Florida Reduces Sales Tax on Commercial Rent

Date November 27, 2017
Authors HBK CPAs & Consultants
Categories

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.

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