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