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Florida Reduces State Sales Tax on Commercial Real Estate Leases in 2023 by Luke Lucas, CPA

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Posted on June 19, 2023 by Luke Lucas

Florida’s legislature recently enacted House Bill 7063, which will reduce the state’s sales tax on rent and license fees for commercial property, including office and retail space, warehouses and certain self-storage units. It is the only state in the nation that imposes sales tax on commercial rent.

Effective December 1, 2023, the sales tax rate commercial real estate owners in Florida must collect from their tenants will fall from 5.5 percent to 4.5 percent. The law does not change the discretionary local-option sales surtax property owners may be required to collect on the total rent they charge. The tax tenants must pay on their commercial leases depends on their base rent and other payments they must make as a condition of occupancy. This may include common-area maintenance fees, property taxes and utilities that a lease agreement specifies are the tenants’ responsibility. Moreover, 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 paying November 2023 rent in mid-December will be subject to the applicable 5.5 percent tax rate that was in effect during that month of occupancy.

Commercial property owners in Florida should note there is a possibility of a further decrease in the state’s sales tax rate on commercial rent and license fees next year based on a bill the legislation passed in 2021. Under Senate Bill 50, the tax rate is eligible for a reduction to 2 percent if the balance of the state’s Unemployment Compensation Trust Fund exceeds pre-COIVD levels of $4,071,519,600 on the last day of any month.

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) 960-9315 or info@bpbcpa.com.