Tech giants including Amazon, Meta, and Google are facing the potential elimination of decades-long tax exemptions as public discontent with data centers continues to escalate. Meta, the parent company of Instagram and Facebook, is currently constructing a data center in Middletown, Ohio, where the controversy is unfolding.

In response to growing public opposition, lawmakers or governors in more than a dozen U.S. states have suspended or canceled data center tax exemptions. Over a decade ago, Ohio's legislature waived sales taxes on server purchases and related equipment for tech firms, hoping the multi-million-dollar incentive would attract much-needed outside investment. The policy worked, turning Ohio into a prime location for data center development.

However, the AI boom has caused the value of these exemptions to balloon, surpassing $1.5 billion last year—more than ten times the state's original estimate. After the news outlet Signal Ohio exposed the true scale of the policy, voter backlash intensified, prompting Republican Governor Mike DeWine to halt new applications for the sales tax exemption in May. Now, some state legislators, including Democratic Representative Tristan Rader, are pushing to abolish the exemption entirely and renegotiate long-term agreements with companies like Amazon, Meta, and Google, which have secured decades of tax relief through state contracts.

In several states, tech giants now enjoy annual tax exemptions exceeding $1 billion each. Rader has introduced a new bill requiring developers to shoulder higher costs for electricity and infrastructure. He stated, "These tech companies are extremely wealthy and don't need such incentives in the first place." His district covers parts of Cleveland, where residents have actively resisted data center projects, and he hopes policy pressure will force companies back to the negotiating table.

Similar scenarios are playing out nationwide. Lawmakers and governors in over ten states, including Illinois, New Jersey, and Washington, are halting tax incentives. This shift underscores how states that once welcomed AI-driven data centers as economic engines have dramatically changed course.

Public data from 2025 shows the scale of data center sales tax exemptions by state: Virginia at $1.94 billion, Georgia at $1.9 billion, Ohio at $1.57 billion, and Texas at $1.02 billion. Note that not all states disclose such figures; Georgia's tally includes equipment exemptions that also apply to other computer facilities. Data is sourced from Good Jobs First and official state estimates.

Dozens of states, including Texas, have proposed similar bills or reforms, potentially costing the industry billions in tax benefits. Industry executives and consultants suggest future data center projects may migrate to states like Indiana, West Virginia, and Wyoming, which still maintain favorable tax policies. Lobbying groups are telling state governments that other taxes paid by tech firms fund local schools and policing, and that canceling incentives would only drive data center projects abroad.

Amazon reports investing nearly $40 billion in Ohio data centers since 2015, creating thousands of jobs and paying close to $11 million in state property taxes and fees last year. Meta says it has invested over $2.3 billion in the state since 2018, contributing more than $40 million in property taxes and fees during that period. Google and Governor DeWine's office have declined to comment.

The pushback against tax incentives is the latest manifestation of societal resistance to the AI wave. Concerns over data centers' massive electricity and water consumption are mounting, and with the November midterm elections approaching, political candidates are closely monitoring public sentiment. In Independence, Missouri, city council member John Perkins lost his recent reelection bid after voting to approve billions in tax incentives for a data center.

Steve Delbianco, CEO of the tech industry group NetChoice, said, "The entire industry is on the defensive." He attributes public resentment to misinformation and warns that canceling incentives will harm local economies. Despite polls showing most Americans oppose having data centers near their homes, President Trump has urged acceptance. He stated last Friday, "A state or town that wants to get rich, lower taxes, create massive wealth, and boost property values should bring in data centers. If you want poverty, crime, and decay, reject them."

More than 35 states offer sales tax exemptions or similar incentives to data center developers. Since servers and chip equipment need upgrading every few years, sales tax relief is a critical component of project financing. Industry executives note that equipment purchases often reach hundreds of millions or even billions of dollars, and the 6-7% sales tax exemption can directly determine site selection. These exemptions partly mirror rules for raw material purchases in manufacturing, aimed at preventing double taxation of the same goods.

Many data center tax breaks come with mandatory investment and employment benchmarks. Local governments also provide property tax reductions to attract projects, which can generate long-term revenue for schools and policing. Federal tax changes have also favored data center construction. Last year's tax reform bill restored immediate expensing for equipment purchases, which had previously been depreciated over several years. Upcoming projects can also leverage the "opportunity zone" program, which is set to offer larger tax cuts for certain rural investments.

States caught off guard when Ohio and others enacted these policies over a decade ago, data centers were much smaller and primarily supported websites and streaming services. With cumulative incentives, Ohio's effective tax rate for data centers was just 1.2% at the end of 2025, the lowest among 15 states surveyed by Ernst & Young, while California's was as high as 16.9%. After ChatGPT debuted in late 2022, the tech industry launched a wave of hundred-billion-dollar investments, vastly amplifying the value of tax benefits and catching state governments unprepared, quickly fueling public opposition.

Tim Schram, a state and local tax expert at BDO, said, "The explosion of hyperscale data centers has made everything happen too fast." New Jersey unanimously passed a $500 million tax credit for data centers in 2024, but last month the state Senate voted 35-4 to cancel the remaining $250 million. Even states retaining exemptions are raising costs for tech firms. Virginia, which leads the nation in data center industry size, has kept the equipment sales tax exemption but added a special tax on data center electricity usage.

Ian Bocaccio of tax advisory firm Ryan notes that after Ohio, Arizona, and Illinois suspended or repealed incentives, project attractiveness has declined. He is advising data center clients to shift to other types of investment tax credits available in various states. However, industry observers believe that the long-term comprehensive benefits of data centers will be hard for local governments to abandon. Bocaccio views the opposition as temporary, saying, "This resistance is just a passing trend; in two years, the conflicts over data centers will have faded away."