Data centers are big business in Northern Virginia, partially thanks to a 2010 bill that created a sales and use tax exemption on the computer chips they rely on.
"The fiscal impact statement on that bill, when we considered it, said it would cost our taxpayers an average of $1.5 million a year," said Virginia Democratic State Senator Scott Surovell. "This year, it's estimated it cost us $2 billion."
The comments came during a keynote speech hosted by the George Mason University Schar School of Policy and Government in Arlington, Virginia on Wednesday.
The lost tax revenue at the state level is rising because the chips need to be refreshed on a regular basis, but each new purchase remains tax exempt. Local jurisdictions are allowed to charge tax on the machinery running the data centers.
"Loudoun County funds almost its entire school budget with data center revenue," said Surovell. "That's why you see Loudoun and Prince William County chasing these things like crazy. They have the land and the open space to do it."
While the localities reap the benefits, the states often end up on the hook for building the infrastructure needed to supply the power needed to keep data centers running.
According to a Pew Research Center study, there are more than 3,000 data centers up and running in the U.S., with another 1,500 in the development pipeline.
"Data centers are going to get built," said Surovell. "They're going to be needed for AI. The question is, where do you want to build them? Do you want to build them in Virginia, benefit from that tax revenue, jobs, and investment, or do you want to let them get built in Texas?"
Last week, the Texas Comptroller arrived at similar conclusions regarding the lost revenue due to sales and use tax exemption. They are pegging the loss at $3.2 billion over the next two years.
The Texas exemption went into effect in 2014. According to their numbers the loss began spiking last year as it went to over $1 billion in 2025 from $148.8 million in 2024.
Homeowners are also weighing in on where and if data centers get built. A proposed project that would bring as many as 37 data centers to Prince William County, Virginia was abandoned on Tuesday as the Board of Supervisors voted to drop a lawsuit over a 2023 zoning change.
The proposed site abuts the Manassas National Battlefield Park. The zoning change was opposed by the American Battlefield Trust and local residents.
Also on Tuesday, Maine's legislature passed a temporary statewide ban on data centers that draw more than 20 megawatts of power.
Friction between state and local taxing authorities is an ongoing theme in the data center debate.
Some
"There is a good place, somewhere to put a data center," said Cy McGready head of energy policy for Equinix, a leading colocation data center provider. "It's a big box with some really nice landscaping around it that prints money for your local government."
The tax-exempt data center issue is coming to a head in Virginia as the state's newly minted Democratic Governor Abigail Spanberger is adding amendments to two bills nibbling away at shifting infrastructure costs to high-load customers and away from residential customers.
Budget negotiations are also underway as a House version seeks to remove the tax exemption from data centers while the Senate version aims to keep it.
On Tuesday the Governor said, "There are efforts afoot in the General Assembly, as it relates to the budget, to ensure that data centers are paying their fair share, as I think everyone broadly agrees is necessary."
