Does Kansas exempt data center construction and equipment purchases from sales tax?

Plain-English summary

2025 Senate Bill 98 created a sales tax exemption for qualified data centers, added to K.S.A. 79-3606 as new subsection (xxxx).

Who qualifies. A "qualified firm" must make an investment in eligible data center costs of at least $250,000,000 in the aggregate by its fifth year of operations, and create and maintain at least 20 new jobs at the qualified data center within two calendar years after commencement of operations.

What's exempt. For a qualified firm, sales tax is exempted on:

• Tangible personal property or services purchased to construct, reconstruct, enlarge, or remodel the data center;
• The sale and installation of machinery, data center equipment, and eligible data center costs; and
• Labor services to install, apply, repair, service, alter, or maintain the data center equipment.

How it works.

• The exemption runs through a project exemption certificate obtained from the state and furnished to contractors (the usual K.S.A. 79-3606 project-exemption mechanism — contractors pass the certificate number to suppliers, hold invoices five years subject to audit, and misuse is a misdemeanor under K.S.A. 79-3615(h)).
• It may be valid for up to 20 years after operations commence.
• The Department of Commerce runs the qualification: no exemption is allowed unless the firm is certified by the Secretary of Commerce, who certifies to the Secretary of Revenue when conditions are met (and notifies when the exemption is modified, suspended, or terminated). The Secretary of Revenue may revoke, suspend, or modify a firm's qualification as requested by Commerce.
• Before awarding any assistance (including this exemption), the Secretary of Commerce must obtain approval from the Fusion Center Oversight Board.
• SB 98 also amended K.S.A. 2024 Supp. 66-101j regarding electric public-utility economic-development rate schedules for qualified data centers.

The exemption applies to qualified purchases made on or after July 1, 2025.

What this means for you

Large data center operators considering Kansas

• The exemption is aimed at big projects — you need $250M+ in eligible data center costs (by year five) and 20+ new jobs (within two years of opening) to qualify.
• Benefits can be substantial: exemption on construction materials/services, machinery and equipment, and maintenance labor, potentially for up to 20 years.
• The process is Commerce-driven — you apply to and are certified by the Secretary of Commerce, and the project must clear the Fusion Center Oversight Board before assistance is awarded.

Contractors and suppliers on data center projects

• Purchases flow through a project exemption certificate; get the certificate number from the qualified firm, pass it to suppliers, and keep invoices for five years (subject to audit).
• Misuse of a project exemption certificate is a misdemeanor (K.S.A. 79-3615(h)) — only use it for the certified project.

Common questions

Q: What are the qualification thresholds?
A: At least $250,000,000 in eligible data center costs (aggregate by year five of operations) and at least 20 new jobs maintained at the data center within two calendar years after operations begin.

Q: What purchases are covered?
A: Construction/reconstruction/enlargement/remodeling property and services, machinery and data center equipment and eligible data center costs, and labor to install/repair/maintain the equipment.

Q: How long does the exemption last?
A: Up to 20 years after commencement of operations.

Q: Who certifies a data center as qualified?
A: The Secretary of Commerce certifies qualification to the Secretary of Revenue; the project must also be approved by the Fusion Center Oversight Board.

Q: When does the exemption start?
A: It applies to qualified purchases made on or after July 1, 2025.

Citations and references

• Senate Bill 98 (2025) — the enacting law; effective on publication in the statute book; exemption applies to qualified purchases on or after July 1, 2025.
• K.S.A. 79-3606, new subsection (xxxx) (Section 6) — the data center sales tax exemption and project-exemption-certificate mechanism.
• SB 98 New Sections 1–4 — definitions (Section 1; Department/Secretary = Commerce), the $250M/20-job requirements and certification process (Section 2), the exemption and up-to-20-year validity (Section 3), and Fusion Center Oversight Board approval (Section 4).
• K.S.A. 79-3615(h) — misdemeanor penalty for misuse of a project exemption certificate.
• K.S.A. 2024 Supp. 66-101j (Section 5) — electric public-utility economic-development rate schedules for qualified data centers.
• Effective date: qualified purchases on or after July 1, 2025.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 25-03

Original ruling text

Policy and Research
109 SW 9th Street
Phone: 785-368-8222
PO Box 3506
Fax: 785-296-1279
Topeka KS 66601-3506
www.ksrevenue.gov
Mark A. Burghart, Secretary
Laura Kelly, Governor

NOTICE 25-03

SALES TAX EXEMPTION FOR DATA CENTERS

(JULY 3, 2025)

During the 2025 Legislative Session Senate Bill 98 was passed and signed into law. Section 6 of the Bill amends K.S.A. 79-3606 to add new subsection (xxxx), which provides an exemption for purchases related to the construction, reconstruction, enlarging, or remodeling of certain qualified data centers.

