Did SC really give data centers $800M in sales tax breaks last year?

While debating whether to allow data centers to keep their tax breaks next year, South Carolina lawmakers believed the large server warehouses’ exemptions cost the state more than $800 million last year.

But the cost of data center sales tax exemptions might actually be lower than $1 million under new numbers sent to The State newspaper Monday.

Exempt sales by data centers hit $13.8 million in fiscal year 2025, according to the South Carolina Department of Revenue. That’s the amount that could have been taxed, if not for exemptions.

Sales tax exemptions on computer equipment, software and electricity can help bring data centers investing money and creating jobs to South Carolina, but it also cuts into state revenue.

Last week, S.C. senators inserted several one-year provisions into the state budget attempting to track and curb the negative impacts of data centers, large warehouses of computers used to power artificial intelligence and other digital services.

Two proposed amendments by state Sen. Chip Campsen, R-Charleston, dealt with sales tax exemptions for data centers. He told lawmakers it cost the state $828 million to provide the tax breaks. Campsen said he objected to the state spending hundreds of millions on luring data centers to South Carolina.

“Should we spend this much money to bring them here?” Campsen asked on the floor Wednesday. “No.”

Campsen told senators his figures came from Frank Rainwater, the executive director of the Revenue and Fiscal Affairs office.

But the state Department of Revenue gave Rainwater’s agency incorrect data, department spokesperson Tim Smith wrote in an email to The State.

“In providing the FY25 number to the RFA, the SCDOR mistakenly used billion instead of million. The RFA then did its calculations based on that number,” Smith wrote in an email.

If data centers paid the state’s 6% tax on the more than $13.8 million in sales exempted in 2025, the state could have made $828,288.

Campsen told The State he was made aware of the corrected numbers a few days ago, after he spoke on the floor.

“I went with the numbers that I was given, and I questioned them, and so did Fiscal Affairs,” Campsen said. “They questioned it, too. But DOR said, ‘that’s what it is.’ ”

The lower numbers did not change Campsen’s perspective on whether the state should provide tax breaks to large technology companies, like Google or Meta, he said. He also suspects the cost to South Carolina to provide tax exemptions will grow.

“You don’t have to bribe people to move to paradise,” Campsen said.

To qualify for a sales tax exemption, data centers must meet job creation and investment requirements, according to the South Carolina Department of Commerce.

A budget item passed last week, sponsored by Campsen, requires the Department of Revenue to report the amount claimed by data centers for a sales tax exemption. The report would also include how many companies took advantage of the exemption. Campsen initially attempted to suspend the exemptions for data centers, but the proposal was withdrawn and not included in the Senate version of the budget.

As more data centers look to move into the state, the infrastructure required to power AI has drawn more scrutiny from the public and lawmakers. Concerns about electricity use, noise production and water demands spurred legislation in the South Carolina State House this year.

Tax breaks for data centers

Fewer than five data centers used sales tax exemptions each year in South Carolina, according to Smith, the Revenue spokesman. The amount exempted has grown from 2020 and 2021, when no data centers claimed the sales tax exemption.

Sales exempted for data centers reached $13.8 million in fiscal year 2025. That’s down from 2024, when $23.1 million in sales for data center’s computers, software and electricity was exempted.

Here is how much data centers spent in each fiscal year that they didn’t pay sales tax on, according to the state Department of Revenue:

• Fiscal year 2020: $0
• FY 21: $0
• FY 22: $7,657,680
• FY 23: $16,666,342
• FY 24: $23,134,304
• FY 25: $13,804,810