Sales tax exemption continues to shape legislative debate over data center growth in Virginia

The debate over eliminating a sales and use tax exemption for data centers in Virginia remains intense, pushing lawmakers into a special legislative session in late April. Christopher Miller, President of the Piedmont Environmental Council, noted the unprecedented dominance of data center discussions in the 2026 legislative session, emphasizing that the issue has become a "kitchen table issue" due to documented impacts. While Senate Democrats approved a budget phasing out the exemption, which allows data center companies to purchase computer equipment without sales tax, House Democrats retained it, leading to a stalemate. Democratic State Senator Creigh Deeds, a leading proponent of eliminating the tax break, highlights its escalating fiscal impact from an initial $1.5 million to nearly $2 billion, arguing this revenue should fund state services. Miller agrees, stating the current exemption funds "the richest corporations in the world" at the expense of Virginians. Conversely, Republican State Senator Mark Obenshain argues that removing the exemption would penalize Virginia's economic growth, while Senator Luther Cifers warns against damaging the state's business reputation by altering agreements. Governor Abigail Spanberger's statement affirmed her belief that data centers should pay their "fair share of energy costs and taxes" but also emphasized honoring existing agreements and ensuring a path forward that benefits ratepayers and the economy. Both Senator Deeds and Miller assert that the memorandums of understanding with data center companies explicitly allow for changes to the tax exemption. Miller also expressed frustration that legislation addressing broader grid reliability and cost allocation, like SB619 and SB339, failed to pass, while lawmakers only "nibbled around the edges" of transparency and local impacts like water use and noise.