Florida tenants and those with licenses to use real property will soon enjoy an earlier-than-anticipated reduction in their sales tax obligations. This change mirrors Florida's ongoing efforts to foster a more favorable business environment. Starting June 1, 2024, the state sales tax rate applied to commercial rentals under section 212.031, Florida Statutes (F.S.), is set to decrease significantly from 4.5 percent to 2.0 percent, providing employers with at least an estimated $1 billion in tax relief.
By slashing the commercial lease sales tax by more than half, Florida is easing the strain on employers, making it easier for them to grow their businesses, hire new employees, and continue to thrive.
Commercial Rentals
Commercial rentals encompass a range of real estate arrangements, including leases and licenses for commercial offices, retail spaces, warehouses, and self-storage facilities. The "total rent charged" includes all payments the tenant must make in exchange for the right to use or occupy the property.
Local Option Discretionary Sales Surtax
The local option discretionary sales surtax, determined by the county where the property is located, remains in effect. This surtax is added to the total rent charged, and the tax liability is calculated based on the period of occupancy provided to the tenant rather than the payment schedule. The revenue generated from this surtax can fund various county projects and services, such as transportation infrastructure, public safety, or education.
Timing for Sales Tax Rates
The Department of Revenue has provided detailed guidelines regarding how the timing of payments and occupancy affects the applicable tax rate:
Rent payments made December 1, 2023, through May 31, 2024, will be taxed at the current rate of 4.5 percent state sales tax and the discretionary sales surtax.
Any payments made before June 1, 2024, which cover the occupancy period beginning on this date, will benefit from the reduced 2.0 percent state sales tax and any applicable discretionary sales surtax.
Rate Reduction Exemptions
The reduced tax rate does not apply to all types of rentals. Transient rentals, which typically include short-term accommodations lasting six months or less, are excluded. Also excluded are rentals for parking and storage for motor vehicles, boat docking and storage spaces, and tie-down or storage for aircraft.
Taxpayer Resources
To facilitate accurate tax reporting for commercial rentals, the Florida Department of Revenue has provided accessible resources on its website at floridarevenue.com/forms. Taxpayers can visit the Sales and Use Tax section for more guidance.
Here to Help
This tax rate reduction represents a tangible benefit for businesses that lease commercial spaces in Florida. Businesses are encouraged to leverage this financial relief and reallocate savings toward growth and development initiatives. As with all tax-related matters, we are here to help you fully understand the implications of these changes and ensure they remain compliant with state laws. We build value-added relationships with each client to understand their business structure and provide solid solutions. Our innovative cross-functional services help businesses address the challenges ahead. Contact us to let us know how we can best support you.