Florida is the only state in the country to subject commercial rent to sales tax. There has been a push at the state level to lower and eventually repeal this tax, with the state tax rate on commercial rent reducing to 5.7% effective January 1, 2019. However, because a renter is required to pay both the state sales tax rate AND the local surtax rate, the tax on commercial rent in Hillsborough County became more painful.
On January 1, 2019, the local surtax rate in Hillsborough County increased from 1% to 2.5% as of January 1, 2019. This means that commercial rent in Hillsborough County is subject to tax at a rate of 8.2%.
Two brief caveats. One, the tax is due when the rent is received. This is a key distinction when compared to sales tax treatment for other transactions for tangible personal property and taxable services. So just because rent is due, the sales tax liability does not occur until rent is actually paid. Two, you also need to be aware of constructive “rent.” Constructive rent generally results from payments made to another party for the landlord/property owner’s benefit – without having to ever be received by the landlord/property owner. This is especially true for cases where the tenant and landlord/property owner are separate legal entities. The may be “related” or roll up into the same federal reporting entity. Regardless, the Department will still determine the existence of constructive rent and subject these payments to sales tax.
Feel free to give us a call if you have any questions about commercial rent or constructive rent. We can help you or your client identify possible liabilities and assist in determining the best way to remedy the situation.
About the Author: Mr. Parker is a sales and use tax attorney and an associate in the law
firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the
firm's Tampa office. Mr. Parker's practice includes state tax
audits and controversies involving sales and use tax and all other state
taxes including communication service tax, cigarette & tobacco tax,
motor fuel tax, and Native American taxation. Mr. Parker received his
accounting degree, law degree, and L.L.M. in Taxation from the University
of Florida. You can read more about Matthew in his
firm bio.
About the Firm: At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
ADDITIONAL RESOURCES
FL BILL: 4.2% SALES TAX ON RENT, published February 20, 2019, by David Brennan, Esq.
SCHOLARSHIP DONATIONS IN LIEU OF FL SALES TAX ON RENT?, published April 15, 2018, by James Sutton, CPA, Esq.
FLORIDA SALES TAX – VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.
IS RENT SUBJECT TO FLORIDA SALES TAX?, published January 26, 2015
FLORIDA COMMERCIAL PROPERTY OWNERS GET BLINDSIDED BY SALES TAX, published December 31, 2011, by James Sutton, CPA, Esq.