Gov. DeSantis has signed House Bill 7063, which reduces the sales tax rate on rent and license fees for commercial property. It is the only state in the nation that imposes this type of sales tax.
Sales Tax Rate on Commercial Property
The new state-level sales tax rate will be reduced from 5.5 percent to 4.5 percent for payments received for occupancy periods beginning on or after December 1, 2023. The tax tenants must pay on their commercial leases depends on the base rent and other payments they must make as a condition of occupancy. It may include common-area maintenance fees, property taxes, and utilities that a lease agreement specifies are the tenants’ responsibility. For example, a commercial tenant prepaying January 2024 rent in October 2023 will pay tax on such rent at the new reduced sales tax rate of 4.5 percent. Conversely, a tenant paying November 2023 rent will be subject to the 5.5 percent rate if paying mid-December. Commercial landlords and management companies sending invoices for occupancy periods beginning on or after December 1, 2023, should update their records to account for the sales tax rate reduction.
Combined Sales Tax and Discretionary Sales Surtax Rate
It is vital to remember the sales tax reduction exclusively applies to commercial property leases. This includes retail space, industrial property, warehouses, convention and meeting rooms, and self-storage units. The law does not affect the discretionary local-option sales surtax property owners may be required to collect on the total rent charged. The combined sales tax and discretionary sales surtax rate for certain Florida counties for 2023 are below:
Brevard County: 5.5%
Hillsborough County: 6.0%
Lake County: 5.5%
Orange County: 5.0%
Osceola County: 6.0%
Pinellas County: 5.5%
Polk County: 5.5%
Seminole County: 5.5%
Volusia County: 5.0%
Six Percent Sales Tax and Exemptions
The rate on many short-term leases, sales of tangible personal property, and certain services provided by commercial landlords are still subject to 6 percent state sale tax. However, a written lease for a residential property with a term of more than six months that cannot unilaterally be terminated by either party without a penalty is exempt. The reduced tax rate does not apply to motor vehicle parking or storage charges, boat dock rentals or storage, or aircraft tie-down fees.
These changes carry broad implications for commercial tenants and landlords, opening potential avenues for growth and development. As such, it is crucial for businesses to stay informed and strategize accordingly to reap the maximum benefits from these fiscal adjustments.
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