Port: Data center company Applied Digital expects to be one of the largest taxpayers in North Dakota history

MINOT — Despite what you may have read on Facebook from grandstanding politicians and angry activists, data center companies in North Dakota pay a lot of taxes.

A sales tax exemption for data centers has made headlines recently, though the reporting on it paints an incomplete picture of the situation.

"Those sales tax breaks, which are not for construction, ranged from $5.4 million in 2021 to $7.8 million in 2023, then leapt to $15.3 million in 2024 and more than $65 million last year," the North Dakota Monitor's Jack Dura reported .

We can have a debate about whether those sort of exemptions are good policy or bad. Generally, I don't like them. The best tax policy is one where the rates are low, and the tax base is wide. Exemptions narrow the base, and put upward pressure on the rate. But let's set that debate aside for the moment.

Dura's report has created a new talking point for anti-data center activists, who are using it to suggest that the companies are getting a free ride from North Dakota's taxpayers. Already Sen. Tim Mathern, D-Fargo, is proposing an amendment to his legislation banning nondisclosure agreements for data center projects that would eliminate the sales tax exemption for data center equipment.

"Why give out-of-state developers this tax break which we could use for North Dakota needs like the Veteran wing of the Heritage Center, childcare or struggling businesses in this 'price increase' environment?" he said in prepared testimony supporting the amendment, a copy of which he provided to me.

But there's more to this story than the amount of taxes data center companies didn't pay. One of the largest of those companies operating in North Dakota — Applied Digital — provided some of those details this week at an interim legislative hearing, and pointed out in a prepared report that they're contributing significantly to the state's bottom line.

Click the image above to view the PDF document.

"We anticipate by '29, we will be the largest single taxpayer in the state of North Dakota," company spokesman Nick Phillips told lawmakers.

That's a remarkable statement, and certainly at odds with the idea that the data center companies are moochers.

Part of that, despite the aforementioned exemptions, is the sales tax. In the documentation provided to lawmakers, Phillips noted that sales tax collections in Ellendale, home to Applied's Polaris Forge 1 campus, have skyrocketed since it opened. Per the company, the city collected approximately $330,000 in sales taxes in 2020, but has already gone into the millions in the first eight months of 2026.

"They went from about $350,000 a year in sales tax to right now through this month they're at $4.5 million in sales tax collections just for what has been going on down at Ellendale," Phillips testified. And, again, that $4.5 million is just the first eight months of 2026.

What's confounding about the tax exemption debate is the chicken-and-egg argument. Opponents of the exemptions will argue that we're giving revenues away. Supporters will say that the exempted commerce wouldn't have happened at all without the exemption. Would data center companies come to North Dakota without the sales tax exemption? Phillips, as you might expect, says no. "We would not be in the state if not for the exemptions," he told me. "Somewhere around 40 states have these exemptions. No one is building these where those don’t exist."

Mathern, not surprisingly, says the opposite. "Data centers will be built even if we eliminate this subsidy. We should do it immediately," he said in the prepared testimony he provided me.

If we're going to have a debate over whether these exemptions should exist, it must include the fact that, despite them, a company like Applied Digital is having a dramatic impact on tax collections. In Ellendale, home to the company's largest completed project in the state, the sales tax revenues aren't down. They're way, way up.

Sales taxes are hardly the only tax the company will pay. There are the income taxes the workers at the facilities will pay, and also property taxes, which Phillips touched on in his testimony to lawmakers. His company estimates that by 2029, they will be paying nearly $24 million per year in property taxes at their four facilities in the state in Ellendale, Harwood, Oliver County and Stutsman County.

That's just an estimate, and one put together by Applied Digital itself, but if that's accurate, it's a remarkable number. Paying $24 million annually in North Dakota property taxes would rank Applied Digital among the top three to five largest corporate property taxpayers statewide. They would likely become the single largest locally assessed commercial taxpayer in North Dakota history.

North Dakota generates roughly $460 million annually from all commercial and centrally assessed entities combined (out of approximately $1.45 billion total collections statewide). A single company paying $24 million would represent approximately 5.22% of all corporate and centrally assessed property taxes collected across the entire state.

The largest overall property taxpayers in North Dakota are multicounty infrastructure giants assessed by the state. The Dakota Access Pipeline has paid an average of approximately $7 million to $9 million per year. Major Class I railroads like BNSF Railway pay tens of millions statewide, but that total is distributed across hundreds of miles of track in dozens of counties.

Should companies like Applied Digital be getting a sales tax exemption? Again, Applied Digital says they're a needed incentive, while the people who don't like data centers say they're not. Wherever you land on that debate, one thing we should be honest about is that, under current tax policies, these data centers represent a large net increase in tax revenues for our state.