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Texas Lawmakers Move to Curb Data-Center Sales Tax Break as Costs Mount

Comptroller audits showing compliance failures and a projected $3.3 billion revenue shortfall have prompted calls to repeal or limit the exemption before the next legislative session in January.

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From left, at front and standing: Don’t Drain Texas organizer Maggie Hill, Agriculture Commissioner Sid Miller and Clayton Tucker, Democratic nominee for agriculture commissioner, join protesters on the Capitol steps in demand of a special session to regulate data center growth before a Senate Committee Hearing on Monday, July 27, 2026.
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Overview

  • State senators held interim hearings on Monday that signaled bipartisan openness to repeal or narrow the decade-old sales-tax exemption for qualifying data centers after new cost estimates grew sharply.
  • The Texas Comptroller reported about 138 eligible centers with 59 certifications in 2026 and projected roughly $3.3 billion in foregone sales tax revenue for the 2028–29 biennium.
  • Audits reviewed by lawmakers found compliance problems: of 20 audited projects, five failed to meet job-creation or build requirements and must repay waived taxes in some cases.
  • Governor Greg Abbott has directed the PUC and ERCOT to require data centers to pay for their own electric infrastructure, adopt water-efficient cooling, and avoid shifting costs to local ratepayers.
  • Grassroots coalitions launched a statewide 'week of action' at the Capitol this week to press for a moratorium or a special session, and legislators plan to file bills when the Legislature reconvenes in January.