On June 29th, 2026, the Virginia General Assembly accepted Governor Abigail Spanberger’s 14 budget amendments signing into law the first legally binding per-kilowatt-hour tax on data-center electricity consumption in the United States. Two days later, on July 1st, 2026, it went into effect.
The rate is $0.011 per kilowatt-hour. It applies to every data center in the Commonwealth of Virginia, existing facilities and new ones alike, utility-supplied power and behind-the-meter self-generation alike. Aggregate collections are capped at approximately $600 million per year, with excess revenue refunded pro-rata to operators. The state projects approximately $1.2 billion in gross collections, directed entirely to the general fund. The tax sunsets on July 1, 2028 unless the General Assembly extends it.
Governor Spanberger’s framing was direct. In a Politico interview earlier this month, she said: “In the budget that we passed, we created the first-of-its-kind consumption tax on data centers and their energy usage… We want data centers to pay their fair share.”
Virginia hosts more data-center capacity than any other state on in the United States. Northern Virginia alone carries an estimated 70% of the world’s internet traffic. The state just landed the largest hyperscale-scale rural megasite commitment in state history in the same budget cycle that imposed America’s first per-kWh data-center tax. It is the most consequential single week for data-center policy in the United States since the sector became measurable in state economic accounts.
How the Tax Works
The scope is broad. The $0.011 per kilowatt-hour rate applies to all electricity consumed at any Virginia data center, without distinction between utility-supplied power and self-generated behind-the-meter power. That closes what has been a growing loophole in similar proposals in other states, where hyperscale operators building their own natural-gas turbines or solar arrays on-site have argued their consumption is not taxable at the electric-grid layer. Virginia’s statute pre-empts that argument by taxing the consumption itself, regardless of source.
The revenue cap is aggregate. Total collections are capped at approximately $600M per year across all covered facilities. If total statewide data-center consumption pushes gross collections above the cap, the excess is refunded pro-rata to operators, weighted by their share of taxed consumption. That structure protects against runaway revenue but creates an unusual dynamic: operators who consume more electricity contribute more to the cap, but also share more of any refund. The net effect approximates a broad-based sector-wide surcharge with an upper bound.
Existing sales and use tax equipment exemptions for data centers remain in place. Virginia has offered those exemptions for over a decade as the primary reason large operators located here in the first place. The state did not remove them, it added the consumption tax on top.
The tax expires on July 1st, 2028 unless the General Assembly extends it. That sunset was likely necessary to secure the votes required to pass the amendment. It will also almost certainly be extended when the 2028 session takes up the next biennium.
Why Virginia Went First
Every state with a serious data-center cluster has been watching this debate for at least 5 years. Georgia’s general assembly considered similar proposals in 2024 and 2025. Texas has debated grid-cost recovery for hyperscale operators throughout the ERCOT reform process. Arizona has faced political pressure from residential ratepayers who see data-center power draw as a driver of their own utility bills. None of them acted.
Virginia acted because Virginia had the political mandate to act. Northern Virginia’s data-center growth has become a bipartisan political constraint. Loudoun County alone has approved data-center development that would consume more electricity than most European countries. Local governments have faced escalating constituent pressure over grid reliability, land use, water consumption, and rising residential ratepayer contributions. The Youngkin administration studied the issue but did not move. Spanberger campaigned on it. The 2026-2028 biennium was the first budget cycle in which the political consensus existed to act.
Virginia is also the state most able to absorb the tax without meaningful sector displacement. Dominion Energy’s northern service territory remains the deepest hyperscale operator concentration on the planet. The infrastructure network, high-voltage transmission redundancy, fiber peering density, land availability adjacent to existing campuses, is not replicable at hyperscale in any competing state within a five-year horizon. Operators can be irritated by the tax. They cannot practically leave.
That combination, political mandate plus infrastructure lock-in, is what made Virginia the state that could act first. Every other data-center state faces some version of both variables, but no other state has both at the levels Virginia does today.
One honest caveat belongs on the record. A tax on a data center’s electricity and a lower bill for the household down the road are not the same thing. The revenue flows to Virginia’s general fund, not to residential ratepayers directly. Whether households see relief depends on how utility regulators allocate infrastructure costs in the next rate case, a separate fight from the one the General Assembly just settled.
Why Other States Are Watching
Georgia, Texas, and Arizona will read the Virginia tax closely, and each for a different reason.
The watching is not idle. Data-center opposition has become a national phenomenon: by Data Center Watch’s tally, organized resistance blocked or delayed roughly 75 projects worth about $130 billion in the first quarter of 2026, spanning 49 states, with more than 300 data-center-related bills introduced in a 6-week span. Virginia acted first in a field where the pressure to act is now nearly everywhere.
