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Florida Moves Closer to Eliminating Sales Tax on Commercial Rent by Luke Lucas, CPA

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Posted on May 23, 2024 by Luke Lucas

Effective June 1, 2024, Florida sales tax on rent and license fees for commercial property will be reduced from 4.5 percent to 2.0 percent, representing an estimated $1 billion in tax relief for Florida businesses.

Florida is one of nine states that does not impose income tax on its residents, but it is also the only state in the nation that imposes a sales tax on the rental of office and retail space, warehouses and certain self-storage units. The amount of the tax depends on the base rent and other payments tenants must make as a condition of their occupancy, including common-area maintenance fees, property taxes and utilities that a lease agreement specifies are the tenants’ responsibility. The applicable tax rate is based on the date a tenant occupies or has a right to occupy a property and not the month or year in which the tenant pays the rent. Therefore, a tenant who took occupancy and began paying rent in January 2024 will still be subject to the previous business rent tax rate of 4.5 percent plus the discretionary local-option sales surtax until June 1, 2024. The reduced 2.0 percent state tax rate will apply to tenants who pay rent for occupancy for all periods beginning on or after June 1, 2024.

The reduction in Florida’s commercial property rent tax is a result of Senate Bill 50, enacted in April of 2021, which, among other things, called for the state tax portion of business rent to be reduced to 2 percent within two months after the State’s Unemployment Compensation Trust Fund exceeds the pre-pandemic level of approximately $4.1 billion.

About the Author: Luke Lucas, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he helps businesses and their owners throughout the country maintain compliance with a complex maze of state and local tax issues. He can be reached at the CPA firm’s Miami office at (305) 960-7000 or info@bpbcpa.com.