Data Center Maryland Sales and Use Tax Exemption Incentive Program
About this page. This page explains the Data Center Maryland Sales and Use Tax Exemption Incentive Program in plain language. The exemption is authorized under Maryland Tax-General Article §11-236, created by Chapter 640 (Senate Bill 397, 2020) - PDF. If anything on this page conflicts with the statute or regulations, the statute and regulations control.
Program Status
The program is currently active.
Commerce accepts applications on a rolling basis. There is no annual deadline.
Businesses should apply before starting the project. Purchases made before Commerce certifies the business and the Comptroller issues an exemption certificate are not eligible.
Program Status
The program is currently active.
Commerce accepts applications on a rolling basis. There is no annual deadline.
Businesses should apply before starting the project. Purchases made before Commerce certifies the business and the Comptroller issues an exemption certificate are not eligible.
Who This Is For
This exemption is for businesses that own or are building a data center in Maryland and that:
- invest in qualified data center personal property in Maryland, and
- create at least five qualified, full-time positions paying at least 150% of the Maryland State minimum wage.
Both colocation/hosting data centers and enterprise (single-company) data centers may be eligible.
Definitions
Data center. A building or group of buildings used to house computer systems, computer storage equipment, and associated infrastructure. Data centers organize, process, store, and distribute large amounts of data.
Qualified data center. A data center located in Maryland that, within three years of submitting an application, meets the program’s investment and job creation thresholds.
Qualified position. A full-time position that pays at least 150% of the Maryland State minimum wage, is newly created, was not moved or transferred from another Maryland facility, and is filled for at least 12 months. Only positions that pay 150% of the State minimum wage for that tax year will count.
Program Duration and Limits
Length of the exemption
- 10-year benefit period: for businesses that meet the standard investment and job creation thresholds, subject to annual renewal.
- 20-year benefit period: for businesses that invest at least $250 million in qualified data center personal property within 10 years of submitting an application, subject to annual renewal.
Annual renewal
The Certificate of Eligibility must be renewed each year for the business to continue receiving the exemption. The business must maintain at least five qualified positions for the entire 10- or 20-year benefit period.
Multiple projects
A business may apply for more than one project. Each project must qualify on its own.
How the Program Works
The exemption applies to the sale or lease of qualified data center personal property used to set up or operate a qualified data center in Maryland.
What is exempt
Qualified data center personal property includes:
- Computer equipment and software: servers, routers, storage equipment, network connections, and other hardware and enabling software used to process, store, retrieve, or move data.
- HVAC and mechanical systems: chillers, cooling towers, air-handling units, pumps, energy storage and energy-efficiency equipment, and other equipment used to operate these systems.
- Electrical infrastructure: substations, generators, transformers, unit substations, uninterruptible power supply (UPS) systems, batteries, power distribution units, remote power panels, and related capital equipment.
Important. Electricity used to operate a data center is NOT exempt. Tools, expendable supplies, and other items used to install qualified equipment are also taxable.
Tier 1 Areas vs. other areas of Maryland
The minimum investment depends on where the data center is located.
- Tier 1 Areas: at least $2 million in qualified data center personal property
- Anywhere else in Maryland: at least $5 million in qualified data center personal property
Tier 1 Areas include:
- Baltimore City
- Allegany, Caroline, Dorchester, Garrett, Kent, Somerset, Washington, Wicomico, and Worcester Counties
- Opportunity Zones located in any Maryland county
Opportunity Zone designations change. Maryland's Opportunity Zone census tracts are periodically renominated, most recently in 2026. Verify a specific address against the current map before relying on Tier 1 status.
Check an address on the Maryland DHCD Revitalization Areas map, the map Commerce uses for this program. For the full statutory definition of Tier 1 Areas, see Maryland Tax-General Article §11-236.
Wage requirement for qualified positions
Each qualified position must pay at least 150% of the Maryland State minimum wage in effect for that tax year. Only positions paying 150% of the State minimum wage for that year will count toward the five-position requirement.
Reference rates by year:
Effective date | 150% of State Minimum Wage |
|---|---|
1/1/2020 | $16.50/hour |
1/1/2021 | $17.40/hour |
| 1/1/2022 | $18.30/hour |
| 1/1/2023 | $19.20/hour |
| 1/1/2024 | $22.50/hour |
| 1/1/2025 | $22.50/hour |
| 1/1/2026 | $22.50/hour |
The Maryland State minimum wage has been $15.00/hour since January 1, 2024, so 150% equals $22.50/hour. This program follows the State minimum wage; county minimum wage rates do not apply. Confirm the current rate at Maryland Department of Labor.
Contractor purchases
Contractors that purchase qualified data center personal property to install in a qualified data center may use the data center’s exemption certificate to make the purchase tax-free.
To do this, the contractor must:
- provide the supplier with a copy of the exemption certificate, and
- provide written notification that the property will be incorporated into a qualified data center.
Tools, expendable supplies, and other items used to install the equipment are taxable.
This treatment is set out in Comptroller Sales & Use Tax Tip #28 - PDF.
