Niagara County Legislature Calls on Hochul to Audit Internet Sales Tax Exemption
View the letter to Governor Hochul
View the Resolution passed by the Niagara County Legislature
(Lockport, NY) -- The Niagara County Legislature unanimously passed a resolution Tuesday night calling on Governor Kathy Hochul to immediately direct the New York State Department of Taxation and Finance to conduct a comprehensive, independent audit of the Internet Data Center Sales Tax Exemption. The Legislature is concerned this decades-old exemption is being wrongly claimed by internet data centers like Lake Mariner in the Town of Somerset, costing state and local governments millions in tax dollars.
In recent comments, Governor Hochul said the state may take action on the exemption next year, but Niagara County is urging her to act now. In a letter to the
governor, Niagara County Manager Rick Updegrove said, “It is our position that, given the ramifications of this exemption on local governments, administrative action should be taken immediately by directing the New York State Department of Taxation and Finance to conduct a comprehensive audit of this exemption and issue a public report of all findings.”
Specifically, the county wants Taxation and Finance to review which companies are currently receiving the internet data center sales tax exemption; whether cryptocurrency and AI data centers qualify for the exemption and, if so, who made that determination; whether recipients are in full compliance with all statutory eligibility requirements; whether the claimed exempt equipment purchases qualify under existing law and if there is a distinction between purchases made by the owners of data centers and tenants of these operations; and the total value of sales tax revenue abated by the State of New York for all data centers as a result of this exemption.
Updegrove further wrote, “In the few public documents available from Taxation and Finance, the Department estimates the exemption costs New York State $12 million last year. Considering the size and scope of the Lake Mariner project alone, we believe the impact is significantly greater than that.”
In relation to Lake Mariner, Niagara County was clear its position is that the company is not entitled to the state exemption, with Updegrove writing, “It is our position that Lake Mariner is clearly not an internet web hosting facility, as it relates to the intent of the original exemption. The available information suggests there has been a significant misuse of the exemption to the detriment of the state and the taxpayers of Niagara County.”
The Niagara County Legislature has authorized legal action against Lake Mariner over the issue, but believes a sales tax audit by Taxation and Finance, with the findings of such an audit publicly released, could help answer many of the questions the county has raised.