Panel divides over ending data center tax breaks as revenue-raising measure

OLYMPIA — The Senate Ways and Means Committee heard lengthy, sometimes emotional testimony on Jan. 26 about a governor-request bill to end portions of Washington’s data-center tax preferences.

Committee staff said SB 6,231 would repeal the sales and use tax exemption for data center refurbishments and replacement server equipment effective July 1, 2026. Staff estimated the change would raise $63.1 million in the current biennium and $144 million in 2027–29, and said DOR administrative costs would be modest.

Sherry Sawyer of the Office of Financial Management told senators the governor’s supplemental budget seeks revenue from closing tax preferences that largely benefit a small number of corporations. OFM and county officials said local governments are overdue for relief after years of sales-tax preferences that limit local revenue options.

Industry and labor groups warned of consequences. Dan DiOrio of the Data Center Coalition and other industry speakers said the exemption supports long-term tenant commitments that underpin investment, jobs and local tax revenue; they warned that removing the benefit risks shifting investment to other states. Labor representatives said refurbishment cycles sustain construction and maintenance jobs and that raising operating costs would reduce local work volumes.

Environmental and community advocates and some fiscal-conservative voices supported the governor’s move to reclaim revenue for core services, arguing data centers have high private capital resources and that exemptions no longer produce promised public benefits.

No committee vote was taken; witnesses on both sides urged lawmakers to weigh the immediate budget pressure against long-term economic development strategies.