Exemption for Michigan Data Centers, January 2016

Equipment purchased by owners and operators of certain qualified data centers or co-located businesses is exempt from Michigan sales and use tax effective January 1, 2016, provided the equipment is for use, storage or consumption in the operations of the data center.

The exemption is due to the enactment of Senate Bills 616 and 617, which are both in effect through December 31, 2035. However, the exemption ceases to apply for businesses failing to meet the certain job creation criteria:

• The exemption continues to apply after January 1, 2022 only if at least 400 center industry jobs and related jobs are created since January 1, 2016.
• The exemption continues to apply after January 1, 2026 only if at least 1,000 Michigan jobs are created since January 1, 2016.

Seller requirements

Generally, sellers who comply with all requirements — such as obtaining identifying information of the purchaser and the reason for the exemption and maintaining proper records of all exempt transactions — are not liable for the tax if a purchaser improperly claims an exemption. It is the person who improperly claims the exemption who is liable for the tax.

For additional information, including a list of what qualifies as “data center equipment” and “qualified data center,” please refer to S 616 and S 617.

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