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Florida Reduces Commercial Rent Tax

by John Heatley, Orlando, July 2019

 

Florida’s commercial rent tax rate has been lowered for the third time in as many years. The new rate beginning next year will be 5.5%, down from 5.7%.

 

The business rent tax is applied to office, retail and industrial leases and can cost companies tens of thousands of dollars annually. It does not apply to hotel or apartment leases.

 

Rent Tax Unique to Florida

 

Florida is the only state in the nation that collects sales tax on commercial leases. The tax is imposed on base rent, plus any additional rent or consideration the tenant is required to pay. It’s also applied to the tenant’s share of common-area maintenance fees and property taxes. Some Florida counties, including Miami-Dade, Broward, and Palm Beach, also add on a local surtax on commercial leases.

 

Governor Ron DeSantis signed the measure into law as part of the state’s $64.5 million budget. The changes to the rent tax are outlined in Section 212.031 (c) of CS/HB 7123.

 

Landlords and commercial real estate groups have advocated reducing the rent tax as a way to fuel economic development and attract business relocations from other states. Former Governor Rick Scott attempted to completely eliminate the rent tax but was unsuccessful.

 

Timing is Key

 

Although the new 5.5% state-level tax rate is effective January 1, 2020, the reduced rate is applicable to the lease period to which the rent pertains.

 

Therefore, if a landlord receives rent payments in 2020 for December 2019, the higher 5.7% rate would still apply plus the applicable local surtax.

 

On the other hand, if a tenant pays the rent for January 2020 in December 2019, the lower 5.5% tax rate would apply.