Virginia's Data Center Tax Break: Who Really Pays?

Virginia exempts data center equipment from state sales and use tax, and the state's own analysts say that single tax break is responsible for most of the data center construction in the Commonwealth. In 2026, lawmakers split three ways over whether to keep it, attach conditions to it, or end it early. If you live near a data center, this fight affects both your tax dollars and your quality of life.

Key takeaways

Virginia's sales and use tax exemption for data centers has existed since 2010 and is currently scheduled to expire, or "sunset," in 2035.
The Joint Legislative Audit and Review Commission (JLARC) and the Virginia Department of Taxation have attributed more than 90 percent of data center investment in the state to the exemption.
Data centers invested roughly 80 billion dollars in Virginia over two years and generated about 5.3 billion dollars in state and local revenue through other taxes, as reported.
In 2026 the House budget proposal (HB30) would keep the exemption but attach environmental and energy conditions, while the Senate proposal (SB30) would end it early, on January 1, 2027.
The General Assembly ended its 2026 regular session without agreement. A special session was scheduled for April 23, 2026.

What the exemption actually is

Since 2010, qualifying data centers in Virginia have not paid state sales and use tax on the computers, servers, and related equipment that fill their buildings. Because a single large facility can hold hundreds of millions of dollars of equipment, the value of that exemption to operators is significant. It is one of the main reasons Virginia became the largest data center market in the world.

Why analysts say it drives the build-out

According to JLARC and the Virginia Department of Taxation, more than 90 percent of the state's data center investment is attributable to the exemption. In other words, state analysts themselves conclude that the tax break, more than any other single factor, is what brings these facilities to Virginia communities. Supporters, including the industry group Data Center Coalition, point to roughly 80 billion dollars of investment over two years and about 5.3 billion dollars in other state and local revenue as evidence the trade is worth it.

The 2026 split

Lawmakers could not agree on what to do:

The House budget proposal, HB30, would keep the exemption in place through its 2035 sunset but add conditions. Under that proposal, qualifying data centers would have to remove carbon-emitting co-located generating facilities by July 1, 2027, meet renewable energy targets ten years ahead of the schedule that applies to Dominion Energy, and install cleaner Tier 4 backup generators by July 1, 2031.

The Senate budget proposal, SB30, would take a harder line and terminate the exemption early, on January 1, 2027, roughly eight years before it is currently set to expire.

Because the two chambers could not reconcile these positions during the regular session, the matter carried into a special session set for April 23, 2026.

What this means for you

The debate is not abstract. When the state forgoes tax revenue to attract a facility, the people who live next to it still absorb the noise, the water demand, the air emissions from backup generators, and the strain on the local grid. The conditions in HB30, such as cleaner generators and faster renewable targets, exist precisely because neighbors have raised those harms. If a data center is being built or expanded near you, the outcome of this policy fight can affect your utility rates, your local services, and the standards the facility has to meet.

If you are already living with the effects of a nearby facility, keep a simple record of what you experience, including the dates and times of noise, any changes to your water, and anything you can photograph. That record is the starting point for understanding whether you have a claim.

Sources

Virginia HB30 (House budget proposal) and SB30 (Senate budget proposal), 2026 session.
Joint Legislative Audit and Review Commission (JLARC) and Virginia Department of Taxation, cited for the estimate that more than 90 percent of investment is attributable to the exemption.
Data Center Coalition (industry group), cited for investment and revenue figures.
Reporting by DLA Piper, "Virginia General Assembly proposes to eliminate sales and use tax exemption for data centers" (March 9, 2026) and "Virginia General Assembly continues debate over sales and use tax exemption for data centers" (March 16, 2026).

Editorial note: bill numbers, dates, and legislative status change quickly. Verify the current status of each bill and confirm the JLARC and Department of Taxation figures against the primary documents before publishing.