As public opposition to data centers has grown in Mississippi, the government economic incentives available to companies have come under increasing scrutiny online and in city hall meetings.
Data centers are eligible for state and local tax incentives that proponents and some officials say are essential to bring projects to the state, but critics disagree.
Standard data center tax exemptions
Most data centers, such as xAI, Compass and AVAIO, have opted for the data center tax exemption created by the Legislature. This does not require further special legislation for a company to receive it.
The standard incentive includes a 10-year exemption on sales and use taxes for certain initial construction materials and equipment needed to operate a data center, exemptions on income taxes and franchise taxes.
To qualify for these incentives, the company needs to be approved by the Mississippi Development Authority, make a minimum investment of $20 million, create at least 20 full-time jobs that pay 125% of the average annual state wage. The average state salary is currently about $49,700.
Mayor Will Purdie and the Clinton Board of Aldermen listen to public comments about a proposed data center in Clinton on Monday, March 16, 2026. Credit: Eric Shelton/Mississippi TodayThese tax exemptions are similar to others Mississippi offers to qualifying agricultural, industrial and aerospace companies.
A sales tax exemption is the most common exemption states offer to data centers. Servers are usually a data center’s most expensive equipment and must be replaced every few years.
Data center sales tax exemptions are part of a long history of sales tax exemptions for manufacturing equipment, according to Dan Diorio, vice president of state policy for the Data Center Coalition, an industry group. He says that not taxing what a business uses to create its products allows it to continue investing in the facility, generating more economic activity.
According to the National Coalition of State Legislators, a nonpartisan group that provides policy and research support to state legislators, 38 states offer direct tax incentives to data centers. While the length, breadth and terms of these incentives vary broadly, all 38 offer some sales tax exemption on information technology equipment.
The Mississippi statute requires certification from MDA, contracts with recapture clauses, documentation proving the company’s financial position and an annual review. If an audit finds the company is not following the requirements, it can lose its exempt status and may face additional penalties. While some states do not have end dates for their incentives, salary requirements or claw-back provisions, Mississippi does.
“This is a performance contract, and MDA administers it as one. Legislative oversight, annual review and state Auditor jurisdiction provide additional layers of accountability. The system is designed to function in the public interest even when no one is watching closely,” MDA said in a statement.
However, some critics say the state’s data center incentive program is too generous.
“You’re abating the majority of taxes by not taxing equipment because equipment is the most expensive thing,” said Kasia Tarczynska, a research analyst at Good Jobs First, a nonprofit research center focused on economic development accountability, especially government incentives for private businesses.
The Center for Economic Accountability, an advocacy organization, named Compass data center in Meridian the “Worst Economic Development Deal of the Year” due to the “breadth and length” of the tax breaks the company would receive.
“It’s deeply irresponsible for Mississippi’s politicians and bureaucrats to give away a decade’s worth of tax revenues just so they can brag to voters about ‘high-tech job creation,” John Mozena, the center’s president, said.
“The Mississippi program is in a way unique because this program also exempts companies from income tax and property tax,” Tarczynska said.
In 2019, a few years before the AI boom, the Legislature lowered the requirements for data centers to qualify for Mississippi’s tax incentives. The minimum investment was lowered from $50 million to $20 million. The minimum number of new jobs was lowered from 50 to 20 and the average salary required was reduced from 150% to 125% of the average annual state wage.
At the time, legislators said this change was necessary to attract more data centers to the state and was requested by MDA. MDA did not comment on why the change was needed.
Tarczynska believes the change was likely because the data center industry looked very different from today.
“Back then the data center industry was much smaller, the projects were tiny, they were not as capital intensive as what we are experiencing now. Therefore, you have this requirement of $20 million. So basically this was created for an industry that doesn’t exist anymore,” Tarczynska said.
Another concern for Tarczynska is local agreements that she says provide a “huge property tax abatement” to companies.
Local tax incentives
Data centers and other companies often sign an agreement with local governments to receive an abatement on property, or ad valorem, taxes.
Each year a county tax assessor estimates the value of all real and personal property, which for data centers includes the land, buildings, servers and other computing equipment. That valuation determines the property taxes owed. Property taxes make up 75% of a typical Mississippi county’s revenue according to the Mississippi State University Extension.
Under the fee-in-lieu agreements, a company can pay as little as one-third of the taxes owed for that year. The money is then distributed to the school district, city and county based on the tax rate for that year.
The agreements begin once an investment of at least $60 million has been made and a center is operational. The company can receive property tax abatements for up to 30 years but each individual piece of property can only receive the abatement for up to 10 years.
Attorney Robert Ireland, representing Saxum Investment Group LLC, asks the Jackson Planning Board to postpone a vote on a proposed data center during a meeting on Wednesday, May 27, 2026. Credit: Eric Shelton/Mississippi TodayAmazon will start making fee-in-lieu payments to Madison County in 2027 for its five completed data centers. The company will pay an estimated $28 million in 2027 with payments increasing as the company opens additional buildings over the next few years. In the first 10 years, it’s estimated the data centers will bring in over $1 billion for the county, school districts, city and community college.
