Summary – Virginia’s 2026 budget preserves the Commonwealth’s sales and use tax exemption for qualifying data center equipment while creating a new electricity consumption tax of $0.011 per kWh, effective July 1, 2026. The new tax applies to both utility-supplied and qualifying self-generated electricity and includes an annual revenue cap with refunds if collections exceed $600 million. Data center owners, operators, and customers should evaluate how the new tax may affect operating costs, contracts, and future expansion plans as additional implementation guidance is released.
On June 30, 2026, Virginia Governor Abigail Spanberger signed the Commonwealth’s 2026 biennial budget bill into law.[1] The budget establishes a Data Center Electricity Consumption Tax beginning July 1, 2026, while preserving Virginia’s existing sales and use tax exemption for qualifying data center equipment.[2]
The legislation resolves one of the most closely watched issues during Virginia’s budget negotiations. Earlier proposals would have repealed the Commonwealth’s sales and use tax exemption for qualifying data center equipment. Instead, lawmakers retained the exemption while adopting a new electricity consumption tax designed to generate additional revenue from one of Virginia’s fastest-growing industries.
