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WashingtonSB 62312025-2026 Regular SessionSenateWALLET

Removing a tax exemption for the replacement of equipment for data centers.

Sponsored By: Noel Frame (Democratic)

Signed by Governor

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Bill Overview

Analyzed Economic Effects

5 provisions identified: 0 benefits, 5 costs, 0 mixed.

No sales-tax break for replacement servers

Beginning July 1, 2026, replacement server equipment no longer qualifies for the sales and use tax exemption. The exemption now covers only original server equipment installed on or after June 9, 2022. For tenants, only original equipment installed in their leased space on or within 10 years of June 9, 2022 qualifies. For the general program, the change applies to data centers that started construction after June 30, 2015 and before July 1, 2035. Replacement server purchases are taxed at normal rates.

General data center exemption winds down

No new certificates under the general data‑center exemption are issued on or after July 1, 2036. All sales and use tax exemptions under that section end on July 1, 2048. Projects after these dates pay normal tax.

Green certification and yearly reporting required

For certificates issued on or after June 9, 2022, a new data center must earn an approved green building certification within three years of being placed in service. If not, previously exempt sales and use taxes become due, the certificate can be canceled, and a 10% penalty may apply. All certificate holders must also file an annual tax performance report that lists construction firms and employment. These rules add compliance work and risk for noncompliance.

Refurbished data centers lose exemptions

Starting July 1, 2026, the state no longer issues new sales‑tax exemption certificates for data centers that qualify only by refurbishment. In the county‑specific program, a center refurbished on or after July 1, 2026 is not eligible at all. The law also caps refurbished‑center certificates at six per year, first‑come, and only one per business per year. These rules sharply narrow tax breaks for refurbishment projects.

Stricter, capped county data center tax break

To get the county‑specific exemption, a business must be in a county with over 800,000 people (April 1, 2021) and show at least 1.5 megawatts of available power when applying. A tenant must contract for at least 150 kilowatts. The department approves only six applications in the first year and six in each of years three through six, first‑come. No new county certificates are issued on or after July 1, 2028. All county‑program exemptions end July 1, 2038.

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Sponsors & Cosponsors

Sponsor

  • Noel Frame

    Democratic • Senate

Cosponsors

  • Bob Hasegawa

    Democratic • Senate

Roll Call Votes

All Roll Calls

Yes: 124 • No: 119

House vote • 3/12/2026

2663 Orcutt Pg 2 Ln 25

Yes: 47 • No: 50 • Other: 1

House vote • 3/12/2026

3rd Reading & Final Passage

Yes: 51 • No: 46 • Other: 1

Senate vote • 2/28/2026

3rd Reading & Final Passage

Yes: 26 • No: 23

Actions Timeline

  1. Governor signed.

    4/1/2026legislature

  2. Chapter 266, 2026 Laws.

    4/1/2026Senate

  3. Effective date 6/11/2026*.

    4/1/2026Senate

  4. Delivered to Governor.

    3/13/2026legislature

  5. Third reading, passed; yeas, 51; nays, 46; absent, 0; excused, 1.

    3/12/2026Senate

  6. Rules suspended. Placed on Third Reading.

    3/12/2026Senate

  7. President signed.

    3/12/2026legislature

  8. Speaker signed.

    3/12/2026legislature

  9. Rules Committee relieved of further consideration. Placed on second reading.

    3/9/2026Senate

  10. Referred to Rules 2 Review.

    3/9/2026Senate

  11. Minority; do not pass.

    3/7/2026Senate

  12. FIN - Majority; do pass.

    3/7/2026Senate

  13. FIN - Executive action taken by committee.

    3/7/2026Senate

  14. First reading, referred to Finance.

    3/3/2026Senate

  15. Third reading, passed; yeas, 26; nays, 23; absent, 0; excused, 0.

    2/28/2026Senate

  16. Rules suspended. Placed on Third Reading.

    2/28/2026Senate

  17. Floor amendment(s) adopted.

    2/28/2026Senate

  18. 1st substitute bill substituted.

    2/28/2026Senate

  19. Placed on second reading by Rules Committee.

    2/27/2026Senate

  20. Passed to Rules Committee for second reading.

    2/23/2026Senate

  21. Minority; without recommendation.

    2/19/2026Senate

  22. Minority; do not pass.

    2/19/2026Senate

  23. WM - Majority; 1st substitute bill be substituted, do pass.

    2/19/2026Senate

  24. First reading, referred to Ways & Means.

    1/20/2026Senate

  25. Introduced

    1/20/2026Senate

Bill Text

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