Microsoft is moving its Azure operations from Washington to Texas.

the company informed early users of the Azure platform that they’ll need to move their applications off the data center located in Quincy, Washington. Microsoft said it will soon offer users an automated tool that will help them migrate to its Southwest data center, most likely a reference to one in San Antonio, Texas.

“This change is in preparation for our migration out of the northwest region,” the blog post reads. “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.”

…except that it’s not really a change in tax policy.

The relevant tax issue began to unfold in late 2007 when Washington’s attorney general wrote an opinion stating that data centers do not qualify as manufacturers, which in some areas of the state are exempt from paying taxes on new projects, including buildings and the equipment in them. Manufacturers in rural areas also get new employee business and occupation tax credits. Before that opinion was issued, some data center operators believed that they could be considered manufacturers and thus get those tax breaks.

After the attorney general’s opinion made it clear that the data center operators would have to pay those taxes, Washington Governor Christine Gregoire drafted a bill that would have handed data center operators a discount on their taxes for equipment in the facilities, but the bill did not pass.

In other words, this is merely enforcement of an existing policy. It was Gregoire who sought a change in policy, but failed to get it. The sad thing is that the reporting is about Microsoft choosing to move. The story should have been about Microsoft trying to take advantage of a tax break intended for manufacturers, but the “race to the bottom” practice of states and municipalities giving tax breaks and free infrastructure to big companies (which is very rarely justified in terms of either jobs or revenue) has become so commonplace that nobody even notices any more. Free market, my ass. This story couldn’t even happen in a free market.