By Isaiah Hogberg
Cost-saving measures are particularly top-of-mind at this time of year, as businesses review their finances and begin to file their taxes. As such, IT channel professionals have an open window to bring forward tax incentives and other cost-cutting ideas that will show your clients you’re proactively thinking about their best interests. Data centers are a big expense for many companies, and they’re also an opportunity for significant savings.
When helping your clients select a data center, there are two areas in particular where they can achieve massive gains in their bottom line: tax-incentive programs and power cost savings. It’s not uncommon for businesses to achieve savings ranging from tens of thousands of dollars to more than $1 million based on these factors alone.
Consider this: If a customer is spending, on average, $200,000 in capital costs for the IT equipment that goes into each cabinet in a data center (servers, storage, network equipment, software) and they pay a 9 percent sales tax rate, this equals $18,000 in sales tax per cabinet of gear. With 10 cabinets, this sales tax cost grows to $180,000. With 100 cabinets, the customer is paying $1.8 million in sales tax alone. By understanding the various tax-incentive programs available, you have an opportunity to help your customers save substantially.
If you’re looking to leverage this for your clients, there are three states in particular with tax-abatement programs that have been gaining national attention as desirable data-center destinations: Minnesota, Nevada and Oregon.
The state of Minnesota offers a data center tax-incentive program that enables companies working with qualifying data centers to obtain a sales-tax exemption for IT equipment going into the data center. This can result in up to a 30 percent savings over the term of a 24-month contract.
Similarly, the state of Nevada recently approved a data center tax-abatement program, which will go into effect in July. This program offers abatement on personal property, sales and use tax for the purchase of eligible equipment in qualifying data centers. Companies working with qualifying data centers can take advantage of this abatement program to reduce their applicable sales tax rate to 2 percent, which is a reduction of up to 75 percent in the tax rate and can equate to a total savings of more than 25 percent over the term of your client’s 24-month contract.
Oregon also offers a multitude of tax advantages. The state’s business tax rate has been ranked in the top five lowest effective for the past five years by Ernst and Young. Oregon has no state sales tax, and specific “enterprise zones” also offer a variety of additional tax abatement programs. Furthermore, Oregon’s power rates are significantly less expensive than the neighboring tech hub, California, which, when coupled with the lack of sales tax, can reduce a customer’s data center total cost of ownership (TCO) by more than 30 percent.
Taking time to understand the tax incentives and power cost savings for your client’s data is a value-added activity that takes fairly little time and has a massive potential upside. Hybrid IT and colocation providers should be able to help you quantify the impacts of these programs and calculate the actual cost savings to your clients, which enables you to reinforce your trusted adviser status by quickly and easily educating your customers on how they can reduce their data-center TCO.
As vice president of channel sales for ViaWest, Isaiah Hogberg is responsible for managing strategic partnerships along with driving and delivering hybrid IT solution sales for the channel partner program.
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