EUCLID, Ohio — A Northeast Ohio lawmaker is calling for the immediate elimination of Ohio’s sales-tax break for data centers, citing separate reporting by News 5 and Signal Ohio on forgone revenue.
Senator Kent Smith, a Euclid Democrat, blasted the incentive during an interview Monday morning. He and Sen. Louis “Bill” Blessing III, a Hamilton County Republican, have been trying to get the sales-tax exemption scrapped for new data center projects.
"This is ridiculous. This is the worst tax break in Ohio history,” Smith said, pointing out that the state tax credit authority has approved incentives for tech giants including Amazon, Google, Microsoft and Meta, the parent company of Facebook and Instagram.
“We’re not getting the permanent jobs that we needed, and we’re leaving revenue on the table,” he added.
New numbers from the Ohio Department of Taxation show the state gave up almost $1.57 billion in sales-tax revenue on purchases of data center equipment and construction materials last year. That’s nearly 12 times what state officials initially expected, according to estimates produced by the tax department in late 2024 as part of the budgeting process.
And that doesn’t include the value of local sales-tax breaks for data center projects — a number the tax department has not released. Signal Ohio was the first to report on the scope of the 2025 tax exemptions, which almost tripled from the previous year.
In 2024, the state provided $554.9 million in sales-tax breaks for data centers. Local sales-tax breaks on purchases of equipment and building materials totaled $166.8 million, according to figures the tax department provided to News 5 for recent stories.
At this point, the data center incentive is Ohio’s second-largest sales-tax break. Tax-expenditure reports show the largest — totaling about $2.5 billion a year — is for manufacturers, who get an exemption on certain production equipment and supplies.
The numbers show just how fast the industry is moving in Ohio, as tech companies and developers race to build massive computing warehouses for cloud storage, corporate data processing and artificial intelligence. The sheer speed of the building boom is putting communities on edge and making it tough for everyone — including state officials — to track what’s happening.
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Andrea Lannom, a spokeswoman for the Ohio Department of Taxation, said there’s been tremendous growth in the industry since analysts published the last tax expenditure report in November 2024, as part of the budgeting process.
That report predicted that Ohio would forgo only $130 million in sales-tax revenues tied to data centers during the 2024 fiscal year and $135.8 million in 2025.
In an email to News 5, Lannom said the estimates “were based upon the best available data and growth forecasts available at that time.”
Smith doesn’t fault the tax department for the steep underestimates. But he said there’s got to be a better way to get accurate information about the value of incentives.
“We as policymakers want to be able to make informed decisions,” he said. “And if the numbers that we’re working with are 10 times inaccurate … that’s not good.”
He and Blessing are the lead sponsors of Senate Bill 374, a proposal to eliminate the sales-tax break for new data center projects. They introduced the bill in March, but it hasn’t been discussed by a committee yet.
Last year, the Republican-dominated General Assembly tried to end the tax break as part of the state’s two-year operating budget bill. But Gov. Mike DeWine vetoed that move.
In his veto message, the governor cited the state’s attempt to transform its economy and compete for high-tech jobs. DeWine also noted that data centers are providing billions of dollars of work for the construction industry.
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This year, amid growing public pushback and social media campaigns against data center projects, lawmakers on both sides of the political aisle have talked about getting rid of the exemption. But it’s not clear they have the votes to override DeWine’s veto.
Tech firms, powerful business groups and construction leaders have been lobbying to preserve the incentive. They point out that 37 other states offer sales-tax breaks for data centers. And in Ohio, the exemption isn’t automatic. It’s available for certain large projects that win approval from the Ohio Tax Credit Authority.
In an emailed statement, a DeWine spokesman said the governor’s team “continues to monitor and analyze the efficacy of this and all tax incentive programs.”
At the state’s sales-tax rate of 5.75%, the 2025 numbers indicate that qualifying data center developers spent at least $27.2 billion on construction materials, servers, racks and other equipment last year.
But that’s an underestimate, since some companies are getting a 100% sales-tax exemption, while others are getting only 50% to 75% off.
Citing taxpayer confidentiality, the state tax department doesn’t release information about individual companies. For the same reason, the department won’t provide aggregate numbers on the value of the data center sales-tax exemption before 2024, when there were fewer than 10 companies receiving a discount or total tax break.
“We need to change the regulations,” Smith said. “Because the public has a right to know.”
He and other critics of the state tax break believe it’s no longer necessary.
They say tech firms and data center companies will keep on building here — with or without state incentives. And they don’t think taxpayers are getting enough of a return on their investment, since many data centers have only a few dozen full-time employees.
Proponents say scrapping the tax break will make it harder for Ohio to attract major investments — from tech firms and other businesses. They predict data center developers will shift their spending to other, nearby states, eliminating thousands of construction jobs.
“I think it would be devastating for Ohio’s economy if they were to get rid of that sales-tax exemption,” Dan Diorio, vice president of state policy for the Data Center Coalition, told News 5 earlier this year.
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It’s difficult to say how much of an impact eliminating the exemption would have on state tax collections. Getting rid of the program for new deals won’t end existing tax-credit agreements. That means Amazon, Meta, Google and at least 15 other companies will keep getting a full or partial sales-tax discount.
In a report released last year, the Ohio Chamber of Commerce Research Foundation said dumping the incentive would cause data center investment to fall by about 35% over a 5-year period. Consultants working with the chamber said Ohio should keep the tax break but require better reporting around job creation, wages and the actual value of incentives.
The consultants also suggested putting caps on incentives to make budgeting more predictable and avoid open-ended deals.
Kasia Tarczynska, a senior research analyst for nonprofit watchdog group Good Jobs First, said Ohio isn’t the only state where it’s challenging to get a complete or timely picture of data center subsidies. She’s watching similar debates play out across the country.
Good Jobs First is urging states and local governments to be more transparent about the value of data center incentives – and what taxpayers are getting in return. Communities could be using some of the tax revenues they’re forgoing to improve roads, fill potholes and pay teachers and firefighters, Tarczynska said.
“There is a space for public investment in companies,” she said. “But it has to be done in a very smart and strategic way. … This is an extremely expensive program for industry that does not need any public support, financial support. This is an industry that is growing rapidly by itself.”
In Columbus, a newly formed joint legislative committee on data centers is scheduled to hold its first hearing Wednesday. Smith expects that, at some point, the future of the tax credit will be part of the conversation.
"It would be an abdication of duty for the joint committee to not discuss this," he said.
Michelle Jarboe is the business growth and development reporter at News 5 Cleveland. Follow her on X @MJarboe or email her at Michelle.Jarboe@wews.com.
