Utah is unable to determine exactly how much revenue the state is losing to data center sales tax exemptions because the state does not collect the necessary data, according to a report published September 1.
A legislative action nearly two decades ago repealed reporting requirements, leaving a gap in transparency that makes it difficult for policymakers to evaluate the tax exemption program as interest in data centers grows.
Rep. Jill Koford, R-Ogden, stated in an email that the rapid growth of data-center investment raises questions about whether the current framework and available data remain adequate. Koford, who sponsored a bill passed earlier this year regarding water usage transparency, noted that the 2009 legislative change to remove reporting requirements for tax-exempt transactions has left limited visibility into the fiscal impact of equipment exemptions for modern large data centers.
Kristian Fors, an analyst with the Utah-based Libertas Institute, said that transparency and accountability are vital for government policy, noting that the state cannot manage what it cannot measure.
Kasia Tarczynska, author of a report from the nonprofit Good Jobs First, said that while many states created these exemptions for smaller-scale data centers 10 to 15 years ago, the industry has changed significantly due to the deployment of artificial intelligence. Tarczynska noted that some states, including Nebraska, Ohio, Illinois, and Massachusetts, have announced pauses on tax incentives for data centers.
The financial implications of these exemptions vary significantly. A report from Good Jobs First found that 14 of the 37 states with such exemptions do not publish official revenue losses in a timely manner. Among those that do, reported losses ranged from $830,000 to $1.9 billion in 2025.
In Utah, if losses reached the higher end of that spectrum, it could represent nearly half of the state's total sales and use tax collection from last year. Such an amount could potentially cover a sizable gap in the state's Medicaid budget or quadruple the amount allocated for a first-time home-owner program this year.
Industry perspectives on the necessity of these incentives remain divided. Khara Boender, a spokesperson for the Data Center Coalition, argued that tax exemptions can be decisive factors in location decisions, citing a 2019 review in Virginia that found most data center investments there would not have occurred without tax exemptions.
However, Tarczynska suggested that subsidies often act as a bonus rather than a primary driver for site selection, which typically focuses on electricity prices, fiber connectivity, land, regulations, water access, and climate.
The Utah Tax Commission's ability to produce annual estimates on sales and use tax exemptions is limited in categories where a small number of companies utilize the exemption, such as data center machinery and equipment, according to Deputy Executive Director Jason Gardner.
