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Microsoft may be doing a forklift move of its new 470,000-square-foot data center in Quincy, Washington after state regulators declared the facility is not qualified for tax exemptions intended for manufacturing facilities.

Data Center Knowledge reports that Microsoft is threatening to move the facility designated to host the Azure cloud-based operating system and application services to a facility in San Antonio, Texas, where it will enjoy lower cost electricity and taxes.

The reported data center exodus is the latest move in a nearly two-year battle between Microsoft and its home state. In December 2007, Washington regulators determined that a data center is not a manufacturing facility in the same sense as a factory since it does not produce goods that are sold to other customers. The ruling made the data center and its services subject to a 7.9 percent services tax. Washington lawmakers reportedly tried passing legislation to correct the tax definitions, but it stalled as critics called it a tax break for rich high-tech companies.

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