Important Notice: Repeal of Exemptions for Electricity Used at Datacenters

Issued By: Sales and Use Tax Division

Date: July 23, 2026

The following important information is addressed in this notice:

  • Repeal of Exemptions for Electricity Used at Certain Datacenters
  • Application of July 1, 2026, Effective Date
  • New Datacenter Reporting Requirements
  • Examples

Definitions

The following definitions apply to this notice:

  • Certified Datacenter - A datacenter that is a qualifying or internet eligible datacenter.
  • Datacenter - A facility that provides infrastructure for hosting or data processing services and that has power and cooling systems that are created and maintained to be concurrently maintainable and to include redundant capacity components and multiple distribution paths serving the computer equipment at the facility. Although the facility must have multiple distribution paths serving the computer equipment, a single distribution path may serve the computer equipment at any one time. The following definitions apply in this definition:
    • Concurrently maintainable - Capable of having any capacity component or distribution element serviced or repaired on a planned basis without interrupting or impeding the performance of the computer equipment.
    • Multiple distribution paths - A series of distribution paths configured to ensure that failure on one distribution path does not interrupt or impede other distribution paths.
    • Redundant capacity components - Components beyond those required to support the computer equipment.1
  • Eligible internet datacenter - A datacenter that satisfies each of the following conditions:
    • The facility is used primarily or is to be used primarily by a business engaged in software publishing included in industry 511210 of NAICS or an internet activity included in industry 519130 of NAICS.
    • The facility is comprised of a structure or series of structures located or to be located on a single parcel of land or on contiguous parcels of land that are commonly owned or owned by affiliation with the operator of that facility.
    • The facility is located or to be located in a county that was designated, at the time of application for the written determination required under sub-subdivision d. of this subdivision, either an enterprise tier one, two, or three area or a development tier one or two area pursuant to G.S. § 105-129.3 or G.S. § 143B-437.08, regardless of any subsequent change in county enterprise or development tier status.
    • The Secretary of Commerce has made a written determination that at least two hundred fifty million dollars ($250,000,000) in private funds has been or will be invested in real property or eligible business property, or a combination of both, at the facility within five years after the commencement of construction of the facility.2
  • Qualifying datacenter - A datacenter that satisfies each of the following conditions:
    • The datacenter certifies that it satisfies or will satisfy the wage standard for the development tier area or zone in which the datacenter is located. There is no wage standard for a development tier one area. If an urban progress zone or an agrarian growth zone is not in a development tier one area, then the wage standard for that zone is an average weekly wage that is at least equal to ninety percent (90%) of the lesser of the average wage for all insured private employers in the state and the average wage for all insured private employers in the county in which the datacenter is located. The wage standard for a development tier two area or a development tier three area is an average weekly wage that is at least equal to one hundred ten percent (110%) of the lesser of the average wage for all insured private employers in the state and ninety percent (90%) of the average wage for all insured private employers in the county in which the datacenter is located.
    • The Secretary of Commerce has made a written determination that at least seventy-five million dollars ($75,000,000) in private funds has been or will be invested by one or more owners, users, or tenants of the datacenter within five years of the date the owner, user, or tenant of the datacenter makes its first real or tangible property investment in the datacenter on or after January 1, 2012. Investments in real or tangible property in the datacenter made prior to January 1, 2012, may not be included in the investment required by this subdivision.
    • The datacenter certifies that it provides or will provide health insurance for all of its full-time employees as long as the datacenter operates. The datacenter provides health insurance if it pays or will pay at least fifty percent (50%) of the premiums for health care coverage that equals or exceeds the minimum provisions of the basic health care plan of coverage recommended by the Small Employer Carrier Committee pursuant to G.S. § 58-50-125.3

Repeal of Electricity Exemptions

North Carolina law provides sales and use tax exemptions for the sale of certain items for use at Certified Datacenters.4 Prior to July 7, 2026, the exemptions included eligible sales of electricity for use at Certified Datacenters (“Electricity Exemptions”).

Session Law 2026-41 repeals the Electricity Exemptions. As a result, after the effective date, sales and use tax is due on the sale of electricity sold for use at Certified Datacenters. Sales of electricity are subject to the combined general rate of sales and use tax.

Effective Date of Repeal

The repeal of the Electricity Exemptions is effective July 7, 2026. The repeal applies to the first billing period that is at least 30 days after the effective date and that starts on or after the effective date.5 As a result, the repeal of the Electricity Exemptions applies to the first billing period that starts on or after August 6, 2026, which is 30 days after the effective date.

Administration of Repeal

Purchasers

A purchaser who claimed the Electricity Exemptions should immediately notify retailers of electricity that it no longer qualifies for the Electricity Exemptions beginning on the effective date of the repeal.

Retailers

Retailers of electricity should be aware that customers who claimed the Electricity Exemptions must be charged sales tax beginning on the effective date of the repeal.

Tax Liability

A purchaser that fails to pay tax after the effective date of the repeal of the Electricity Exemptions is subject to tax, penalty, and interest.

New Certified Datacenter Reporting Requirement 

Session Law 2026-42 requires a person that purchases electricity for use at a Certified Datacenter to file an informational return or report. “A person that purchases electricity for use at a [Certified Datacenter] shall, within 30 days of the end of each quarter, provide to the Secretary the amount of tax paid on the electricity.” The information must be provided to the North Carolina Department of Revenue (“NCDOR”) in “an electronic format as prescribed by the Secretary.”

The first return or report will be due on October 30, 2026. The Department will issue additional guidance on the filing of this return or report before October 30, 2026.

Other Certified Datacenter Exemptions

The repeal of the Electricity Exemptions only repeals the exemptions for sales of electricity. The repeal does not modify the exemption for certain other items to be located and used at Certified Datacenters.6

Examples

Billing Period Prior to Effective Date

Operator purchases electricity for an eligible internet datacenter and previously provided the electricity provider with a completed exemption certificate. The operator is billed monthly on the 15th of the month. The operator receives its bill for the period July 15th through August 15th.

The operator must immediately notify the electricity provider that it no longer qualifies for the Electricity Exemptions. However, the electricity provider is not required to charge the operator tax on this billing period because the billing period started prior to August 6, 2026. The electricity provider must charge, and the operator must pay, sales and use tax on all future billing periods.

Billing Period After the Effective Date

Operator purchases electricity for a qualifying datacenter and previously provided the electricity provider with a completed exemption certificate. The operator is billed monthly on the 20th of the month. The operator receives its bill for the period August 20th through September 20th.

The operator must immediately notify the electricity provider that it no longer qualifies for the Electricity Exemptions. The electricity provider must charge, and the operator must pay, sales and use tax on the electricity because the billing period started after August 6, 2026. 

In addition, the operator must file a report or return with the NCDOR on or before October 30, 2026, to report the tax paid on the electricity.

Assistance

If you have questions about this notice, you may call the Department at 1-877-252-3052 (8:00 a.m. until 4:30 p.m. EST, Monday through Friday). 

To the extent there is any change in the rate or amount of tax, change to a statute or regulation, or new case law subsequent to the date of this notice, the provisions in this important notice may be superseded or voided. To the extent that any provisions in any other notice, directive, bulletin, or published guidance regarding the subject of this notice and issued prior to the date of this notice conflict with this important notice, the provisions contained in this important notice supersede the previous guidance.

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