Florida has long positioned itself as an attractive destination for data center development, thanks in part to a sales tax exemption introduced in 2017. That incentive helped offset steep upfront costs by eliminating state sales tax on construction materials, equipment, servers, software, and electricity.

But big changes are coming.

On June 30, 2025, the Florida Legislature passed HB 7031, a tax reform package that reshapes the incentive landscape. Beginning August 1, 2025, only data centers with an IT load of 100 megawatts (MW) or more will qualify for the exemption. Smaller facilities—whether new or already operating—will lose access to the tax break entirely.

What’s Changing

  • Exemption eliminated for sub-100 MW centers
    All purchases of equipment, electricity, and construction materials at facilities below 100 MW become taxable as of August 1.
  • No grandfathering
    The law applies retroactively, with no protection for projects previously certified under the old rules.
  • Higher threshold to qualify
    Only centers with at least 100 MW of critical IT load remain eligible.
  • Risk of audits and repayment
    Purchases made tax-free after August 1 could be clawed back in an audit.

Why It Matters

For developers, owners, and tenants of mid-sized facilities, this is more than a policy shift—it’s a direct cost increase. Construction budgets may need to be revised, contracts renegotiated, and tenant leases re-examined. Some facilities could see their competitive edge erode, especially compared to states with more inclusive incentive programs.

On the other hand, the move reflects Florida’s bet on attracting mega-scale projects. By narrowing incentives, lawmakers aim to direct resources toward the largest operators who bring significant infrastructure, jobs, and long-term investment.

The Bottom Line

HB 7031 signals a turning point for Florida’s data center market. Facilities under 100 MW will need to reassess their financial models and cost assumptions, while developers of larger centers stand to benefit.

Whether this shift strengthens Florida’s long-term competitiveness—or drives mid-sized projects elsewhere—remains to be seen. But one thing is clear: beginning this August, the economics of building and operating a data center in Florida will look very different