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Tax trumps green as Microsoft relocates data center |
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Thursday, 06 August 2009 |
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By Mel Duvall
Microsoft management, voicing displeasure with changes to tax policies, is making plans to abandon hosting applications in the company's home state through its Windows Azure cloud computing service.
In a notice to customers on its Azure blog, Microsoft said it will shift applications from its data center in Quincy, Washington to a facility in San Antonio, Texas.
"Due to a change in local tax laws, we've decided to migrate Windows Azure applications out of our northwest data center prior to our commercial launch this November," the company stated in the blog. "This means that all applications and storage accounts in the 'USA - Northwest' region will need to move to another region in the next few months, or they will be deleted."
At the heart of the move: a change in Washington state tax law that will exclude data centers from a sales tax break for manufacturers. As a result, Microsoft and other data facility operators would pay a 7.9% tax on new equipment.
Prior to the change, Quincy had been a magnet for new data centers. A report in Data Center Knowledge notes that companies were attracted to the center because of a cheap and abundant availability of hydro-generated power.
Such electricity is viewed as desirable by companies for its "green" appeal. Microsoft paid just 1.9 cents per kilowatt hour for its power in Quincy, compared to rates of about 12 cents per hour in Silicon Valley.
Microsoft's decision also demonstrates how quickly large companies can now shift operations to take advantage of more favorable conditions, be it cheaper electricity, government grants or tax policies.
Recently, North Carolina has been able to capture several large, high-profile data centers through government tax breaks. In May, Apple announced it would spend as much as $1 billion to build a major data center in Maiden, N.C.
The Apple data center is just 25 miles from a huge Google data center built in Lenoir in 2007. At that time Google was able to negotiate a $100 million tax break from the state.
The data center corridor in North Carolina also has fairly attractive electricity rates in the range of 4 to 5 cents per kilowatt hour.
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