Virginia Senate Moves to End $1.6 Billion Data Center Tax Exemption

The Virginia Senate has voted to end a projected $1.6 billion annual sales‑tax break for data centers, a two‑decade‑old incentive that helped make the state the world’s largest hub for server farms supporting U.S. internet and cloud services. The proposal would require data‑center operators to resume paying at least the state’s 5.3% sales tax on equipment and software, reversing a long‑standing exemption that the state tax department says helped drive more than $80 billion in industry investment and thousands of jobs. Gov. Abigail Spanberger’s office has signaled concern about "going back on Virginia's commitments" to companies that have already built in the state, while Democratic Senate Finance Chair L. Louise Lucas, a chief backer, argues the money is needed to fund priorities like teacher raises, health insurance assistance and transit. Industry group the Data Center Coalition warns the change would "effectively halt investment" in Virginia even as companies such as Amazon Data Services continue buying land for new projects, and the broader fight reflects mounting national pushback over data centers’ noise, land use and soaring power demand tied to artificial intelligence. The measure now faces an uncertain fate in the House of Delegates amid intraparty Democratic tensions and a fast‑approaching budget deadline that will determine whether Virginia continues subsidizing an energy‑hungry sector that underpins much of the U.S. digital economy.