2023: FL Sales Tax Rate on Commercial Rent is going DOWN

Florida is the only state to charge sales tax on commercial rentals of real property. “Commercial real property” subject to this tax includes land, buildings, office or retail space, convention or meeting rooms. It may also include licenses granting the use of real property for the placement of vending, amusement, or newspaper machines. Exempt rentals include those assessed as agricultural, those rented to exempt, nonprofit organizations or government agencies, those used exclusively as dwelling units, or public streets or roads used for transportation purposes.

Further, the amount of “rent” upon which the tax is imposed includes not only the base rent, but also “constructive rent” – known as pass-through expenses such as insurance, mortgage payments, or ad valorem taxes that a tenant makes on behalf of the property owner.

Currently, the tax is imposed at a state rate of 5.5 percent. However, at the end of this year’s legislative session, Governor DeSantis signed House Bill 7063 into action, which reduces the sales tax rate on commercial leases of real property from 5.5% to 4.5% effective December 1, 2023. Nevertheless, local option sales surtaxes still apply on top of this now 4.5 percent rate. That means that the effective commercial rental rate can still be as high as six percent, or as low as five percent. The chart below shows the applicable surtax rate in each county.

However, the Florida commercial renters and landlords can expect another sales tax rate reduction in 2024! That’s because the legislature previously authorized the reduction of the business rent tax state rate down to 2% during the 2021 legislative session. The significant decrease is to be effective the first day after the second month after the Unemployment Compensation Trust Fund reaches its pre-pandemic balance. That is estimated to happen around mid-2024.

The rates correspond with the period of occupancy, as opposed to when payment is made. For example, any amounts charged for occupancy during the month of November 2023 will have the 5.5% rate applied, regardless of when the rent is actually paid. Amounts charged for December of 2023 will have the rate of 4.5% applied, regardless of when the rent is actually paid.

Jackie Mustian is an associate in the Fort Lauderdale office of Moffa, Sutton, & Donnini, P.A. She focuses her practice on Florida state and local tax, with an emphasis on sales and use tax. Jackie assists in protesting Florida sales tax audits regarding alcohol, beverage, and tobacco products as well as commercial rentals.

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.

Authority

• Sales and Use Tax on the Rental, Lease, or License to Use Commercial Real Property, GT-800016, Florida Department of Revenue. https://floridarevenue.com/Forms_library/current/gt800016.pdf
• H.B. 7063, 2023 https://www.flsenate.gov/Session/Bill/2023/7063/BillText/er/PDF
• Discretionary Sales Surtax Rate Table, Florida Department of Revenue Address/Jurisdiction Database, https://pointmatch.floridarevenue.com/General/DiscretionarySalesSurtaxRates.aspx
• S.B. 50, 2021 https://www.flsenate.gov/Session/Bill/2021/50/BillText/er/PDF