Qualified Data Centers

New Data Centers

• At least 25,000 square feet and
• Invested at least $30 million within 48 months
• Attain the three following building characteristics:
  • Uninterruptible power supplies, generator backup power, or both
  • Sophisticated fire suppression and prevention systems
  • Enhanced security

Refurbished Data Centers

• Rebuilt or modified at least 25,000 square feet and
• Invested at least $50 million within 24 months
• Attain the three following building characteristics:
  • Uninterruptible power supplies, generator backup power, or both
  • Sophisticated fire suppression and prevention systems
  • Enhanced security

For more information, see Data Center Sales Tax Incentives from the Minnesota Department of Employment and Economic Development.

When do I qualify for the exemption?

Your facility must be certified by DEED before you qualify for the exemption. You cannot request refunds until you qualify.

When your facility is certified, DEED will notify you. Once the facility is certified, you may apply for refunds on qualifying purchases made before your certification.

This exemption applies to:

• Electricity used to operate or maintain a qualified data center
• Enterprise information technology equipment
• Software

Examples include:

• Cooling systems, cooling towers, and other temperature control infrastructure
• Computing, networking, and data storage equipment (computers, servers, routers), including hardware installation and maintenance agreements
• Power infrastructure to transfer, distribute, and manage electricity
• Rack systems, trays, and cable
• Software purchased for use in a data center, including installation and maintenance agreements.

What software qualifies for the exemption?

To qualify, the original software license or original software purchased must both:

• Be loaded at the qualified data center
• Remain on the enterprise information technology equipment located in the qualified data center

For example, qualifying software may:

• Operate, maintain, control, or monitor the enterprise information technology equipment located in the data center
• Manage, manipulate, analyze, collect, store, process, distribute, or allow access to large amounts of data at the data center, or perform other similar functions
• Be accessed through the data center servers, including remote access
• Generate data that is stored on the data center servers and is accessible from outside the data center
• Have its licensing centralized at the data center, with remote access to the data center servers for license verification

Do I need to provide software documentation to receive the exemption?

Yes. You must provide documentation to show the original license or original software was loaded and remains at the qualifying facility.

Examples include:

• Installation invoices 
• Invoices with ship-to, delivery addresses, or installation location information
• Software license agreements 

Note: This list is not all-inclusive and we may require a combination of records. The records provided must be relevant, reliable, and consistent.

What electricity qualifies for this exemption?

Once the data center is certified by DEED, you may purchase electricity exempt from sales tax. To claim this exemption, give your supplier a completed Form ST3, Certificate of Exemption.

Use Form ST11, Sales and Use Tax Refund Request to request a refund for sales tax paid on electricity used on or after the date the facility became a qualified data center.

You may file a refund request for tax paid on electricity between the date your facility met the qualified facility requirements and the date your facility was certified.

Your facility is qualified once you:

• Construct new or substantially refurbish 25,000 square feet
• Spend $30 million within 48 months on a new data center or $50 million within 24 months on a refurbished data center
• Attain the three following building characteristics:
  • Uninterruptible power supplies, generator backup power, or both
  • Sophisticated fire suppression and prevention systems
  • Enhanced security

Some items are taxable even if they are required for the facility to become a qualified data center. Taxable items include:

• Building materials
• Diesel fuel or gasoline used in back-up generators
• Fire suppression systems
• Office furniture
• Security systems
• Software that is not loaded at the data center
• Software that is loaded at the data center but neither the original license nor the original software remain at the data center
• Software maintenance agreements prior to July 1, 2013

When you purchase qualifying equipment and computer software, you must pay sales or use tax and then request a refund. To request a refund, use Form ST11, Sales and Use Tax Refund Request and follow the instructions. You may file two refund requests per calendar year. 

What if a data center has multiple owners?

Each owner must apply separately for a refund of the tax paid on their purchases of equipment and software.

What if I’m a tenant of a co‐located certified data center?

Each tenant‐business housed in a co‐located certified data center may submit their own refund request using Form ST11. You will need to show that your business is operating out of a qualified data center. You need to keep any agreements or other documents that verify this and have them available when you submit a refund request.

How long does the exemption last?

Once a facility is certified by DEED, they may request refunds for up to 20 years from the date of their first qualifying purchase, or by June 30, 2042, whichever is earlier.

For example, if the date of your first qualifying purchase was April 1, 2014, you may request refunds for purchases made on or before March 31, 2034.

What determines the date of my first qualifying purchase?

We determine the date of your first qualifying purchase by the first item on your refund request that qualifies for the refund. The purchase date of the first qualifying item becomes the date that you are eligible for the sales and use tax refund for up to 20 years.

• Minnesota Statute 297A.68, subdivision 42, Qualified data centers
• Revenue Notice 16-07, Sales and Use Tax – Exemptions – Qualified Data Centers
• Fact Sheet 129, Utilities Used in Production
• Fact Sheet 134, Computer Software