Georgia’s sales tax breaks for data centers tally more than $2.5 billion

The adjustment also highlights how programs intended to recruit business can become exponentially more expensive if lawmakers underestimate an industry’s growth potential, said Kasia Tarczynska, a senior research analyst at left-leaning incentives watchdog Good Jobs First. The organization this week publicized the report from Gov. Brian Kemp’s budget planners in a news release.

“These estimates are growing in a really huge way,” she told The Atlanta Journal-Constitution in an interview. “And I’m worried that by the next year when the next year’s tax expenditure report comes out, the estimates will be even larger.”

Georgia has emerged as one of the top data center markets in the United States. Although supporters have cheered the investment and jobs they bring, many residents have raised concerns about land use, water consumption and electricity demand the huge computing centers require.

So far, debate under the Gold Dome this legislative session has intensified over whether steps are needed to protect consumers from the cost of electricity infrastructure planned to serve the power hungry server farms.

Data center developers, meanwhile, continue to add to Georgia’s project pipeline.

Link Logistics on Thursday pitched the sixth new data center project this year in Georgia, according to Development of Regional Impact filings. A DRI is an infrastructure study required for large projects.

The pitch by Link Logistics, a subsidiary of private equity giant Blackstone, includes nearly 1.6 million square feet of data center space across five buildings for a 232-acre site in Union City off Roosevelt Highway.

New scale

Georgia lawmakers have codified two sales tax exemption programs for data center companies: one for large or hyperscale projects and the other for bulk computer equipment purchases. The Georgia Department of Economic Development advertises both incentives as tools to attract data centers and high-tech companies.

Those two programs have waived at least $163 million in local and state sales tax collections each year since 2022, according to state tax expenditure reports. The Governor’s Office of Planning and Budget found the subsidies eclipsed $1 billion in tax savings during 2025’s fiscal year, and it projects that figure to nearly triple by 2027.

Credit: AP

Credit: AP

Tarczynska said these programs, which were adopted by lawmakers before the AI boom of 2023, have proved to be outdated and financially boost some of the world’s most valuable companies and an industry that critics contend needs no taxpayer-backed assistance.

“We are applying an old way of subsidization to an industry that has not existed before,” she said of hyperscale data centers. “This is a totally new industry, … that’s why it’s so extremely important for subsidy programs, when they are created, to include sunset provisions.”

A sunset provision is when a policy will automatically expire unless extended by lawmakers. The state’s current high-tech data center sales tax exemption is set to sunset at the end of 2031, but there are multiple bills up for consideration that would pause or eliminate it sooner.

Since it went into effect in 2018, that program by itself has waived more than $1 billion in potential taxes for Georgia. It’s expected to cost more than $700 million every year starting in 2027, according to a recent study of the incentive by the University of Georgia.

Kemp vetoed a bill in 2024 that would have suspended the tax breaks for hyperscale projects, saying it would be abrupt and could undermine investment.

When asked about the updated incentive estimate and potential legislation, a Kemp spokesperson said, “It’s our office’s practice not to comment on pending or proposed legislation out of respect for the legislative process.”

Local impacts

Big Tech and data center lobbyists argue that statewide tax incentives are needed to remain competitive. At least 37 states have some form of an incentive for data centers, according to the UGA study.

Data center proponents also say statewide tax losses are offset by the property tax gains reaped by local governments.

“It’s effectively a tax sourcing question,” Christopher Kimm, an executive at data center operator Equinix, previously told the AJC. “You’re moving it from the sales tax at the state level to the property tax at the local level.”

Credit: Zachary Hansen / Zachary.Hansen@ajc.com

Credit: Zachary Hansen / Zachary.Hansen@ajc.com

Local governments, however, often offer their own property tax breaks to data center developers and operators, which can mitigate those effects. Microsoft said last month it will no longer pursue local tax breaks, an announcement that comes after multiple local Georgia government agencies have provided tens of millions in property tax breaks to the company over the years.

In addition, property tax generation hinges on properties being assessed at the promised value, which doesn’t always happen. Some places, such as Fulton County, have been accused of underassessing high-end buildings and data centers, leaving millions of dollars in potential taxes on the table.

Georgia isn’t alone with struggling to properly estimate the scale of its tax incentive programs. Some states, such as Texas and Pennsylvania, have also vastly underestimated the cost of their data center subsidy programs, Good Jobs First said.

Texas in 2023 expected its data center tax exemption to waive about $130 million in 2025. But when the Lone Star State issued its latest report two years later, that figure ballooned by more than 682% to surpass $1 billion.

“It’s a problem across the country that governments and auditors are a few steps behind companies on understanding the real costs of these sales and use tax exemption programs,” Tarczynska said.