Ohio pauses key tax break fueling AI data centre boom

Ohio projected its data centre sales tax exemption would cost $142 million in fiscal 2026. It cost nearly $1.6 billion in 2025. That 11-fold overrun has now prompted Republican Governor Mike DeWine to suspend the tax break for new applicants, a surprise move that immediately drew fire from business groups, labour unions, and tech investors who had been counting on Ohio's competitive incentive environment to continue.

The exemption granted to Ohio is rather extensive, not only including building supplies but also server racks, cooling facilities, and other machinery that needs to be updated on a two-year cycle owing to technological developments.

This, along with the exponential growth of the number of hyperscale data centres due to the ChatGPT boom, saw the bill exceed all of Ohio's projections based on the earlier levels of utilisation.

"The governor felt it was the right time to let citizens and businesses know we're going to pause on new offers of this tax incentive while that process plays out," spokesperson Dan Tierney said.

An initiative by the residents to ban hyperscale data centres from being built is now underway with the hopes of having the matter on the ballot in November, which will be the toughest ban on data centres ever put forth by any US state.

The effort has until July 1 to gather over 400,000 voter signatures. If it does so, it will join other items on the ballot, like the upcoming election between Republican Vivek Ramaswamy and Democratic candidate Amy Acton for governor.

Data centres in 38 states currently receive some kind of exemption from paying sales taxes, according to the National Conference of State Legislatures, with many of them having been created for an earlier time when the centres were not AI-powered and didn’t consume as much energy.

Virginia now finds itself in a bind over whether to get rid of its roughly $1.6 billion yearly exemption on data centre taxes, as budget talks there have hit a roadblock.

DeWine, however, has been very careful in his messaging about the temporary halt being only that while pointing out that Ohio has received around $37 billion 'worth of investments in its data centres in both 2024 and 2025.