[whartung]

How are (can) datacenters be taxed?

Mind, I don't know, but normally you put in a business, or factory, etc. the state can tax the economic output of the factory.

The factory builds things, sells things, they tax the sales of those things. Local employees get salaries that can be taxed, etc. Of course, property taxes on the land and improvements.

But how does that work with a datacenter?

If I pay $5 for an EC2 instance that happens to be hosted in, say, Virginia, is that a "sale" from the "Virginia Data Center", or is that sale realized somewhere else?

Of course I don't know how that works with, say, a Ford assembly line in Tennessee, with the car sold in California. Does Tennessee get a piece of that Bronco when it leaves the factory, or is it all just internal, corporate money shifting?

As I understand it, the people -> systems ratio is really low. Large datacenter managed by, perhaps, a 1 or 2 dozen people. Most of the "work" is remote, but there needs some hands on to dust the hardware off once a week. But, it's not your typical ratio of people per sq ft of space as other industries.

Just seeing that if you have this datacenter thats "bringing in" lots and lots of dollars, how does the state and local community get their take of that economic activity?

[twoodfin]

Property tax is the dominant method for local governments to capture the value of hosted commercial activity.

You don’t need a high rate to capture plenty of value out of a $multi-billion data center.

The problem is mostly on the electricity side, with highly regulated utilities not prepared (on the regulator or regulated sides) to respond to such a large shock to demand. Utilities are typically regulated at the state level.

[kotaKat]

They keep negotiating payments-in-lieu-of-taxes to dodge fair tax rates and grab special treatment, so we do see a loss in value there over decade(s) in many cases.

[twoodfin]

Sure, there’s plenty of places where you could plausibly build a data center, so the leverage that localities have to insist on high tax rates is limited.

[inigyou]

Then it can't be that bad to move it to another state, right?

[twoodfin]

Nope. Northern Virginia communities, for example, have seen significant budgetary wins from data center buildout over the past decade.

[inigyou]

Those previously completed projects in NV are completely unlike the ones currently being proposed and protested

[gruez]

>so we do see a loss in value there over decade(s) in many cases.

Source? Maybe it was the case 10 years ago, but today with all the datacenter backlash it's hard to imagine anyone giving sweetheart deals to them.

[cogman10]

10 years ago? Several states have 0% property taxes on the books for data centers, Utah being one of them.

That's a big reason for the Box Elder data center.

https://gpuleaseindex.com/incentives/utah

[gruez]

>https://gpuleaseindex.com/incentives/utah

That page has conflicting information. The top text says "Property tax abatement: Limited", which implies tax breaks are limited, but then the bullet point says "Property Tax: Limited", which implies the opposite. Moreover the site doesn't cite any sources so you can't even verify yourself.

[cwmma]

If you can't tax the outputs you tax the input.

So force then to pay more for electricity or water either through direct taxes or by forcing them to subsidize other users.

[victorbjorklund]

If the factory in Tennessee is its own legal entity and the sales office is in another (it’s a group) then yes transfer pricing is used where the goal is to use the market price of an arm length distance (what would you pay for the factory/data center if it was someone unrelated to you) and if same company (guess more uncommon) you use formulas to allocate where value is created and where taxes should be paid.

[beAbU]

You tax the revenue that the entity that owns the datacentre generates, like any other business.

Am I missing something?

[cwmma]

First off business are taxed on profits not revenues, so a money losing business doesn't pay taxes.

Second if there is something that causes undesirable side effects (like a data center) you want to tax that activity specifically so the Corp with 8 data centers pays more then the Corp with 1.

[QuantumFunnel]

The entities that own the data centers (the mag7) famously do not pay much in taxes due to their extensive use of tax havens and loopholes

[pj_mukh]

"tax havens and loopholes"

Feels like we should fix those instead of wonton lashing out at any and all economic output.

[twoodfin]

Google (Alphabet) paid over $26B in corporate income taxes last year.

[CrimsonRain]

Why do data centers need to be taxed separately?

Why does the local community need their take from that economic activity? What are they even providing? Are they providing land, electricity, and hardware for free to the data center?

[fra]

For two reasons: 1. They create externalities 2. They generate an economic flux that can be taxed

[CrimsonRain]

So where were you in last 20 years asking for tax on DCs?

[cogman10]

We are talking about multiple datacenters being built today which use more power than all the 2006 data centers combined.

The energy usage of these new datacenters is unlike anything we've previously seen. The closest we've seen was crypto mining and people certainly protested that.

[rainsford]

I can't speak for the person you're replying to, but data center growth wasn't massively exploding 20 years ago.

[jbm]

If human activity is taxed, AI activity will be taxed. It's just inevitable. It will be taxed at multiple levels until we figure out the right level to do so. Some of it will be detrimental to AI development but that's normal - in Canada we had a hidden manufacturing sales tax until the 80s which made exports more expensive.

A technology that puts X% of people out of work is going to be taxed.

[CrimsonRain]

DCs do much more than AI.

AI companies are already paying tax.

[rainsford]

At the very least they take limited land in a community that could instead be used for any number of different things. If they're not taxed, they provide essentially no benefit, economic or otherwise, to the community in which they're located. Basically any other use of the land would provide more localized benefit by providing more jobs, housing, places for residents to shop or things for them to do, etc, all of which benefit the community more than a data center.

Of course data centers aren't just taking up land. They also in many cases produce massive amounts of noise, water and electricity usage, and are visually pretty unappealing to have in your backyard. And there is essentially no upside. Data centers aren't like shopping malls. You might benefit from them existing, but you don't benefit from them existing right next door. If they're not providing at least some tax benefits to the community, I can think of zero reason any community would want them.

[inigyou]

The xAI one is emitting so much NOx pollution that it gave entire towns asthma for the rest of their lives and nobody is compensating them for it. People in Georgia are being threatened with no electricity next year because it's all going to data centers.

[CrimsonRain]

Has nothing to do with taxing dc.

Sue them for pollution/hazard.

So raise the prices? Build more capacity? If you elect politician who can't plan ahead for a simple thing as electricity grid capacity...who's to blame?

[burnt-resistor]

Data centers should probably be mostly regional or local co-ops with community-based dividends like Alaska.

[charcircuit]

They shouldn't. It's such a toxic view that because something is successful that it justifies stealing money from them.

[pembrook]

The factory comparison is a moot point. This isn't about taxation.

Do you think the people hysterically screaming about a data center being built within a 500 mile radius of them would be okay with you building something that uses even more energy/resources like an actual factory?

We don't need unique taxation regimes for datacenters...they've existed as a concept for 70-80 years and are not novel in terms of their energy usage (they use less energy than traditional factories and less water than golf courses). These are all solved problems.

The solution to a fundamental lack of meaning in secular modernity will not come via taxation unfortunately. The doomsday religion that has captured the zeitgeist for the past 40 years is grasping at straws (datacenters) while trying to pivot from climate hysteria to AI hysteria given their end times prophecy did not come true. No amount of tax money will provide the same level of meaning as LARPing as an activist fighting in defense of an abstract fragile god (a femininely delicate "mother earth").

[qntmfred]

> The solution to a fundamental lack of meaning in secular modernity will not come via taxation

Well we better figure out where it ought to come from then. Maybe AI can help us explore the latent space.