Virginia Approves First-Ever Data Center Power Tax

Virginia has approved a new electricity tax on data centers set at $0.011 per kilowatt-hour, beginning July 1, 2026, projected to generate $600 million annually for the state. The tax applies to all electricity consumed by data centers, including power from utilities and self-generated sources, while preserving existing sales tax exemptions for data center equipment. Virginia, particularly Northern Virginia, hosts the largest data center market in the US and significant global internet infrastructure, making this policy potentially influential for other states considering similar measures. The tax is estimated to increase effective electricity rates for data centers by slightly more than 10 percent, with a refund mechanism that returns excess collections above $600 million to operators proportionally.