Amazon is looking to expand its cloud computing operation even further, and it appears that the online retailer has its sights set on adding to its Oregon data center footprint. Before more sites can be added, however, the company wants to remove an obstacle within the state tax code.
An Amazon official testified in early February in front of Oregon lawmakers that the company is interested in creating as many as 11 new data centers in the state, but an issue known as central assessment will need to be addressed first. Central assessment relates to the manner in which property taxes are collected from utilities and telecom providers. It is also known as a brand tax as it links property premiums to the value of the company’s brand, meaning large firms like Amazon would pay more in taxes than would smaller organizations with the same size facility.
Amazon is not the only major corporation getting cold feet over the potentially harsh taxing of data center operators. Central assessment may impact Apple’s expansion in Prineville, Oregon, as well as efforts by Google to bring its high-speed Google Fiber offering to Portland. However, Amazon appears to have the biggest investment hanging in the balance, with as many as six new facilities needing to be relocated if the issue is not settled soon.
Central Assessment Canceling Out State Tax Incentives
Many companies were originally drawn to Oregon because of the data center tax incentives it offers. The state collects no sales tax on equipment, and enterprise zones were created to provide an exemption on property taxes for major operators. These breaks saved organizations tens of millions of dollars each year, but the cost of the brand tax would effectively cancel out those savings.
So far, central assessment has not been used with data centers, but operators are worried that it may start to be applied to them. Amazon currently operates four Oregon data centers, but stopped the construction of a fifth site over the tax issue, waiting to see how it was resolved by the state.
Oregon lawmakers will debate new bills in mid-February concerning whether data centers should be exempt from the brand tax. The first, SB 570, could put a cap on central assessment. An alternative second bill, SB 571, would make data centers exempt from central assessment altogether.
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