Sales Tax on Commercial Leases to Drop Again

Florida is one of the very few states or areas of the country that levy a sales tax on commercial rents. The sales tax is also due on any other amounts included in the definition of the term “rent” included in the lease. Since most lease documents define all sums due from a tenant as “rent,” including real estate taxes, operating costs, and insurance pass-through reimbursements as rent, the typical payment by a commercial tenant in Florida is higher than in other states, putting Florida commercial landlords at a disadvantage.

Current Sales Tax on Commercial Rents

The commercial real estate industry (especially the retail industry) has been lobbying hard to make Florida more competitive by abolishing or diminishing the sales tax on commercial rents. Absent any locally imposed tax surcharges in certain counties of the state, the current Florida sales tax rate on commercial rents is 4.5%. This is due to prior legislative action that reduced the sales tax rates from 5.5% to the present 4.5%.

Change to Sales Tax on Commercial Rents

Effective June 1, 2024, rates will drop again. The rate will be 2% for any rent for rental periods after June 1, 2024. The new rate will be effective even if the payment for rental periods after June 1, 2024, is made before such date. Likewise, if the payment is made after June 1, 2024, but is for the rental period prior to June 1, 2024, the existing 4.5% rate must be collected. The reduction does not affect any local option sales taxes or surcharges levied by individual counties, which must still be collected at the same rate as before.

Commercial landlords must fully comprehend the implications of the new reduced rates and their effect on their rental invoices and future sales tax remittances. Our firm regularly posts on issues impacting the commercial real estate industry. Please subscribe to our blog for notifications of new articles and upcoming events.