A data center is like a bank vault — its true value is on the inside.
Instead of gold bars and bags of cash, data centers are filled with cutting-edge computer servers that store the world’s digital information and the brains of artificial intelligence.
The high-grade technology housed within these facilities makes them eye-popping projects to attract, sometimes billed as multibillion-dollar investments. A new study, however, found many states, including Georgia, are forgoing hundreds of millions of dollars each year by allowing companies to buy that expensive equipment effectively tax-free.
Georgia is projected this year to waive roughly $296 million in sales and use taxes for equipment purchased for large data centers, according to a report released Thursday by left-leaning incentives watchdog Good Jobs First. Georgia is among 10 states projected to waive at least nine figures worth of tax collections through statewide programs aimed at incentivizing data centers, an industry that has grown immensely in recent years.
Georgia lawmakers have codified two sales tax exemption programs for data center companies: one for large or hyperscale projects and another 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 estimates those incentives will surpass $327 million in 2026.
“Because server farms are extremely capital intensive and require replacement of servers every two to five years when they wear out, these exemptions are lucrative for companies and costly for states and localities,” the Good Jobs First report says.
Economic development and incentive proponents say other states compete for these projects, which can add to local tax bases and create jobs, so these programs can be a deciding factor.
Tough to track
Georgia has been ground zero for the industry’s rampant growth spurt, spurred by fast-developing AI technologies and increased demand for more digital storage space.
Since 2023, the metro Atlanta area has been the hottest data center market in the country, becoming the first region to dethrone Northern Virginia in leasing activity for data storage space, according to real estate services firm CBRE.
At the end of 2024, nearly 2,160 megawatts worth of data center development was under construction across metro Atlanta, more than double the area’s amount of existing space. No other major market in the U.S. comes close to matching that projected wave of computer server farms.
The ballooning amount of data center space under construction has proved a challenge for state budget projections, Good Jobs First senior research analyst Kasia Tarczynska said.
In 2024, Georgia’s annual tax expenditure report estimated large data center equipment exemptions would total about $15 million. Two reports later, that figure was adjusted to $36 million — a 140% increase.
“The number of (data center) projects has grown so much in the last couple of years that states, including Georgia, had to revise the cost of these sales tax exemptions quite significantly,” Tarczynska said.
Other states have seen even larger revisions, such as Texas, where, in 2025, the cost projection for its data center sales tax exemption program was increased from $130 million to $1 billion.
“The industry’s high-velocity growth, combined with the virtually automatic structure of the state tax exemptions, is preventing states from making accurate cost projections,” the Good Jobs First report said.
‘The state is losing money’
Good Job First’s analysis does not evaluate other forms of tax revenue generated by data centers, the strain they place on utility grids nor other local incentive programs.
Some Georgia counties and cities have approved multimillion-dollar property tax breaks for large data center projects, arguing that the facility will generate significantly more tax revenue in the long term. Proponents also say data center employees earn high salaries, even though usually only a few dozen work full time in the mammoth-sized facilities.
It’s a challenge to evaluate the full return on investment at both a state and local level, given the complicated layers of government incentives to woo data centers. But the most recent analysis in Georgia didn’t find many financial benefits.
In late 2022, the University of Georgia evaluated the state’s sales tax program for hyperscale data centers, one of the two incentives Good Jobs First analyzed. The audit found state tax collections decreased as a result of the policy, ranging from a $5 million loss in 2018 when the state first adopted the policy to a projected $57 million loss in 2030.
Georgia’s law mirrors a similar Virginia law that dozens of other states have copied. Despite heavy lobbying from the industry, the Georgia General Assembly last year passed a bill to suspend the program for further review. But Gov. Brian Kemp vetoed it, saying it would be abrupt and could undermine investment.
Good Jobs First advocates for all states to revoke their statewide data center incentive programs, arguing they aren’t needed and act as a corporate giveaway.
“The new tax that they generate is not enough to cover the tax breaks they receive,” Tarczynska said. “So in the end, the state is losing money.”
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