Data center (rural counties): eligible server equipment

The owner of an eligible rural data center, and its qualifying tenants, can buy eligible server equipment free of Washington sales and use tax, plus the labor to install it. Servers must be original equipment installed without intervening use, and for centers built after June 2015 the servers must be installed in a building. Replacement servers no longer qualify after the 2026 change. DOR issues the certificate; the seller keeps a copy.

Who qualifies

• A qualifying business (a for-profit owner of an eligible rural data center) or a qualifying tenant leasing space from it, each holding its own DOR certificate.
• The data center meets the same tests as for power infrastructure: rural county, at least 20,000 square feet of server space in a facility of at least 100,000 square feet, backup power, fire suppression, enhanced security, and construction in a statutory window.
• Governments, tribal governments and public corporations are not qualifying businesses or tenants.

What qualifies

• "Server equipment": computer hardware in the data center used exclusively to provide electronic data storage and data management services, including cloud services, for the owner or tenant or their clients, plus the software needed to run the hardware.
• For data centers whose construction began after June 30, 2015: original server equipment installed in a building within the data center on or after July 1, 2015.
• For tenants: original server equipment installed in the tenant's leased space on or after April 1, 2010.
• Labor and services to install eligible server equipment.
• The equipment must be installed "without intervening use" in a data center with a valid certificate. Use tax is exempt too (RCW 82.12.986).

Not covered

• Personal computers, server racks, and peripherals such as keyboards, monitors, printers and mice.
• Servers in stand-alone, prefabricated or modular units, including shipping containers; these are not "directly installed in a building."
• Replacement server equipment. DOR's June 2026 notice says it was removed from the definition, so replacement purchases are not exempt.
• Repair labor on servers; the statute covers only installing labor for server equipment (power infrastructure repair is covered separately).
• Hardware not used exclusively for data storage and data management services.

What the buyer gives

A copy of the Certificate for Sales Tax Exemption for Purchases by Data Centers that DOR issued to the owner or tenant. The owner applies on REV 40 2428 and a tenant on REV 40 2449, through My DOR under the Data Centers topic, before purchasing server equipment. After approval, the buyer files the Buyer's Sales and Use Tax Preference Addendum each period and an Annual Tax Performance Report by May 31.

What the seller keeps

RCW 82.08.986(2)(b): the buyer "must present the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files." DOR's data center page says the same: present the certificate to the seller, "who must keep a copy for their files." Check the certificate's issue date: under (2)(d) only purchases on or after that date qualify, and certificates expire two years after issue unless construction has begun ((2)(e)). RCW 82.32.070(1) requires five years of records, and RCW 82.08.050(4) requires proper records of exempt sales.

Common mistakes

• Putting racks, monitors or keyboards on the exempt invoice. The statute excludes them from server equipment.
• Exempting replacement servers. The 2026 change removed replacement server equipment from the definition.
• Selling servers for a containerized or modular deployment tax-free. For post-2015 centers they must be installed in a building.
• Exempting a server repair call. Only installation labor is covered for servers.

Common questions

Are servers for a rural Washington data center exempt from sales tax?

Yes, original server equipment installed in an eligible rural data center by a certificate holder. Replacement servers are no longer eligible after the 2026 change (DOR special notice, June 3, 2026).

Are server racks exempt?

No. RCW 82.08.986(8)(l) says server equipment does not include the racks on which it is installed.

Is the software that runs the servers exempt?

Yes. The definition of server equipment includes the computer software needed to operate the hardware.

What happens if the data center misses its job targets?

The exempted taxes become due in proportion to the time the requirement was not met, and the certificate is canceled, unless DOR grants an exception for circumstances beyond the business's control (RCW 82.08.986(3)(d)).

Sources

• RCW 82.08.986 (1)(a), (2)(a)-(e), (3)(d), (6), (8)(f), (h), (i), (j), (l)
• RCW 82.12.986 (1)-(4) use tax
• DOR Tax incentive programs Data Centers: Rural data centers (application process, approval and reporting)
• DOR form REV 40 2428 (6/25/26), Owner Application for Sales Tax Exemption for Purchases by Data Centers - Rural; and REV 40 2449 (12/9/25), Tenant Application - Rural Sections 1-6 (tenant form: https://dor.wa.gov/sites/default/files/2022-06/40%202449.pdf)
• DOR Special Notice (June 3, 2026): Modification to sales and use tax exemption for rural data centers Refurbishment and replacement server equipment changes, effective July 1, 2026
• RCW 82.08.050 (4), (7)(a)-(c)
• RCW 82.32.070 (1) five-year record retention