CLIENT
Our client is a global technology leader operating hyperscale data centers in the Phoenix metro area of Arizona. The client was actively building out multiple facilities with the support of various prime contractors and subcontractors.
CHALLENGE
The client was in the midst of large-scale construction projects when a 2022 Arizona tax law change introduced a new opportunity: labor costs associated with the installation of exempt data center equipment could now also qualify for exemption. Many contractors continued to tax these labor charges—missing the opportunity. The client needed help identifying potential overpayments across a complex mix of construction phases, ranging from newly-launched builds to completed facilities.
SOLUTION
DMA reviewed construction budgets for approximately ten facilities in various stages of completion. The team analyzed the prime contractor’s large-scale construction budgets, which were often presented in lump sums. They worked directly with the contractor to gather pertinent documentation from subcontractors, detailing their billings through the prime contractor to the building owner. DMA also collaborated with the prime contractor to distinguish expenses incurred before and after the legislative change. By focusing on specific designations such as ‘data hall’ areas versus non-qualifying administrative spaces, DMA identified eligible exempt labor costs. The team educated contractors on these changes, confirmed their applicability, and guided the client through retrospective refund claims and prospective tax savings via change orders.
RESULT
DMA’s analysis led to an expected $25 million in tax savings. The total included approximately $5 million in refund claims and additional future savings secured through change orders on active projects. DMA also uncovered $223,000 in retail sales tax overpayments on equipment purchases, further enhancing the client’s financial outcome.
WHY DMA?
DMA’s deep understanding of Arizona’s data center exemptions, along with long-standing relationships with key contractors, was instrumental in the success of this engagement. Our prior work in the region built a foundation of trust that allowed our consultants to access detailed documentation and collaborate effectively with all parties. This proactive, relationship-driven approach ensured accurate application of the law and maximized recovery opportunities across complex construction timelines.
DMA’s Transaction Tax Professionals are Experts in Exemptions
Unlock your tax savings today—contact DMA to see how we can maximize your data center exemptions and secure significant refunds.