ROANOKE, Va. – The state may be missing out on an estimated $1.9 billion a year because of a sales tax exemption for data centers. Lawmakers are considering scaling back or ending the incentive, which currently exempts certain equipment and software from sales tax.
Nearly two decades ago, Virginia exempted specified equipment and software used by tech companies, a policy credited with attracting massive investment and building out power and fiber infrastructure. The exemption is scheduled to run through 2035, but some lawmakers want data centers to resume paying the state’s minimum 5.3 percent sales tax.
“I don’t think they should get any tax breaks whatsoever, considering they’re a multibillion-dollar company,” said Jessie Bearman, a member of the Southwest Virginia Data Center Transparency Alliance.
To explain the debate, political analyst Dr. Cayce Myers cited how the industry has changed since the exemption was written.
“Data centers, when it first was enacted, they existed but not at the scale they did today. Now, data centers have become this huge political issue, huge local issue, an issue where people don’t want them in their local communities. Moreover, it’s an issue where there’s a lot of tax revenue that’s potentially lost through this exemption, so the question is if you remove the exemption, do you get the revenue?”
The legislature is split. The Virginia Senate voted to end the sales-tax exemption while the House voted to keep it, arguing that removing the incentive could push future investment to other states.
“My understanding is in the budget debate, there’s competing proposals about how to deal with data center tax breaks. It’s not just that there’s one tax break, there’s a set of them, and this never has to be an all-or-nothing proposition. Get rid of all of them or keep all of them. I always figure that they’ll always find a solution somewhere in the middle,” said U.S. Senator Tim Kaine.
More data centers are planned for Southwest Virginia, including a proposed Google facility in Botetourt County. Some residents say the exemption should end if local infrastructure must expand to support the projects.
Sherly Jarusck, a Troutville resident, asked, “If Google’s not paying any taxes, who’s going to build the infrastructure? Who’s going to build the pipes that draw the water?”
Lawmakers have not reached a final agreement. The debate over data center tax breaks remains one of the issues delaying Virginia’s state budget; the General Assembly is set to wrap up Saturday and will reconvene on April 22.
10 News will keep viewers updated on developments.