alt Hacker NewsHow are (can) datacenters be taxed?
Mind, I don't know, but normally you put in a business, or factory, etc. the state can tax the economic output of the factory.
The factory builds things, sells things, they tax the sales of those things. Local employees get salaries that can be taxed, etc. Of course, property taxes on the land and improvements.
But how does that work with a datacenter?
If I pay $5 for an EC2 instance that happens to be hosted in, say, Virginia, is that a "sale" from the "Virginia Data Center", or is that sale realized somewhere else?
Of course I don't know how that works with, say, a Ford assembly line in Tennessee, with the car sold in California. Does Tennessee get a piece of that Bronco when it leaves the factory, or is it all just internal, corporate money shifting?
As I understand it, the people -> systems ratio is really low. Large datacenter managed by, perhaps, a 1 or 2 dozen people. Most of the "work" is remote, but there needs some hands on to dust the hardware off once a week. But, it's not your typical ratio of people per sq ft of space as other industries.
Just seeing that if you have this datacenter thats "bringing in" lots and lots of dollars, how does the state and local community get their take of that economic activity?
Replies
You tax the revenue that the entity that owns the datacentre generates, like any other business.
Am I missing something?
If the factory in Tennessee is its own legal entity and the sales office is in another (it’s a group) then yes transfer pricing is used where the goal is to use the market price of an arm length distance (what would you pay for the factory/data center if it was someone unrelated to you) and if same company (guess more uncommon) you use formulas to allocate where value is created and where taxes should be paid.
If you can't tax the outputs you tax the input.
So force then to pay more for electricity or water either through direct taxes or by forcing them to subsidize other users.
Data centers should probably be mostly regional or local co-ops with community-based dividends like Alaska.
Why do data centers need to be taxed separately?
Why does the local community need their take from that economic activity? What are they even providing? Are they providing land, electricity, and hardware for free to the data center?
The factory comparison is a moot point. This isn't about taxation.
Do you think the people hysterically screaming about a data center being built within a 500 mile radius of them would be okay with you building something that uses even more energy/resources like an actual factory?
We don't need unique taxation regimes for datacenters...they've existed as a concept for 70-80 years and are not novel in terms of their energy usage (they use less energy than traditional factories and less water than golf courses). These are all solved problems.
The solution to a fundamental lack of meaning in secular modernity will not come via taxation unfortunately. The doomsday religion that has captured the zeitgeist for the past 40 years is grasping at straws (datacenters) while trying to pivot from climate hysteria to AI hysteria given their end times prophecy did not come true. No amount of tax money will provide the same level of meaning as LARPing as an activist fighting in defense of an abstract fragile god (a femininely delicate "mother earth").
Property tax is the dominant method for local governments to capture the value of hosted commercial activity.
You don’t need a high rate to capture plenty of value out of a $multi-billion data center.
The problem is mostly on the electricity side, with highly regulated utilities not prepared (on the regulator or regulated sides) to respond to such a large shock to demand. Utilities are typically regulated at the state level.