RICHMOND, Va. — As the end of the 2026 General Assembly session nears, the debate over getting rid of a sales tax exemption for data centers continues at the State Capitol as lawmakers near the beginning of budget negotiations.
Teachers, lawmakers, and other advocates held a news conference Wednesday in support of an amendment in the Senate's proposed budget to eliminate the tax exemption. The House proposal keeps the exemption, but would tack on clean energy requirements.
"We're asking data centers to pay their fair share," said Rodrigo Soto with the Commonwealth Institute for Fiscal Analysis.
The sales tax exemption covers computer equipment and software used by data centers.
A fiscal impact statement from 2008 estimated it would cost the state around $1.5 million in tax revenue. But a more recent state report said centers bought over $33 billion worth of equipment in the last fiscal year, saving $1.9 billion in taxes.
Sen. Russett Perry (D-Loudoun), whose district is home to the largest concentration of data centers in the country, is among the advocates calling for full removal of the exemption.
"This industry is not a struggling industry. It is not a fragile industry," Perry said. "Responsible governance requires us to evaluate incentives when they outlive their purpose."
Supporters of removing the exemption say the tax revenue could be redirected to fund essential services.
"Money that can be reinvested where it actually helps Virginia families — in strong public schools, affordable health care, reliable transportation, and child care that working parents can afford," said 4th grade teacher and Virginia Education Association president Carol Bauer.
Last week, members from several trades unions in Virginia held a rally calling for the exemption to remain. They say the incentive is meant to attract more centers, which could bring well-paying jobs.
"The data center industry was born in this Commonwealth and we want to keep it here," said Don Slaiman, Director of Community Relations with IBEW Local 26.
"We've already been doing a great job keeping that work and trying to keep that middle class American Dream going for all of us. And I say, why stop now?" IBEW Local 26 member Kwaku Afriyie said.
House Appropriations Chair Luke Torian (D-Prince William) said data centers provide a strong tax base for the localities where they operate, including his own area of Prince William County.
"My locality depends on those resources tremendously. So we'll have a robust conversation about where we're going to go with that," said Torian.
But Perry argued Virginia is the epicenter of the industry for several reasons, including its closeness to the federal government, and companies will still come without the exemption.
"That network effect does not disappear because we asked the wealthiest companies in the world to pay the same sales tax every other industry pays," she said.
Up next for the competing proposals: each chamber has to appoint members to what is known as the budget conference committee by Wednesday and the two sides will work together on a finished version of the budget.
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