HB 1005

 26.31.38  101st Legislative Session  1005
                                        2026 South Dakota Legislature
                                                 House Bill 1005
 Introduced by: Representative Roe
1 An Act to provide a sales and use tax exemption for goods and services related to
2data center operations.
3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
4 Section 1. That a NEW SECTION be added to chapter 10-45:
5The terms used in this Act mean:
6    (1)      "Computer software," programs and other operating information used solely for
7the maintenance and operation of a qualified data center;
8    (2)      "Data   center,"    a    centralized     repository      for     the    storage,  management,
9dissemination, and processing of electronic data and information, except for that
10which relates to the mining of digital currency;
11    (3)      "Enterprise information technology equipment," the following products used solely
12for the maintenance and operation of a qualified data center:
13(a)     Computer hardware, servers, storage arrays, backup systems, disaster
14recovery   equipment,      routers,     cooling        systems,     temperature  control
15infrastructure, network equipment, switches, load balancers, firewalls,
16network cabling, edge devices, network monitoring equipment, water
17treatment systems, chilled water equipment, economizers, cooling towers,
18and piping and pump equipment for cooling towers;
19(b)     Power   infrastructure     for    the   management  of   electricity,  dedicated
20distribution    equipment,       backup   power  generation      systems,  battery
21systems, construction materials for structures unique to data centers or
22other related infrastructure excluding primary electric generation service,
23transmission, or utility distribution infrastructure;
24(c)     Racking systems, raised flooring, cabling, or trays necessary for the
25maintenance and operation of a qualified data center;
                                                                                              Underscores indicate new language.
                                                                                            Overstrikes indicate deleted language.
 26.31.38  2  1005
1(d)    Security systems, physical access control systems, surveillance systems,
2biometric scanners, security monitoring equipment, and monitoring
3systems, environmental monitoring systems, infrastructure management
4tools, and building management systems;
5(e)    Testing and diagnostic equipment used for maintenance, commissioning, or
6troubleshooting;
7(f)    Telecommunications and fiber infrastructure, fiber optic cabling, satellite
8equipment, and internet exchange components; and
9(g)    Air quality systems, specialized HVAC, filtration, and humidity control
10equipment;
11    (4)     "Qualified business," the owner, operator, or tenant of a qualified data center or a
12proposed data center;
13    (5)     "Qualified data center," a facility located in this state:
14(a)    Comprised of one or more buildings containing a data center;
15(b)    Where all buildings that contain a data center qualify as real property
16subject to taxation pursuant to §§ 10-4-1 and 10-4-2;
17(c)    Where the qualifying date occurs on or after July 1, 2026, and on or before
18June 30, 2036; and
19(d)    Equipped with fire suppression and prevention systems; and
20    (6)     "Qualifying date," the date on which a building permit is issued for the initial
21construction of the facility.
22 Section 2. That a NEW SECTION be added to chapter 10-45:
23There are specifically exempted from the provisions of this chapter and from the
24    computation of tax imposed by it, gross receipts from the sale of enterprise information
25    technology equipment or computer software to be used in a qualified data center. A
26    qualified business is exempt for a period of fifty years after the qualifying date.
27 Section 3. That a NEW SECTION be added to chapter 10-45:
28To be eligible for the exemption provided in section 2 of this Act, a qualified
29    business in a qualified data center, or a qualified business in a proposed qualified data
30    center, shall submit any documentary evidence required by the Department of Revenue
31    to verify the eligibility of the qualified data center or proposed data center. The
32    documentary evidence required by this section is confidential. The secretary of the
33    Department of Revenue shall determine if the qualified business is eligible.
                                                                               Underscores indicate new language.
                                                                             Overstrikes indicate deleted language.
 26.31.38  3  1005
1To be eligible for the exemption provided by section 2 of this Act, a qualified
2    business shall:
3    (1)     Ensure electric service provided to the qualified business by an electric utility is
4under a written agreement or rate schedule that avoids the shifting of costs to
5other customers of the electric utility; and
6    (2)     Provide notice to local water providers to ensure that water consumption is
7compatible for the location in which the qualified data center is situated.
8Upon determining the eligibility of a future qualified business in a proposed
9    qualified data center, the secretary shall provide an exemption certificate for taxes
10    imposed pursuant to this chapter and chapter 10-46.
11To retain eligibility for the exemption provided in section 2 of this Act, a qualified
12    business must file an affidavit with the secretary attesting that the data center or the
13    future data center qualifies for the exemption provided in section 2 of this Act, prior to
14    June first of each year.
15 Section 4. That a NEW SECTION be added to chapter 10-46:
16There are specifically exempted from the provisions of this chapter, gross receipts
17    from the sale of enterprise information technology equipment or computer software to be
18    used in a qualified data center. A qualified business is exempt for a period of fifty years
19    after the qualifying date.
                                                                                Underscores indicate new language.
                                                                              Overstrikes indicate deleted language.