A proposal out of the Virginia Senate would roll back a more than 15-year-old data center tax break and raise billions in state revenue. But the data center industry, deeply entrenched in Virginia’s economy thanks in part to that tax break, is calling on an unlikely ally in the fight to stop it.
“This is affordability for all Virginians. It takes the savings back for them,” said Senate President Louise Lucas to reporters after she announced her plans to roll back a long running tax break for Virginia’s data center industry.
Back in 2009, the legislature, seeing the opportunity for success on a business that relies on close proximity to one another, DC and an under-ocean internet cable that reaches land in Hampton Roads, said data centers wouldn’t have to pay sales and use tax on the equipment in their facilities.
Chris Lloyd is with the consulting firm McGuireWoods. At a data center business conference in Richmond last summer, he explained the sales tax exemption’s history.
“So, the idea is why would you want to tax the final input to a final product. The same concept carried forward with the sales and use tax exemption,” Lloyd said. “Virginia was the first state to do that, but now we’re up to 37 states which have now mimicked that.”
Even last summer Lloyd said the tax exemption was still important, especially as those other states adopted it. And part of the strategy to keep that carve out feels unique because it relies on something corporations don’t usually look to: union labor.
“In 2016 we worked 14 million hours, today, we worked 28 million hours in 2025,” said Don Slaiman, the political coordinator for IBEW local 26, an electrician's union in Northern Virginia. As the data center industry invested tens of billions in new buildings since 2009, his union’s membership exploded. And the pay? Slaiman said apprentice electricians make almost $30 an hour, journeymen make about $60. And they get benefits.
“This industry here, from the get-go, has been responsive to workers, has been inclusive of trade unions, because they are leased before they’re built,” Slaiman told Radio IQ. “It’s all about time to market and it's all about using skilled labor, getting the guts right from the get-go.”
To that end, IBEW members packed into the General Assembly building recently to plead their case. Here’s Jason Parker with IBEW who’s among those who fear reinstating the tax would see data centers leave.
“This is a coveted industry around the country,” Parker said Thursday. “It’s very important to us here in Virginia so we don’t have to pack our bags and travel and go travel to do the work we’re doing right now.”
The fear that data centers may leave the state is shared by localities who benefit from other taxes paid by the industry. According to Loudoun County’s Board of Supervisors, which the largest concentration of data centers in the world calls home, changes to the tax exemption quote “puts even more pressure on property owners through the local real estate tax and other revenue enhancements.”
That’s likely because, according to the county’s own numbers, they collected taxes on $17.3 billion worth of data center personal property, or equipment, and even more in real property taxes considering the industry’s local assessed land value of about $42 billion.
There have been similar tax windfalls in other localities, including Prince William County where a long-running data center expansion project has driven up local revenues but led to push back from residents.
Chief among opponents is Senator Danica Roem. Roem filed the sales tax rollback budget amendment Lucas is now championing.
“They are often multi-trillion-dollar companies within a multi-trillion-dollar industry. They should not be receiving taxpayer dollars when they don’t need them,” Roem told Radio IQ. “That’s money we need for fixing roads and feeding kids.”
Notably about $300 million of the funds raised by ditching the tax break would be directed to roads in and around Roem’s district.
And Lucas, so far, isn’t backing down. In a social media post Wednesday night, she compared the strength of her position to that of “the three types of steel we used at the shipyard.”
Back in the early 70s, Lucas famously was the first female shipfitter at the Norfolk Naval Shipyard. To IBEW’s Slaiman, that means something to the future of the data center industry and whatever happens to their tax break.
“There’s not an anti-union bone in Senator Lucas’s body. She understands us better than any Senator,” Slaiman said. “We have full faith in that Senator Lucas knows what she’s up to.”
But Lucas may not be swayed.
“A lot of folks are saying [data centers are] gonna leave, go to other places, but I don’t believe that’s going to happen,” Lucas said. “I think they’ll continue to build in Virginia, but I think they understand it's going to be a different playing field right now.”
As for Governor Abigail Spanberger, who has also seen labor unions as an ally, when asked about the tax earlier this week she pointed to other legislative changes that she believes will make them pay their fair share, but was noncommittal on the tax break rollback.
“Many communities want to welcome data centers as businesses, as, frankly, local revenue, that is very important,” The governor told reporters. “There are many more conversations to be had.”
Spanberger had just left an event supporting Virginia’s poultry industry, and it lingered in her mind: “I don’t think that chicken is fully cooked yet.”
The future of the data center sales tax should be decided in the coming weeks.
