A change buried in HF5125 will make data center equipment purchases fully taxable starting next summer—and it could affect your supply chain and bidding.
Most construction and trades owners in Minnesota don't realize that a significant sales tax exemption is about to disappear. Starting July 1, 2026, Minnesota will repeal the sales tax exemption that currently allows data center operators to buy enterprise information technology equipment and computer software tax-free. After that date, those purchases will be subject to Minnesota's standard sales tax rate.
This change is buried in HF5125, a bill primarily focused on data center taxation. The repeal is codified in Section 6(b) on Page 4 of the bill and eliminates the exemption under Minnesota Statutes §297A.68, subdivision 42.
Currently, qualified data centers—including refurbished and large-scale facilities—can purchase specialized IT equipment and software without paying sales tax. This exemption has made Minnesota competitive for data center development and attracted significant investment in the state.
When the exemption ends on July 1, 2026, all such purchases will become fully taxable. That means data center operators will pay Minnesota's sales tax on enterprise information technology equipment and computer software they previously bought tax-free.
For trades and construction businesses, this matters in several ways. If you supply equipment, materials, or services to data center projects, you may see changes in how clients budget and bid work. Data center operators may adjust their purchasing timelines or sourcing strategies ahead of the July 2026 deadline. Some may accelerate purchases before the exemption expires to avoid the tax hit.
If you're bidding on data center construction or renovation projects, understanding this timeline helps you anticipate client behavior and price your work accordingly. Clients may front-load equipment purchases in the first half of 2026, or they may shift their project schedules to account for higher post-July costs.
The repeal takes effect July 1, 2026. That gives data center operators roughly 18 months from now to plan. If you work with data center clients, this is a good time to have conversations about their capital equipment plans and whether they're considering accelerating any purchases.
This change also signals a broader shift in Minnesota's tax policy toward data centers. The state is moving away from preferential tax treatment for the sector, which may influence future incentives or regulations affecting data center development in Minnesota.
For trades businesses that operate statewide or work across multiple sectors, the data center exemption repeal is one piece of the tax landscape to monitor. While it doesn't directly affect most construction materials or labor, it does affect a growing segment of Minnesota's economy and the clients who invest in it.
Source: Minnesota HF5125, Section 6(b), Page 4; Minnesota Statutes §297A.68, subd. 42.