SOURCE: BYTEGRID

BYTEGRID

February 04, 2014 07:00 ET

BYTEGRID® Drives Pro-Business Change in Ohio Data Center Tax Exemption

100 Percent Sales Tax Exemption on Data Center Investment Enabling Ohio Data Center Tenants to Save Millions in Total Cost of Occupancy

CLEVELAND, OH--(Marketwired - Feb 4, 2014) -  BYTEGRID®, a leading data center company focused on the nationwide acquisition, development and operation of premier multi-tenant data center facilities, today commented on the impact of the recent elimination of sales tax on qualifying investments for both owners and tenants of data centers in the state of Ohio. The tax statute modification was accomplished through the joint efforts of BYTEGRID and JobsOhio, the private economic development entity in the State.

As part of a series of tax credits approved for local companies in exchange for job creation, BYTEGRID, which purchased the Cleveland Technology Center (CTC) last May, and its tenants were awarded a 100 percent tax abatement for 15 years. It is anticipated that the qualifying investments by BYTEGRID and its tenants at the CTC will generate at least 20 high-paying jobs on premise and $1.5 million in annual payroll. Many more additional jobs will also be stimulated in proximity to the CTC as a result of the data center ecosystem and ensuing business growth. 

Multi-tenant data centers are an economic engine and business enabler which house the critical IT infrastructure of enterprises, service providers, and cloud provider tenants who deliver their services to individual customers from those data centers. These businesses are highly sensitive to the total cost of occupancy (TCO) related to their IT assets for which sales and use taxes are typically a large component.

The sales tax abatement, combined with the fact that Ohio does not have personal property tax, makes Ohio one of the lowest cost destinations for data center users and investment.

The Ohio tax change involves a modification to the existing statute (122.175 Tax exemption for sales, storage, use, or other consumption of computer data center equipment). Previously, this statute provided the tax exemption only to qualifying data center owners in certain instances, not the business tenants who use the data center to run their IT environments and who also incur significant expense for the equipment they bring into the data center to build their IT environment (i.e., servers, switches, routers, network and storage devices, etc.)

With the change in the law's criteria, tenants in qualifying data centers can now take advantage of the sales tax exemption with the opportunity to save millions annually.

Key modifications to the statute include:

  • A lower minimum investment by the data center to qualify for the exemption. Previously, the data center owner was required to make a $150 million investment. With the change, the amount of the required investment was lowered to $100 million and such investment criteria now include the aggregate investments of the owner and the tenants. 
  • A reduction in the minimum required annual data center payroll -- from $5 million to $1.5 million -- as determined by aggregating the payroll of both the data center owner and tenants. 

BYTEGRID conservatively estimates that a multi-tenant data center customer leasing 10,000 square feet of critical infrastructure space and consuming 1,000 kilowatts of power will typically invest from $10 to $40 million in related IT equipment. Under the modified statute, and based on the current 8% tax rate, such a tenant would achieve a savings of approximately $800,000 to $3,200,000 in the first year alone. Significant additional savings would also be achieved as the tenant replaces obsolete equipment, which typically occurs every three to five years.

The impetus for the change in the Ohio tax statute was BYTEGRID's acquisition of the 333,215 square foot Cleveland Technology Center (CTC), the market leader in secured telecommunications that sits on top of one of the largest fiber point of presence sites in Ohio. As part of the acquisition, BYTEGRID successfully lobbied the Ohio State legislature, with Governor Kasich's support, to modify the criteria of the two-year old statute to allow data center tenants to also qualify for the exemption and also to lower the qualifying threshold criteria.

Data center tax incentives are on the rise nationally as states recognize the growing importance of the data center as the foundation of the IT ecosystem required for business growth generating tax revenue increases associated with local business investment.

"JobsOhio recognizes that big data is critical to the state's economic future. We are grateful to the Ohio General Assembly for amending language that will support BYTEGRID's efforts to grow here and for providing JobsOhio with such a valuable tool for retaining and attracting other job creators in this industry to Ohio," said Mark Patton, JobsOhio Managing Director for Information Technology.

"BYTEGRID has a vision for the Cleveland Technology Center and we are excited to execute on Phase One of a multi-million dollar, multi-phased expansion and renovation plan," said Kenneth Parent, CEO of BYTEGRID. "We look forward to serving as the primary provider of capacity and connectivity, as well as an ideal disaster recovery location, for Midwest and East Coast markets, while BYTEGRID becomes known as Cleveland's premier digital business address."

BYTEGRID's data centers are highly secure, compliant business platforms serving some of the world's largest companies, service providers and government agencies. BYTEGRID's innovative data center model offers a compelling alternative as to how local organizations and Fortune 500 companies outsource their data center capacity in the Northeast Ohio corridor. 

About BYTEGRID®
BYTEGRID Holdings LLC, is a privately-held company headquartered in Northern Virginia focused exclusively on the nationwide acquisition, development and operation of premier data center facilities. The company serves the growing need for mission-critical data center space by providing highly secure, interconnected, carrier-neutral, and density-robust data centers that serve commercial, government and service provider markets. BYTEGRID currently owns and operates data centers in the Washington, D.C., Atlanta, GA, Cleveland, OH and now Chicago, IL metro area with plans to acquire additional facilities in 2014. The company is led by industry veterans with significant experience in data center operations, design and construction; data center sales and marketing; real estate development and finance; and telecommunications. For more information, please visit www.BYTEGRID.com.

Contact Information

  • BYTEGRID CONTACT:
    Carter B. Cromley
    Email Contact
    (703) 861-7245