Modify provisions pertaining to the purchasing of goods and services related to data center operations.
Summary
SB234 creates a new sales and use tax exemption for certain purchases of enterprise information technology equipment and computer software used in a “qualified data center” in South Dakota. The bill defines a qualified data center, a qualified business, and a broad list of covered equipment and infrastructure, including servers, storage, cooling systems, power backup systems, security systems, fiber infrastructure, HVAC, and related building and monitoring systems. It also excludes data centers used for digital currency mining from the definition.
To qualify, a business must provide documentation to the Department of Revenue, which is made confidential, and the department must determine eligibility. The bill also requires the business to have electric service under an agreement or rate schedule that avoids shifting utility costs to other customers, and to notify local water providers so water use is compatible with the site. For proposed data centers, the secretary may issue an exemption certificate in advance, and the business must file an annual affidavit by June 1 to keep the exemption.
Impact
SB234 would amend South Dakota’s sales and use tax laws in chapters 10-45 and 10-46 by exempting gross receipts from sales of qualifying data center equipment and software from state taxation. The measure would affect data center owners, operators, tenants, vendors, and contractors by reducing the tax cost of building and operating eligible facilities, while also imposing administrative verification requirements on the Department of Revenue. It would also create compliance conditions tied to utility cost allocation and water-provider notice, potentially influencing how large data center projects are structured and sited in the state.
Sentiment
The available voting history suggests the bill faced mixed support and some resistance. On February 18, 2026, it was deferred to the 41st legislative day by a narrow 5-4 vote, indicating the measure was not broadly settled at that stage. No committee transcript is available, but the close vote implies the bill generated meaningful debate rather than unanimous enthusiasm.
Contention
The likely points of contention are the tax exemption’s fiscal impact, whether it gives a special incentive to a particular industry, and whether the benefits justify the administrative and infrastructure demands. The bill’s requirement that electric service arrangements avoid shifting costs to other customers suggests concern about ratepayer impacts, while the water-notice requirement indicates sensitivity to local resource use. Opponents may also question the confidentiality of eligibility documentation and whether the exemption should apply to proposed facilities before they are fully built or operating.