South Dakota House Bill 1005 Proposes Tax Exemption for Data Center Operations
South Dakota House Bill 1005 proposes a sales and use tax exemption for goods and services related to data center operations, requiring data centers to prevent cost shifting to other utility customers and notify local water providers of their consumption. Sponsored by Republican Rep. Kent Roe, the bill aims to enhance the state's competitiveness by aligning it with neighboring states that offer similar tax incentives. The legislative session begins on January 13, 2026, following a failed attempt with Senate Bill 177 in 2025.
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House Bill 1005 aims to provide a sales and use tax exemption for goods and services related to data center operations in South Dakota. The bill mandates data centers to establish agreements that prevent cost shifting to other electric utility customers and requires notification to local water providers regarding water consumption.
A similar initiative, Senate Bill 177, failed in 2025. Currently, there are no major data centers in South Dakota, although proposals exist in Deuel and McPherson Counties. The bill's sponsor, Republican Rep.
Kent Roe, argues it will align South Dakota with neighboring states like North Dakota, which offers tax incentives for data centers. Roe states that South Dakota's current tax structure, particularly on equipment, hinders competitiveness.
The South Dakota legislative session begins on January 13, 2026, with Gov. Larry Rhoden's State of the State address.
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