Sales, Use and International Tax Activity Update - August 2010

Virginia “Bytes” into Data Centers

The Virginia Department of Taxation has ruled that the new data center exemption from retail sales and use taxes (allowed under Va. Code Ann. §58.1-609.3(18), effective July 1, 2010) applies to various equipment and tangible personal property that a taxpayer purchased for use in its qualifying data center.

However, general upgrades to the facility, such as repairing or replacing roofs and lighting fixtures, and modifying rooms and the fiber optic network for the fire alarm system, would be considered general building improvements excluded from the exemption and would be taxable. Similarly, fencing around the data center for safety and security would be taxable. Professional fees are not tangible personal property and would not be subject to tax.

The Ruling of Commissioner, P.D. 10-121, Virginia Department of Taxation, June 29, 2010.

The Ruling of Commissioner can be viewed on the Virginia Department of Taxation Web site.

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