Utah does not track how much revenue it loses from sales tax exemptions granted to data centers, a situation stemming from legislative changes nearly two decades ago that removed reporting requirements. This lack of transparency makes it difficult for policymakers to properly assess the program and its statewide impacts.
Rep. Jill Koford, R-Ogden, expressed concern that the current system and available data may not be adequate given the rapid growth of data center investment. Koford has previously advocated for greater transparency, sponsoring a bill this year that mandated reporting on data centers’ water usage. Kristian Fors, an analyst with the Libertas Institute, emphasized the importance of transparency and accountability for any government policy, stating directly, "You can’t manage what you can’t measure." He stressed the necessity for Utah to monitor these incentives.
Utah is not alone in its lack of clear data. A report by Good Jobs First, a nonprofit focused on government accountability, indicated that 14 of 37 states offering similar sales and use tax exemptions to data centers do not timely publish their official revenue losses. For states that do, reported losses for 2025 ranged between $830,000 and $1.9 billion, with larger amounts projected for subsequent years.
If Utah were to face losses at the higher end of this national spectrum, $1.9 billion would represent nearly half of the state's total sales and use tax collected last year. Such an amount, while a fraction of the state’s $37 billion budget, could substantially cover a gap in the state's Medicaid budget and quadruple the funds allocated for a first-time home-owner program this year, still leaving over $1.6 billion. Even the lower national estimate of $830,000 would be enough to cover the governor’s annual wages and benefits for more than three years.
The framework for Utah’s exemption program was revised in 2009 when the state Legislature eliminated the requirement for businesses, individuals, and nonprofits to report transactions exempt from state and local sales taxes. Utah State Tax Commission Deputy Executive Director Jason Gardner stated that prior reporting was inconsistent and unreliable. Koford pointed out that when the reporting change was made, lawmakers did not anticipate modern hyperscale AI data centers. This historical context, Koford added, has resulted in limited visibility into the actual financial impact of the equipment exemption as it applies to the large data centers operating today. Although the 2009 bill directed the commission to produce annual estimates on sales and use tax exemptions, Gardner confirmed that it cannot do so for categories utilized by only a few companies, such as data center machinery and equipment.
Kasia Tarczynska, author of the Good Jobs First report, suggested that many states' current exemption programs were designed for the smaller data centers prevalent 10 to 15 years ago. She noted that the industry has undergone significant transformation due to artificial intelligence deployment, leading to a surge in subsidy costs. Tarczynska advised states to re-evaluate these programs. She argued that these tax breaks do not significantly influence where companies decide to locate data centers, with primary factors including electricity prices, fiber connectivity, affordable and available land, minimal regulations, water access, and a stable climate. Tarczynska characterized subsidies as a minor additional benefit in the site selection process.
In contrast, Khara Boender, a spokesperson for the Data Center Coalition, countered this perspective. She referred to a 2019 review by Virginia’s legislative audit and review commission, which concluded that most data center investments in Virginia would not have happened without tax exemptions. Boender stated this finding challenges the notion that these incentives are not decisive factors. She also mentioned the economic contributions of the data center industry as a reason for states to offer such exemptions. Boender noted that Utah’s policy recognizes the capital-intensive nature of data center investments and aligns their tax treatment with manufacturing equipment, which receives similar exemptions in many other states. She declined to comment on how a reporting requirement for these exemptions would affect the industry.
Tarczynska cautioned that state agencies' estimates of exemption costs are frequently lower than their actual value. She described the lack of transparency as a warning, advocating for well-defined requirements and obligations for all subsidy programs, including reporting requirements and expectations for job creation. Utah’s sales and use tax exemption program extends beyond data centers to include various other categories, such as sales to religious and charitable organizations, in-state manufactured aircraft, and certain construction products. Koford clarified that the purpose of these exemptions is to prevent companies from being taxed multiple times as goods move through the supply chain, not to provide additional business incentives. Libertas Institute analyst Fors argued for a fair tax policy that is consistent across all industries, stating there should be no favoritism in government policy.
