Virginia Data Center Tax Break Tops $4 Billion

A legislative audit finds the state's sales tax exemption for data centers cost more than $4.05 billion over five years ended June 30, 2025.

Updated on Nov. 10, 2026 in Data Centers

Isometric editorial illustration of a plain data center block with rooftop cooling units beside rows of server racks, in muted oxblood, teal, and cream. — Virginia's sales tax exemption for data centers cost more than $4.05 billion over five years ended June 30, 2025, a state audit found. AI Illustration. Upload story photo >

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Do you think Virginia's data center tax breaks are worth their cost to the state?

The Joint Legislative Audit and Review Commission (JLARC) found Virginia's data center sales tax exemption totaled more than $4.05 billion over the five years ended June 30, 2025. JLARC adjusted the fiscal 2025 value of the exemption to $1.42 billion, down from the $1.9 billion reported by the state Department of Taxation.

Why it matters

The exemption accounts for 60% of Virginia's economic development incentives, making it a central element of how the state courts large technology investment. The findings bear directly on how lawmakers weigh the revenue cost of the tax break against the jobs and economic activity it generates.

JLARC reports the exemption generated 29 jobs and a $6 million boost to the state economy per $1 million of sales taxes not paid, compared with 14 jobs and $2 million for other business exemptions. The figures do not yet cover fiscal years before 2021, which the commission deemed unreliable.

The players

Joint Legislative Audit and Review Commission (JLARC)

JLARC is the nonpartisan research arm of the Virginia General Assembly that conducts independent evaluations of state programs and tax policies.

Virginia Department of Taxation

The Virginia Department of Taxation administers the state's tax laws and reported the $1.9 billion fiscal 2025 benefit figure that JLARC later adjusted.

The details

JLARC's analysis adjusted the Department of Taxation's January figure to a fiscal 2025 value of $1.42 billion, and found the total exemption rose 53% from the prior year. Tax credits and other incentives, including loans, gap financing and income tax breaks, generate fewer jobs and less economic impact per $1 million than the data center exemption.

• June 30, 2021: Start of fiscal years with reliable exemption figures
• June 30, 2025: End of the five-year period totaling $4.05 billion in exemptions
• January 2026: Department of Taxation reported a $1.9 billion exemption benefit
• June 30, 2026: Fiscal 2026 ends; its exemption value has not yet been calculated

Roadmap

Virginia's data center exemption has grown into the state's largest economic development incentive, outweighing other tools. The JLARC findings extend a pattern of state lawmakers reassessing how much revenue they forgo to attract large technology investment.

Virginia residents pay for the exemption through foregone state revenue, which the audit values at more than $4.05 billion over five years. The findings may shape future budget debates over whether the state keeps offering the break at its current scale.

The takeaway

The audit shows the exemption's cost depends heavily on which year and which estimate is used, so reading the figures side by side matters. Readers tracking Virginia's budget should compare JLARC's adjusted values against the original Department of Taxation numbers.