Washington has enacted legislation under Washington Senate Bill 6231 that eliminates key sales and use tax exemptions previously available to data centers.
The changes impact replacement equipment and refurbished data centers, which historically allowed ongoing exemption benefits for existing facilities.
Removal of Replacement Equipment Exemption
Washington no longer treats replacement server equipment as qualifying exempt equipment.
Only original server equipment installed in an eligible data center qualifies for exemption going forward.
This means:
- Routine equipment refreshes and upgrades are now taxable
- Ongoing exemption opportunities for existing data centers are significantly reduced
Refurbished Data Centers No Longer Qualify
A data center that is refurbished on or after July 1, 2026 is no longer considered an eligible computer data center.
This applies to projects involving:
- Modernization of servers
- Upgrades to power infrastructure
- Improvements to ventilation or facilities
Elimination of Refurbishment-Based Certificates
Washington will no longer issue exemption certificates for data centers that qualify through refurbishment after July 1, 2026. In addition, any existing refurbishment-based exemptions will expire after July 1, 2026.
Effective Dates
June 11, 2026 – Law becomes effective
July 1, 2026 – Key provisions take effect, including:
- Removal of replacement equipment exemption
- Disqualification of refurbished data centers
- Expiration of refurbishment-related benefits
What This Means to Your Businesses
The exemption is now limited to first-time investments only.
New data center construction and the initial installation of server equipment may still qualify for exemption.
Any future activity, including:
- Replacing servers
- Upgrading equipment
- Refurbishing existing facilities is now fully subject to sales and use tax
In other words, businesses can benefit from the exemption when they build and equip a data center for the first time, but not when they upgrade or replace equipment later.
Leyton’s Perspective
These changes reduce one of the more valuable recurring exemption opportunities for data center operators.
Companies with existing facilities in Washington should review upcoming capital expenditures and assess whether purchases made before July 1, 2026 can still qualify.
If your business operates data centers in Washington, Leyton’s SALT team can help evaluate the impact and identify any remaining tax exemptions or refund opportunities.
