Virginia Enacts Unprecedented Electricity Consumption Tax on Data Centers

As of July 1, Virginia data centers will pay more for electricity.  

As part of the state’s budget package (H.B. 30), Gov. Abigail Spanberger on June 30 signed legislation imposing a new electricity consumption tax at the rate of $0.011 per kWh of electricity consumed by data centers. The tax, which is the first of its kind, will be collected by each data center’s electric utility with its monthly invoices. 

The tax is also imposed on self-supplied electricity and is to be remitted by the data center to the State Corporation Commission.

The new tax is intended to raise $600 million per year. If collections exceed $600 million, each data center operator will be entitled to a pro rata share of the excess for the year. Refunds will be issued in the form of an account credit for tax collected by electric utilities. Excess tax remitted on self-supplied electricity will be refunded directly to the data center operator.    

Virginia Code §58.1-609.3(18) provides a sales tax exemption for qualifying data center operators and their tenants for the purchase of various equipment. In January, the Virginia Department of Taxation published a report estimating that this exemption saved data centers $1.9 billion in fiscal 2025. That forgone revenue, and public concerns about electricity and water consumption by data centers, motivated state lawmakers to consider repealing the exemption during fiscal 2026 budget negotiations. The new electricity consumption tax was created as a compromise.