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Bill

HB 897

Retail Sales and Use Tax; exemption for data centers.

2026 Regular Session Introduced by Rip Sullivan

Virginia bill proposes sales tax exemption for data center construction and equipment to attract facility investment while reducing state tax revenue.

Committee substitute printed 26108015D-H2
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Bill Summary · HB 897

Legislative bill overview

HB 897 proposes to exempt data centers from Virginia's retail sales and use tax on equipment and materials used in their construction and operation. The bill has progressed through committee review with a substitute version, indicating negotiations over the bill's specific scope and conditions.

Why is this important

Data center tax exemptions can attract significant private investment and job creation to a state, but they also reduce state tax revenue that might otherwise fund public services. Virginia is competing with other states offering similar incentives to attract data center operations, making this a strategic economic development decision with direct fiscal consequences.

Potential points of contention

  • Revenue impact: The fiscal cost to the state budget depends on how many new data centers locate in Virginia versus existing operations claiming retroactive exemptions, creating uncertainty in revenue projections.
  • Scope definition: The substitute versions suggest debate over which equipment qualifies, whether exemptions apply to construction materials, and if ongoing operational equipment is included—broader definitions cost more but may be more competitive.
  • Fairness concerns: Exempting one industry sector while other businesses pay full sales tax raises questions about whether government should pick winners and whether data centers (often highly automated) justify tax breaks given limited local job creation compared to revenue foregone.

Compiled from official sources — confirm details with the bill’s official record.

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