Key Eligibility Requirements
To qualify, a business must:
- Be certified by the Maryland Department of Commerce as a Qualified Data Center
- Invest at least $2 million (Tier 1 Areas) or $5 million (anywhere else in Maryland) in qualified data center personal property within three years of submitting an application
- Create at least five qualified positions within three years of submitting an application
- Maintain at least five qualified positions for the entire 10- or 20-year benefit period
- Renew the Certificate of Eligibility each year
To qualify for the 20-year benefit period, the business must also invest at least $250 million in qualified data center personal property within 10 years of submitting an application.
Documents You Will Need to Apply
Applicants should be prepared to provide:
Project information
- Description of the data center project
- Project location (to determine whether it is in a Tier 1 Area)
- Projected total investment in qualified data center personal property
- Year-by-year breakdown of projected investment for the next three years
Job creation information
- Projected number of new jobs by year
- Projected wages for each new position
- Confirmation that positions will pay at least 150% of the Maryland State minimum wage
Business documentation
- Business legal name and structure
- Authorized officer’s signature on the application
- Acknowledgment of the Qualified Data Center Requirements in the application
Commerce may request additional documentation to verify eligibility.
How to Apply
- Submit an Eligibility Application - PDF - 343.02 KB to the Maryland Department of Commerce before starting the project. Purchases made before certification are not eligible.
- Commerce reviews the application and, if approved, issues a Certificate of Eligibility. Commerce then notifies the Maryland Comptroller’s Office.
- The Comptroller’s Office issues a Sales and Use Tax Exemption Certificate to the business.
- The business presents the Comptroller’s exemption certificate to suppliers when buying qualified data center personal property to make the purchase tax-free.
- Renew the Certificate of Eligibility with Commerce each year for the duration of the 10- or 20-year benefit period.
Important. You must have the exemption certificate from the Comptroller before making any tax-free purchase. Purchases made before the Comptroller issues the certificate are taxable.
Application Review Timeline
- Commerce review: varies based on the completeness of the application.
- Comptroller exemption certificate: the statute allows up to 30 days after Commerce notifies the Comptroller. In practice, certificates are often issued sooner.
Contact Commerce for an estimated timeline based on the specifics of your application.
How You Use the Exemption
Unlike a tax credit, this benefit is not claimed on a tax return. The exemption applies at the time of purchase.
After receiving the Comptroller’s Sales and Use Tax Exemption Certificate, the business or its contractor may:
- present the certificate to a supplier when purchasing qualified data center personal property
- complete that purchase without being charged Maryland sales and use tax
The business is responsible for keeping records of all exempt purchases. The Comptroller may assess sales and use tax on purchases that do not meet program requirements.
If a purchase is denied or assessed by the Comptroller, the business should file an appeal with the Maryland Department of Commerce regarding eligibility issues, not with the Comptroller’s Office.
Frequently Asked Questions
Data Center MD Sales & Use Tax Exemption FAQs
A data center located in Maryland that, within three years of submitting an application, has created at least five qualified positions and invested at least $2 million (Tier 1 Areas) or $5 million (other areas) in qualified data center personal property.
Submit an Eligibility Application to Commerce before starting the project. Purchases made before Commerce certifies the business and the Comptroller issues an exemption certificate are not eligible.
The Certificate of Eligibility may be renewed each year for up to 10 consecutive years if the business meets the standard investment thresholds within three years of applying. The benefit period extends to 20 consecutive years if the business invests at least $250 million within 10 years of applying.
A qualified position pays at least 150% of the Maryland State minimum wage, is full-time, is newly created, was not moved or transferred from another Maryland facility, and is filled for at least 12 months. The business must maintain at least five qualified positions for the entire benefit period to remain eligible.
Tier 1 Areas include Baltimore City; Allegany, Caroline, Dorchester, Garrett, Kent, Somerset, Washington, Wicomico, and Worcester Counties; and Opportunity Zones located in any Maryland county. Because Opportunity Zone designations change, verify a specific address on the DHCD Revitalization Areas map.
Yes. A business may apply for multiple projects. Each project must qualify on its own.
No. Electricity used to operate a qualified data center is not exempt. The exemption applies only to qualified data center personal property such as servers, HVAC equipment, and electrical infrastructure.
Yes. A contractor purchasing qualified data center personal property that will be incorporated into a qualified data center in Maryland may use the data center’s exemption certificate. The contractor must provide the supplier with a copy of the exemption certificate and written notification that the property will be incorporated into a qualified data center. Tools and expendable supplies used to install the equipment remain taxable.
Applicants may appeal the denial of an Exemption Certificate with the Maryland Department of Commerce. Appeals should not be filed with the Maryland Comptroller’s Office.
A qualified data center may also be eligible for reduced or zero county or municipal personal property tax. Contact the Maryland Department of Assessments and Taxation for more information.
Legal Notices and Required Language
This exemption is authorized under Maryland Tax-General Article §11-236.
Enacting legislation:
Comptroller guidance:
Program resources:
- Eligibility Application (PDF) - PDF - 343.02 KB
- Maryland DHCD Revitalization Areas map — check whether an address is in an Opportunity Zone
Applicants should consult the statute and applicable regulations for the complete legal requirements governing this exemption.
Contact
Amy Poad
Tax Specialist, Tax Incentives
Maryland Department of Commerce
401 E. Pratt Street
Baltimore, MD 21202
Email: [email protected]
Phone: 410-767-0429