AI and tech companies in Texas can qualify for major sales tax exemptions on servers, power systems, and cooling infrastructure under §151.359. This law can save millions in costs over 20 years , if you meet the eligibility rules.
What is the Texas Data Center Exemption?
Texas Tax Code §151.359 offers a state sales tax exemption on certain hardware, software, and power equipment used in qualified data centers.
You May Qualify If:
- You lease at least 1 megawatt (MW) of data center space
- You invest $200 million+ in capital costs
- You create at least 20 jobs in Texas
- You apply and get approval from the Texas Comptroller
Why It Matters for AI and Cloud Startups
AI and cloud-driven firms spend heavily on:
- GPUs, servers, storage
- Cooling systems
- Power and cabling equipment
With a 6.25% state sales tax, plus local taxes, costs add up. Under §151.359, you can buy this infrastructure tax-free, saving hundreds of thousands to millions.
What’s Covered?
Exempt from sales tax:
- Servers and hardware
- Backup generators and UPS
- Chillers and HVAC
- Networking and cabling
- Software used to operate the infrastructure
Not covered:
Office furniture, basic supplies, construction labor
Example: AI Firm in Texas
Company: VRTX AI
Location: Houston data center
Lease: 1.5 MW for 5 years
CAPEX: $210 million
Employees: 22 across Texas
Savings: $35 million in hardware × 6.25% = $2.18 million saved
How to Qualify (2025 Steps)
- Verify lease and investment size
- Apply for exemption certificate with the Texas Comptroller
- Track employee hiring (minimum 20 jobs)
- Get certificate before purchasing equipment
- Use certificate with vendors for tax-free buying
- Maintain records for audit purposes
Conclusion
The Texas data center exemption is a game-changing tax break for tech and AI firms investing big in infrastructure. If you’re leasing or building a data center, you could save millions in sales taxes with proper planning.
Call to Action
Book a strategy session with Anshul Goyal, CPA, EA, FCA to see if your AI or tech company qualifies for this powerful Texas exemption and how to apply.
Disclaimer:
This article is for informational purposes only. Businesses must meet strict eligibility criteria under §151.359 to claim sales tax exemptions. Always consult a tax advisor before making any exempt purchases.
Top 5 High-Searched FAQs
1. What is §151.359?
It’s a Texas sales tax exemption for data center equipment.
2. How much can I save?
Up to 6.25% + local tax on millions of dollars in hardware.
3. Do I need to own the data center?
No. Leasing 1 MW+ for 5 years qualifies.
4. What equipment qualifies?
Servers, cooling, power systems, and control software.
5. How do I apply?
Submit an application to the Texas Comptroller and get approval before buying.
About Our CPA
Anshul Goyal, CPA, EA, FCA helps AI startups and tech firms across Texas legally reduce sales and franchise taxes. With deep knowledge of §151.359 and infrastructure planning, he supports clients with entity setup, tax compliance, and incentive claims.