Ohio’s data center sales-tax exemption cost far more in 2025, state tax department says
Ohio’s biggest sales-tax break for data centers has turned out to be substantially larger than state budget forecasts suggested, with updated “actuals” from the Ohio Department of Taxation showing the exemption cost $1.6 billion in lost state revenue in 2025.
The department also said the exemption cost about $555 million in lost revenue in 2024, a figure that was already described as roughly four times larger than the Department of Taxation forecast for that year.
In its explanation for why the updated figures did not come earlier, the department said it could not share calculated actuals before 2024 due to taxpayer confidentiality concerns, noting that fewer than 10 companies had claimed the exemption at the time. Andrea Lannom, a spokesperson for the tax department, also tied the problem of estimating the tax break to growth in the data center industry and in companies’ use of the exemption since the department’s Tax Expenditure Report in November 2024.
The tax break itself is structured as an exemption from Ohio’s 5.75% statewide sales tax for qualifying data center projects. For facilities costing at least $100 million to build, the exemption allows developers to waive up to 100% of the state sales tax for up to 15 years. The exemption also can apply to other capital-intensive energy projects, including private natural gas plants some developers build to fuel data center operations.
State lawmakers have faced pressure in recent budgets to weigh the economic-development rationale for the exemption against the revenue costs. In the most recent budget legislation, lawmakers voted to end the data center tax break to help finance another round of income tax cuts. DeWine vetoed that effort, with a spokesperson saying the governor believes the exemption is needed to lure data center developers to Ohio.
The newly provided cost data is expected to feed into renewed debate over whether lawmakers can alter incentives already committed to developers. Progressive economist Zach Schiller, who previously argued that state estimates were too low, said in an interview that while the scale surprised even him, the figures support his broader claim that the tax department’s estimates had been lowballs. He also raised questions about how Ohio could address longer-term contracts with developers, and whether lawmakers could at least halt new tax breaks.
Legislative leaders said they want public scrutiny of how the tax department’s estimates diverged from actual revenue losses. House Speaker Matt Huffman, a Republican, said he would like to seek the three-fifths vote required to override DeWine’s veto but indicated he lacks the political support to do so.
Rep. Adam Holmes, a Muskingum County Republican and chair of a special legislative committee focused on data centers, said he did not have immediate knowledge of how or why the tax department’s numbers were so far off, but said the panel will soon field testimony from state officials. “Let’s figure out what the heck is going on, and do it in a public forum,” Holmes said, adding that “that tax (break), that needs to be explained.”
Sen. Kent Smith, a Cuyahoga County Democrat, said the new figures show the data center exemption is among the most lucrative incentives the state offers. Smith questioned how a confidentiality rationale could account for the scale of the losses, saying “there’s not a lot of things that take over $1 billion of our money,” and arguing that even if confidentiality concerns played a role, they should not explain how large the tax break became.
The data center exemption was established in the early 2010s by Republican lawmakers, with the intent of attracting technology companies to Ohio. The tax break predates the modern wave of hyperscale, energy-intensive data centers that companies have built or are building to support artificial intelligence and other computing-intensive industries.
Data centers have also drawn broader scrutiny nationally because of the strain their demand can place on the electric grid, environmental concerns related to onsite power generation, and the public subsidies provided compared with the scale of jobs that can follow after facilities are built. A report cited by the tax-break debate estimated data centers received billions in public subsidies in Ohio between 2017 and 2024, and lawmakers have responded by creating an environment in which the incentives’ costs and forecasting accuracy are now being publicly re-examined.
The updated figures were first reported by News 5 Cleveland, and the Associated Press story said the department’s updated “actuals” account for both the statewide sales-tax exemption and—through additional local sales-tax losses—another category of revenue loss reported for 2024.