sales and use tax exemption

The Virginia Senate's budget proposal maintains a sales tax exemption for data centers but introduces a tiered tax on diesel generators used by the industry, projected to generate $1.8 billion for the state. The tax aims to address pollution concerns and offset lost revenue from the exemption, with varying rates based on generator types.

Virginia's House and Senate released conflicting budget proposals, with the House removing environmental standards for data centers and creating a commission to study their impact, while the Senate included a teacher raise and funding for health services. The data center tax exemption remains a key point of contention.

Virginia lawmakers are returning to Richmond for another budget negotiation session as the June 30 deadline nears, with a government shutdown risk if no agreement is reached. The primary dispute centers on a Senate proposal to phase out a data center tax exemption, opposed by Governor Abigail Spanberger and House Democrats who argue it could harm business investment.

Virginia's state revenues have exceeded forecasts by over $850 million despite losing 41,900 jobs since the start of fiscal year 2026. A budget standoff between the Democratic-controlled Senate and House of Delegates centers on a dispute over rolling back a sales and use tax exemption for data centers.