New Section 1 of the Bill is a definitional section which defines the terms, "commencement of construction", "commencement of operations", "data center equipment", "department", "eligible data center costs", "qualified data center", "qualified firm", and "secretary". The department is the Department of Commerce, and the secretary is the Secretary of Commerce.

New Section 2 provides a qualified firm that makes an investment in eligible data center costs of at least $250,000,000 in the aggregate by the fifth year of operations and creates and maintains at least 20 new jobs at the qualified data center within two calendar years after the commencement of operations may receive a sales tax exemption for certain (1) eligible data center costs of the qualified data center, and (2) labor services to install, apply, repair, service, alter, or maintain data center equipment. New sections 2(b), (c), (d), (e), and (f) set forth the terms and conditions that must be met to qualify for the sales tax exemption. New subsection (2)(g) provides the Secretary of Commerce shall certify to the Secretary of Revenue when a qualified firm has met the conditions provided by new sections 3 and 4 of the Bill, and amendments thereto, and that the Secretary shall also provide notice when the sales tax exemption is modified, suspended, or terminated pursuant to subsection (c).

New Section 3(a) provides a qualified firm that meets the requirement of New Section 2, and amendments thereto, may be eligible to receive a sales tax exemption. Section (3)(b) provides the sales tax exemption may be valid for 20 years after the date of commencement of operations. Section 3(c) provides no sales tax exemption will be allowed unless the qualified firm has been certified by the Secretary of Commerce. Section (3)(d) provides the Secretary of Revenue may revoke, suspend, or modify a firm's qualification as requested by the Secretary of Commerce.

New Section 4 provides that prior to awarding any public financial assistance or benefits to a qualified data center project, including, but not limited to, the sales tax exemption, the Secretary of Commerce must seek and receive approval from the Fusion Center Oversight Board, after certain evaluations and reviews are conducted.

Section 5 amends K.S.A. 2024 Supp. 66-101j regarding electric public utility economic development rate schedules as they relate to a qualified data center.

Section 6 amends K.S.A. 2024 Supp. 79-3606 to add new subsection (xxxx) to provide an exemption from sales tax for certain purchases related to the construction, reconstruction, enlarging, or remodeling of a qualified data center by a qualified firm. Specifically, the new subsection provides an exemption for:

(xxxx) all sales of tangible personal property or services purchased for the purpose of and in conjunction with constructing, reconstructing, enlarging or remodeling a qualified data center by a qualified firm that meets the requirements established in sections 1 through 3, and amendments thereto, and has been approved and certified for a project exemption certificate by the secretary of commerce, the sale and installation of machinery and data center equipment and eligible data center costs purchased by such qualified firm for such qualified data center and labor services to install, apply, repair, service, alter or maintain data center equipment of such qualified firm at such qualified data center. When a person contracts for the construction, reconstruction, enlargement or remodeling of any such qualified data center, such person shall obtain from the state and furnish to the contractor an exemption certificate for the project involved, and the contractor may purchase materials, machinery and equipment for incorporation in such project. The contractor shall furnish the number of such certificates to all suppliers from whom such purchases are made, and such suppliers shall execute invoices covering such purchases bearing the number of such certificates. Upon completion of the project, the contractor shall furnish to the owner of the qualified firm a sworn statement, on a form to be provided by the director of taxation, that all purchases so made were entitled to exemption under this subsection.
All invoices shall be held by the contractor for a period of five years and shall be subject to audit by the director of taxation. Any contractor or any agent, employee or subcontractor thereof who shall use or otherwise dispose of any materials, machinery or equipment purchased under such a certificate for any purpose other than that for which such a certificate is issued without the payment of the sales or compensating tax otherwise imposed thereon shall be guilty of a misdemeanor and, upon conviction thereof, shall be subject to the penalties provided for in K.S.A. 79-3615(h), and amendments thereto. As used in this subsection, "data center equipment," "eligible data center costs," "qualified data center" and "qualified firm" mean the same as defined in section 1, and amendments thereto.

The provisions of Senate Bill 98 take effect and are in force from and after publication in the statute book. The new sales tax exemption found in K.S.A. 79-3606 applies to qualified purchases made on or after July 1, 2025.

TAXPAYER ASSISTANCE

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.gov. If you have questions about this Notice, please contact:

Taxpayer Assistance Center
Kansas Department of Revenue
Scott Office Building, 1st Floor
120 SE 10th Ave
P. O. Box 3506
Topeka, KS 66601-3506
Phone: 785-368-8222
Fax: 785-291-3614