Georgia has the fastest-growing hyperscale data-center cluster in the Southeast. Atlanta’s peering and transmission capacity has expanded materially since 2023, and Georgia’s legislature has already moved: its Senate voted during the 2026 session to wind down sales-tax exemptions for new data centers, though the measure stalled before final enactment. The Virginia model, broad-based, capped, sunset-protected, gives Georgia a template it can adapt without appearing to originate a novel tax. Expect the question back in Georgia’s 2027 session, with Virginia’s structure as the reference.
Texas is different. ERCOT’s market structure means grid cost recovery from data centers has been handled through wholesale market design rather than tax policy. But the political pressure on residential rate stability is real, and the Virginia precedent gives the Texas legislature political cover if it decides to add a targeted consumption tax on top of existing wholesale mechanisms. Texas is less likely to copy Virginia’s structure directly. It is more likely to use Virginia’s precedent to defend whatever mechanism Texas ultimately selects.
Arizona is the state most likely to copy Virginia directly. Arizona’s data-center cluster is smaller than Virginia’s or Georgia’s, but its residential ratepayer politics are more acute. Salt River Project and Arizona Public Service both face growing rate design pressure. A Virginia-style consumption tax offers Arizona a mechanism to address ratepayer concerns without renegotiating utility rate structures.
The precedent matters more than the revenue. The first state to enact any novel tax structure carries the political weight of proving it can be done. Virginia just did.
What This Means for Operators and Economic Development Offices
Data-center operators active in Virginia now face a per-kilowatt-hour cost layer they did not carry two weeks ago. At $0.011 per kilowatt-hour, a 100-megawatt facility running at full utilization contributes roughly $9.6 million per year to the tax before any pro-rata cap adjustment. A gigawatt-scale campus contributes closer to $96 million per year. The Stack Infrastructure Berry Hill deal, once operating at scale, will be a material contributor to the general fund.
Operators evaluating new sites, or considering expansions to existing Virginia campuses, will now include the consumption tax in their locational cost model. That will affect marginal siting decisions, particularly for greenfield projects that could reasonably locate in Georgia, the Carolinas, or Ohio. It will not affect existing campus operations in Northern Virginia at scale, because the infrastructure lock-in is real.
For economic development offices, the Virginia precedent first looked like a recruitment opening: marginal data-center projects that would have located in Virginia might reconsider peer states that still tax data-center electricity at nothing. That window is already narrowing. In the two weeks since Virginia acted, North Carolina repealed its own sales-and-use tax exemption on data-center electricity in the 2026 budget Governor Josh Stein signed in mid-July, a change projected to raise $21.4 million in fiscal 2026-27, rising to $28.6 million annually by 2030-31. North Carolina kept its capital-investment incentives and ended only the electricity subsidy, the same line Virginia drew. Ohio has paused new data-center exemptions, and Illinois has suspended new incentive agreements. The set of states still offering an untaxed-electricity advantage grows shorter by the month.
Site readiness still carries these deals. The Virginia tax changes the cost math at the margin. It does not change the fundamentals of hyperscale site selection: buildable acreage at scale, standing electrical service capacity, water and wastewater sufficiency, fiber peering, and jurisdictional governance capable of moving at the speed the sector requires.
Sources
- Virginia Legislative Information System, HB30 Conference Report Item 3-5.24#1c.
- Office of the Governor of Virginia, press release on 2026-2028 biennial budget acceptance, June 29, 2026.
- Politico, Governor Spanberger interview on the first-in-nation data-center consumption tax, July 2026.
- Virginia Mercury, June 29, 2026 coverage of General Assembly acceptance of Spanberger’s budget amendments.
- Williams Mullen legal analysis of the Virginia data-center electricity consumption tax.
- Virginia Business, July 2026 coverage of the budget and consumption tax mechanics.
- Data Center Frontier and Data Center Dynamics coverage of the Virginia consumption tax and comparable state proposals.
- Comparable state legislative history from Georgia General Assembly, Texas Legislature ERCOT reform proceedings, and Arizona Corporation Commission ratepayer filings.
- Forbes, July 13, 2026, “Power-Bill Fears Drove Virginia’s First-In-Nation Data Center Tax.”
- Newsweek, July 2026, “Virginia Becomes Testing Ground for New Data Center Tax.”
- Data Center Knowledge, July 2026 coverage of North Carolina ending its data-center electricity tax break while retaining capital incentives.
- Georgia Recorder and Atlanta Journal-Constitution, 2026 coverage of Georgia Senate action on data-center tax exemptions.
- Data Center Watch, first-quarter 2026 tally of blocked and delayed data-center projects.
