Virginia Enacts First-Ever Data Center Power Tax

Virginia Governor Abigail Spanberger signed a first-of-its-kind data center electricity consumption tax into law on June 30, 2026, effective July 1, 2026. The tax charges data centers $0.011 per kilowatt-hour on all power used, capped at $600 million annually, while leaving the state's sales-and-use tax exemption for equipment intact. As the largest data center market in the US, Virginia's move provides a template for other states grappling with AI-driven power demand.

Virginia Enacts First-Ever Data Center Power Tax Virginia Governor Abigail Spanberger signed a first-of-its-kind data center electricity consumption tax into law on June 30, 2026 , as part of the state's two-year budget, effective July 1, 2026 . The tax charges data centers $0.011 per kilowatt-hour on all power used, including electricity a facility generates for itself, is capped at $600 million a year about $1.2 billion over the biennium , and leaves Virginia's existing sales-and-use tax exemption for data center equipment intact. As the largest data center market in the US, Virginia's move gives every other state grappling with AI-driven power demand a concrete template to react to or copy, according to Data Center Knowledge and Virginia Mercury. Virginia, the largest data center market in the US, just became the first state to tax the power AI data centers consume directly, rather than only withdrawing sales-tax breaks or charging generator-capacity fees, and its approach, taxing consumption while leaving equipment tax breaks alone, gives every other state grappling with AI-driven electricity demand a working template to react to or copy. What happened Virginia's 2026 budget, signed by Governor Abigail Spanberger on June 30, 2026, creates a data center electricity consumption tax of $0.011 per kilowatt-hour, effective July 1, 2026, according to Virginia Mercury, Data Center Knowledge and legal analyses from Williams Mullen and Greenberg Traurig. The tax applies to electricity from utilities, competitive retail providers and self-generated sources, including behind-the-meter generation, and is capped at roughly $600 million a year, about $1.2 billion over the two-year budget cycle; collections above that cap are refunded to operators on a pro rata basis. The final bill replaced an earlier Senate proposal that would have taxed backup generator capacity and was projected to raise $1.8 billion over the biennium. The budget separately requires data centers to limit water use in designated scarcity areas and directs new noise regulations by 2030, though it leaves the industry's far larger sales-and-use tax exemption, estimated at $1.9 billion a year according to Virginia Mercury, untouched for now; a legislative work group will study phasing out that exemption and report back in November. Financial context A continuously operating 500 MW facility would owe roughly $48 million a year under the tax, and a 1 GW campus nearly $100 million before any refund, Data Center Knowledge reported. Rob Gramlich, president of power-sector consulting firm Grid Strategies, told the outlet the tax amounts to a little more than a 10% increase in effective electricity rates for data centers. For practitioners Operators modeling total cost of ownership for AI infrastructure in Virginia should treat the $0.011/kWh consumption tax as a modest, capped add-on next to electricity bills, not a reversal of the state's underlying incentives; the sales-tax exemption on equipment, worth far more to most projects, remains in place while its future is studied separately. What to watch Former FERC Chairman Mark Christie, in a LinkedIn post cited by Data Center Knowledge, called the tax an offset rather than a fundamental policy shift, since operators keep their sales-tax exemption, and argued it does not resolve who ultimately pays for new grid infrastructure built to serve data center demand. Data centers were also explicitly excluded from a separate large-load utility rate carveout in the same budget that covers manufacturing and industrial customers, and the November work-group report on the equipment exemption is the next milestone likely to affect operators' costs. Key Points - 1Virginia's new $0.011 per kWh data center electricity tax took effect July 1, 2026, covering both grid and self-generated power. - 2The tax is capped at about $600 million a year while leaving the state's larger data center equipment sales-tax exemption intact. - 3As the largest US data center market, Virginia's consumption-tax approach gives other states a template for taxing AI-driven power demand. Scoring Rationale First-of-its-kind state tax tied directly to AI data center electricity consumption, in the largest US data center market, with real projected revenue, per-facility cost impact, and a capped/refundable design; likely to influence policy debates in other states as AI power demand grows. Sources Public references used for this report. Practice interview problems based on real data 1,625 SQL & Python problems across 15 industry datasets — the exact type of data you work with. Try 250 free problems /problems