How Pennsylvania, Virginia, Ohio, Maryland, and Georgia define the equipment their data center sales tax exemptions cover, from networking hardware to software and replacement purchases. Current as of October 2026.
Interactive version: jphoebus.github.io/data-center-exempt-equipment
Debates over data center sales tax exemptions usually focus on who qualifies and what the exemptions cost. This comparison looks at what they cover. Each state defines exempt equipment differently, and those definitions decide whether networking hardware, software, power and cooling systems, and replacement purchases fall inside the exemption. It is a companion to State data center incentives, compared.
- Every state covers the network, not just the servers. Pennsylvania, Virginia, and Georgia name networking equipment in their definitions, and Maryland's guidance lists network infrastructure. Ohio covers any property used to conduct a data center business.
- Software is where definitions diverge. Pennsylvania exempts all software, including licensing agreements. Virginia exempts software only when it is sold or leased with exempt hardware. Ohio limits the exemption to software used to run the data center.
- Replacements make the exemptions recurring. Pennsylvania and Virginia explicitly cover replacement and upgrade purchases, and Maryland and Georgia cover ongoing purchases throughout the benefit period. Georgia's fiscal analysts, drawing on the state's evaluation, estimate that about 20 percent of data center equipment is replaced each year, so the exemption applies again with each refresh cycle, which helps explain why costs have outrun early projections.
- What qualifies a project is not always what is exempt. In Pennsylvania, servers, networking equipment, and software are exempt, but they do not count toward the capital investment threshold that qualifies a data center for the program.
- Fall 2026: Pennsylvania's Senate has not acted on the House-passed repeal (HB 2198).
- After November 3, 2026: Ohio's Substitute HB 646, which would cut new exemptions to 50%, is expected to return.
- December 15, 2026: Virginia's Joint Subcommittee on Tax Policy reports on its exemption.
- January 2027: Maryland's governor seeks repeal in the 2027 session.
- By December 31, 2031: Georgia's exemption sunsets, after an evaluation required under the state's new rule for large incentives nearing expiration.
The question I expect to shape the next round: as states attach conditions rather than repeal outright, whether the definition of covered equipment becomes the next lever, narrowing what counts rather than ending the exemption.
The full comparison is in exempt-equipment.csv, with one row per state and 12 columns covering the defined term, legal authority, networking equipment, software, replacements and upgrades, power and cooling, notable exclusions, qualification thresholds, and 2026 status. Each row lists its sources. Where a detail could not be confirmed, the file says so rather than guessing. This comparison is for policy analysis and is not tax or legal advice.
- What states changed on data centers in 2026
- State data center incentives, compared
- How states check their tax incentives
- DOE's SPARK grid selections, tracked
- Who pays for data center power
I'm Joshua Phoebus. I spent seven and a half years in Pennsylvania state government, including four years as Director of Performance and Transformation in the Office of Governor Tom Wolf, where I led the Commonwealth's performance-based budgeting engagement across twenty-nine executive agencies and guided agencies on compliance with the tax credit reviews required under Act 48.
- LinkedIn: linkedin.com/in/joshuaphoebus
- Website: joshuaphoebusllc.com