Ohio Ends Data Center Tax Break Over Rising Costs

Ohio is suspending a sales tax exemption for new data center projects after the cost of the break grew well beyond prior projections. The exemption covers construction materials and equipment such as server racks and cooling systems. State officials said the pause will remain in place while a joint legislative committee studies the facilities' effects on local communities and state budgets.

Background on the Exemption The exemption had been used to attract large computing facilities that support artificial intelligence training and operations. Thirty-eight states offer similar breaks, many enacted before the rapid expansion that followed the 2022 release of ChatGPT.

In 2024 the state projected the exemption would total $136 million in fiscal 2025 and $142 million in fiscal 2026. Actual figures reached $554 million in 2024 and nearly $1.6 billion in 2025.

Residents in several communities have organized to place a referendum on the November ballot that would ban new hyperscale data centers statewide. The measure requires more than 400,000 signatures by July 1. Lawmakers formed the data center study committee on May 13 after noting public concern over land use, noise, and electricity demand.

A spokesperson for the governor's office said the pause gives residents and businesses clarity while the committee completes its work. The current governor is term-limited, so any future resumption would occur under a new administration.