Florida Reduces Sales Tax on Commercial Rent

Florida has imposed sales tax on commercial rent for nearly fifty years, and is the only state to do so. While there has been reluctance to eliminate this tax, recently Florida announced that effective January 1, 2018 they will decrease the sales tax rate from 6 percent to 5.8 percent on rent charged for leasing, letting, renting or granting a licenses to use real property. This decrease will be applicable against total rent charged which includes all consideration paid by the tenant to the landlord for the privilege or right to use or occupy that real property under Code section 212.031.

This is the first step in a plan by Governor Scott to eliminate the tax on commercial rent and attract new business into the state. While a small reduction, it is a big change for the state which is the only one in the country that charges sales tax on commercial rent. Florida currently imposes a tax at a rate of 6 percent on commercial rent, the local option discretionary sales surtax imposed by the county where the real property is located continues to apply to the total rent charged.

The changes will go into effect January 1, 2018, and the new tax rate will only be applicable to rent payments based on the dates the property is occupied. Thus, you cannot defer any rent payments until 2018 to take advantage of this new rate, as this new rate is not based on when payment is due or paid. This could result in an overpayment of sales tax for leases that reflect pre-payments of rent made before January 1st but for occupancy after December 31st if the new rate is not accounted for.

About the Author(s)

Cassandra Baubie is an Associate at HBK CPAs & Consultants and is a member of its Tax Advisory Group (TAG).

Ms. Baubie joined HBK in 2017. She works in the firm’s Youngstown, Ohio office after earning a dual Bachelor of Arts degree in Legal Studies and Psychology from the State University of New York The University at Buffalo and a Juris Doctorate from the University of Pittsburgh School of Law, where she also completed a Tax Law Certification. She graduated from both schools with high honors and spent a semester studying abroad in London, England, as well.

Ms. Baubie has experience in tax law research. Prior to joining HBK, she worked for Jurist.org, a global legal news organization, and was a member of the University of Pittsburgh Tax Law Review Journal. Ms. Baubie also worked for the University of Pittsburgh School of Law’s Low Income Tax Clinic where she performed IRS litigation and Tax Court work, and provided compliance work for low income individuals and businesses. She was an avid volunteer with the Olmsted Center for Sight in Buffalo.

Ms. Baubie lives in Struthers, Ohio, with her fiancé Shawn and their Australian Shepherd, Cody.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.