an applicant meets the requirements for certification, it will issue a certificate to the applicant that contains the following information:

• Name of entity approved for the tax exemption
• Certification effective date and termination date
• Qualification period or periods for which the tax exemption is effective
• Any other information, conditions or limitations EOED determines are necessary to ensure the qualified data center is constructed and operated consistent with M.G.L. C. 23a § 70, C. 64h § 6(zz), and 400 CMR. 9.00.

Denial of Application

If EOED denies an application, the applicant will receive a notification that includes reasons for the denial and be provided 30 calendar days to cure the deficiencies. 

Reporting Requirements

A certified qualified data center must submit a report by September 1 of each year to EOED that includes the following information:

• The actual number and type of jobs created and maintained at the qualified data center and at other locations in Massachusetts;
• The actual investments in qualified data center costs associated with the qualified data center;
• A cost accounting report detailing the actual eligible expenditures made that are exempt under the tax exemption.
• Any other information EOED requires to determine the qualified data center remains eligible for the tax exemption.

Legal Authority