Madison County is the only county in Mississippi to tie the fee-in-lieu percentage to specific project benchmarks. The company must create 700 jobs by 2036 and maintain that number for five years and invest $10 billion by 2030 or it will pay a higher fee. It is also the only county to make the estimated fee-in-lieu payments public.
Amazon’s 2024 incentive package
Senate bill 2001, the 2024 incentive package the Legislature passed for Amazon Web Services, grabbed headlines with the announcement the company was investing $10 billion in the state, at that time the largest investment in state history. Since then, other companies have taken the state’s more automatic, statutory incentives.
“AWS’s project did not come through the standard data center program. It came through a special session of this Legislature that started in January 2024, and it was different by design,” said Bill Cork, the executive director of MDA, at a recent state AI task force meeting.
While the bill does not explicitly name Amazon, to qualify for the incentives another company would need to invest at least $10 billion, create 1,000 new jobs paying at least 125% of the state’s average annual wage, among other requirements. So far, Amazon is the only data center developer meeting those requirements.
The legislation was passed under the Mississippi Major Economic Impact Act. Legislators use the act to provide incentives tailored to individual projects, such as Continental Tires and Amplify Cell Technologies.
In the bill, the Legislature approved $44 million through appropriations, mostly for workforce development; a $215 million loan to Madison County for infrastructure work and other incentives. Most notably, a permanent exemption on sales and use taxes for equipment purchases was provided.
It also includes clawback provisions for the state to recoup money if Amazon does not hold up its end of the deal.
“They require annual performance to unlock each successive year. The state built in the equivalent of a continuous performance review, giving it ongoing leverage throughout a multi-decade relationship,” MDA said in a statement to Mississippi Today..
A report from the state economist’s office found the initial investment would bring in $41.3 million in state revenue during the construction phase and $153.7 million in the first 15 years of operation. Amazon has since announced an additional $15 billion investment to build more centers in the state. MDA estimates that the Amazon data centers have a $3.3 billion impact on the state’s annual GDP, which was $165 billion in 2025.
Pros and cons of incentives
Data centers can be a significant source of revenue for local governments by directly paying taxes and experts say that they generate additional business and tax revenue in the community.
“You’re generating a significant amount of local property tax revenue and local business tax revenue. Data centers create these significant ecosystems around them that far outweigh the cost of the sales tax exemption program itself,” Diorio said.
A report from the accounting firm PwC, commissioned by the coalition, estimated that existing data centers in Mississippi directly contributed $141 million in state and local taxes in 2024, a 29% increase year over year.
“We very much see the economic activity that data centers generate far surpass the cost of the exemptions that they get. But it’s a critical tool helping to ensure that the state remains competitive, especially in comparison to its neighbors,” Diorio said.
“The incentive is not a gift. It is the entry fee for a competition that Mississippi did not design and cannot sit out,” according to MDA.
“Tax incentives, the primary tool used in large corporate deals, do not redirect existing revenue away from small businesses or anyone else. They represent revenue the state would not have collected if the company had located elsewhere,” MDA added.
But some analysts argue that companies decide where to locate for a range of factors and that local tax incentives are not a primary one.
Clinton Mayor Will Purdie and Vice President of Amazon Web Services Economic Development Roger Wehner, center, and other local dignitaries open the Clinton Amazon data center, Tuesday, June 9, 2026, in Clinton. Credit: Vickie D. King/Mississippi Today“Oftentimes public officials are providing what we call subsidies to projects that would happen even without these subsidies,” Tarczynska said.
A 2025 report from the Georgia Department of Audits and Accounts, estimated that 70% of data centers in that state would still have been built without tax exemptions. It calculated the state lost out on $474.2 million in fiscal year 2025 from the exemption. However, the report also found that the exemption resulted in over $1.2 billion value added to the state economy.
The report acknowledged that while incentives might not be the first consideration for where to locate a data center, “a lack of incentives, or a repeal of existing incentives, may signal a negative business climate and may create an atmosphere of uncertainty for firms planning to relocate or expand.”
What’s next for incentives in Mississippi?
Other states are starting to reevaluate their data center incentives. In June, Illinois Gov. JB Pritzker paused the state’s data center incentive program and Texas Gov. Greg Abbott suggested a repeal of sales tax exemptions for data centers.
While some Mississippi leaders have begun to consider whether there needs to be additional data center regulations, many have said the incentive structure is working well with data centers bringing in transformational tax revenue for cities, counties and school districts.
“It’s going to greatly impact our total operating budget. We’ve seen some flat revenues the last year or so,” said Meridian Mayor Percy Bland at a July meeting of an AI task force the Mississippi Legislature created. “We see over the next eight to 10 years our budget doubling in size with what Compass’s investment is going to be for the city of Meridian.”
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