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August 4, 2010

Taxes, Tariffs and the Mega Datacenter

Nicole Hemsoth

Datacenters, as one might imagine, have a tendency to appear in areas where both power costs and taxes are low.  Far from being a rarity where the conditions are so favorable, the number of these centers is expected to grow in the coming years. Signs pointing to this are numerous, including recent projections from Intel claiming that nearly one-quarter of their chips will go into mega datacenters by the end of next year.

Making the conditions favorable for datacenter construction is not a top priority for some governments and some of those who have constructed their datacenters in a once-hospitable climate have found the tables turned as tax hikes occurred or previous breaks were overturned. This is what happened last year when the state of Washington declared that its host of datacenters were no longer permitted the sales tax break they counted on and that there would be higher taxes on new centers. Far from taking this in stride, Microsoft pulled its Quincy, Washington Azure facility up by its roots and migrated to Texas. As Laura Smith from TechTarget noted, Google is also faced with a similar decision as it considers moving out of North Carolina.

Smith also stated today that “people can wax poetic about the cloud, but the services flying over the Web touch down on a piece of physical equipment somewhere. Consider Digital Realty Trust, a provider of data centers (move-in or custom) with more than 15 million square feet of space in 70 locations worldwide. Its datacenter facility in Chicago is the city’s second-largest consumer of power, behind O’Hare International Airport.”

Are containerized datacenters the best alternative until the technology catches up with the desire to migrate? Smith says, “when other parts of the country—or world—begin to offer tax incentives for building mega datacenters in their backyards, being able to move workloads from one datacenter to another would make good economic sense. However, this requires a software later that Google and others are still working on.”

Full story at TechTarget

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