Requiring data centers to be located on land that was zoned for industrial or manufacturing uses or was not zoned on July 1, 2025, to qualify for the sales tax exemption for qualified data centers.

2025-2026 Regular Session

The sales tax exemption for data centers now requires the site to be on land zoned for industrial/manufacturing uses as of July 1, 2025, narrowing eligible locations.

Died in Committee

#taxation

Purpose and intent

SB 526 amends the sales tax exemption for the construction or remodeling of qualified data centers. The core change requires that a qualified data center be located on land that was zoned for industrial or manufacturing uses on July 1, 2025, to qualify for the exemption, and only for land that was subject to zoning regulations by a local authority on or before that date.

Key provisions and changes

Qualified data center definition (operative for exemption):

A data center is a building or group of buildings housing networked computer servers, connected via fiber for redundancy and resiliency.
The qualifying site must be on land that:
Was zoned and classified for industrial or manufacturing uses on July 1, 2025, and
Was under zoning regulation by a local authority on or before July 1, 2025.

Geographic and zoning constraint (new condition): This zoning-on-origin requirement applies only to land that was subject to local zoning by that date; land not zoned or not industrial/manufacturing by that date is ineligible for the exemption, even if a data center is built there.

Definitions retained/clarified: The bill retains definitions for:

Commencement of construction and operations (timing tied to the agreement under KSA 2025 Supp. 74-50,332).
Data center equipment and eligible data center costs (excluding electricity costs from eligible costs; includes buildings, site work, cooling, water efficiency, cabling, software, and other essential property).
Qualified firm (registered business engaged in development, operation, or leasing of a data center; excludes certain telecom and service providers).

Administrative changes: Repeals the existing K.S.A. 2025 Supp. 74-50,331 and replaces it with the amended version reflecting the new land-zoning requirement.

Who or what is affected

Qualified firms seeking the sales tax exemption for constructing or remodeling a data center will be constrained by the zoning requirement.

Local jurisdictions (cities/counties) may experience changes to zoning administration and planning review workload related to siting of data centers.

State revenues: The fiscal note indicates no expected change in state revenues from the exemption itself, and negligible administrative cost at the state level.

Other state agencies: Department of Revenue, Department of Transportation, and local associations (League of Municipalities, Counties) reviewed potential impacts; localities may bear more zoning/administrative costs depending on activity.

Procedural and timeline aspects

Effective date: The act takes effect upon publication in the statute book.

Effective period: Applies to land meeting the specified zoning criteria as of July 1, 2025.

Legislative history: Introduced and referred to the Senate Committee on Commerce in March 2026; bill text provided in 2026 session.

Practical impact

SB 526 tightens eligibility for the qualified data center sales tax exemption by tying eligibility to pre-existing industrial/manufacturing zoning as of July 1, 2025. This narrows eligible sites and may steer new data center development toward already zoned industrial land, potentially influencing siting decisions, zoning processes, and local planning resources.

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