As the conversation around data centers has heated up recently, we thought it would be beneficial to state our blueprint for how these types of ventures should be treated when it comes to taxes. Utah should want to be competitive in this space. Data centers can bring major capital investment, construction activity, high-paying jobs, infrastructure upgrades, and long-term additions to the tax base. But as with any fast-growing industry, policymakers should be careful. The goal should not be to punish data centers, nor should it be to hand out overly generous special deals. The goal should be sound tax policy.
That means Utah needs a clear blueprint for how data centers should be treated.
The first priority is neutrality.
Data centers should generally be treated like other capital-intensive businesses. Policymakers should avoid singling them out for targeted tax penalties simply because they use large amounts of equipment, electricity, or land. Taxes on business inputs, such as machinery, equipment, utilities, and other operating costs, do not just fall on the business. They increase the cost of investment, make Utah less competitive, and can ultimately reduce economic growth.
At the same time, neutrality also means avoiding a system built around special, project-by-project giveaways. Broad, simple, and generally available tax policies are better than complex incentive packages negotiated behind closed doors. Utah should focus on low rates, broad bases, and predictable rules that apply fairly across industries.
For sales and use taxes, that means policymakers should be cautious about taxing major business inputs such as servers, machinery, equipment, and related construction materials. When these items are taxed, it raises the upfront cost of investment and discourages capital formation. A better approach is to treat these purchases as standard business inputs and, where possible, provide broad and automatic exemptions rather than narrow incentives tied to complicated job or investment thresholds.
Property taxes deserve careful attention as well. Land and buildings should be taxed under the same neutral rules that apply to other real property. But tangible personal property taxes on servers, batteries, and other equipment can create unusually heavy burdens for data centers. Servers are expensive, replaced frequently, and central to the operation of the facility. Taxing that equipment too aggressively can discourage reinvestment and place Utah at a competitive disadvantage.
Utah policymakers should continue looking for ways to reduce or eliminate taxes on tangible personal property. Where full elimination is not immediately possible, the state should at least provide predictable depreciation schedules and avoid surprise tax burdens that make long-term investment harder to plan.
Corporate income tax policy also matters. Policymakers should avoid tax formulas that punish capital-intensive businesses simply for locating property or payroll in the state. The tax code should reward investment in Utah, not penalize it.
One of the biggest taxpayer concerns with data centers is infrastructure, especially electricity. Data centers can place large demands on the power grid, and residential ratepayers should not be forced to subsidize those costs. This is where strong taxpayer and ratepayer protections are essential.
Large-load customers should pay their fair share of grid upgrades through properly structured tariffs, power purchase agreements, or developer-funded improvements. If a data center requires major infrastructure expansion, the costs should be transparent and tied to the actual needs created by the project. Utah should welcome investment, but not through hidden cost-shifting onto families and small businesses.
Transparency must be part of the blueprint. Any tax incentive, abatement, infrastructure agreement, or special arrangement should be publicly disclosed and regularly reviewed. Policymakers should be able to show whether a project is producing net benefits for taxpayers. That includes new property tax revenue, construction activity, jobs, infrastructure improvements, and any foregone revenue from incentives.
Utah should also avoid using tax policy as a backdoor regulatory weapon. Environmental, land-use, water, and community concerns should be addressed through normal permitting and regulatory processes that apply fairly and consistently. If there are legitimate local impacts, they should be handled directly and transparently — not through discriminatory tax penalties aimed at one industry.
The best path forward is not a race to the bottom. Utah does not need to offer the largest giveaway to win investment. Instead, Utah should build a tax environment that is stable, neutral, competitive, and transparent. Data centers should know the rules before they invest, taxpayers should know what public officials have agreed to, and ratepayers should be protected from unfair cost shifts.
This blueprint can be summarized simply:
Treat data centers like other businesses. Do not punish investment. Do not rely on special deals. Protect taxpayers and ratepayers. Keep the tax code simple, neutral, and growth-oriented.
If Utah follows that approach, data centers can be a long-term asset for the state rather than a source of controversy. They can help expand the tax base, strengthen infrastructure, and support Utah’s role in the modern economy — without asking taxpayers to carry the burden for private investment.
Good tax policy should not be about picking winners and losers. It should be about creating a fair system where investment can grow, taxpayers are protected, and Utah remains competitive for the future.