Florida stands alone among all states in the country by imposing a comprehensive sales tax on commercial real estate leases.
The Florida legislature took note of this fact and has chipped away at the effective tax rate on such rents since 2017, with additional reductions having been passed in 2020, 2021 (not yet effective as discussed below), and now again in 2023. The next rate reduction will occur on December 1, 2023, pursuant to House Bill 7063 of the 2023 legislative session, which revised § 212.031, Florida Statutes, to permanently reduce the state portion of the tax levied on the total rent or license fee charged for “renting, leasing, letting, or granting a license for the use of any real property” from 5.5 to 4.5%.
As noted above, the tax rate reduction passed in 2021 has yet to take effect. Pursuant to Senate Bill 50 of that year, the rate will further reduce to 2.0%, on the first day following the second month after the Florida Unemployment Compensation Trust Fund reaches its pre-pandemic balance (i.e. $4,071,519,600). That date is currently unknown, but Trenam will continue to monitor the situation.
This sales tax applies to all base, additional, and percentage rents, as well as any other consideration “for the granting of a privilege to use or occupy real property for any purpose” in most commercial lease contexts in Florida, with certain rarely applicable non-taxable use exceptions. There is typically an additional county sales tax imposed (e.g., an additional 1.5% in Hillsborough County, and 1% in Pinellas and the majority of other Florida counties) that must be tacked onto the state’s remittance rate. The statute also makes clear that the tax rate applicable to any rental payment is the rate in effect during the period of occupancy relevant to that payment, not the time of payment of such rent. This means that any delay or acceleration of a given rental payment is irrelevant to the rate applied to that remittance.
We will keep our clients apprised of any further developments on this front. In the meantime, we encourage our clients who participate in any commercial leasing arrangements in Florida, whether as a landlord or a tenant, to account for this latest rate adjustment in their payments, collections, and remittances, beginning on December 1, 2023.
