A change buried in Idaho's H0897 will cost data center builders significantly more in taxes—but only if you start construction after a specific date.
Most Idaho business owners don't realize that a provision in H0897 is about to shrink a valuable sales tax exemption for data center construction. If you're planning to build or expand a data center facility, the timing of your project now matters enormously to your bottom line.
H0897 amends Idaho Code §63-3622VV(1) to restrict the sales tax exemption for data center equipment. Here's the key: any new data center facility where construction begins on or after April 1, 2026, loses the sales tax exemption on building materials, fixtures, and structural components.
The restriction is technically retroactive to January 1, 2026, but the operative trigger is the April 1, 2026 construction start date. After that date, only server equipment itself remains exempt from sales tax. Everything else—steel, concrete, electrical systems, HVAC, cabling infrastructure, and other structural components—becomes taxable.
For a data center operator, construction materials and fixtures typically represent a substantial portion of total project cost. Losing the sales tax exemption on these items means paying Idaho's sales tax (currently 6% statewide, potentially higher with local taxes) on hundreds of thousands or millions of dollars in materials and labor-related purchases.
A modest data center expansion could see tax liability jump by tens of thousands of dollars. Larger builds could face six-figure increases in state and local taxes.
This provision applies to any business—whether a dedicated data center operator, a tech company building internal infrastructure, or a retailer with significant server facilities—that is constructing a new data center facility. It does not affect existing exemptions for equipment replacements or upgrades at currently operating facilities, only new construction.
If you've already broken ground or have a construction contract signed before April 1, 2026, you may still qualify for the broader exemption, though the exact interpretation of "commenced" construction should be verified with Idaho's tax authority or your accountant.
If a data center project is on your roadmap, review your timeline immediately. The difference between starting construction in March 2026 versus May 2026 could represent significant tax savings. Consult with your tax advisor or accountant about whether your project qualifies for the current exemption and what documentation you'll need to prove construction commenced before the April 1 deadline.
The full text of H0897 and the specific amendment to §63-3622VV(1) are available through the Idaho Legislature's website. For a business-specific breakdown of how this applies to your situation, consider reaching out to your industry association or a tax professional familiar with Idaho's data center incentives.
Source: H0897, Section 1, amending Idaho Code §63-3622VV(1)