Florida Sales Tax Rate Reduction on Commercial Real Property Leases

This article is being posted as a reminder to Landlords, Property Managers and Tenants of the recent Florida sales rate tax reduction on commercial property leases. Effective December 1, 2023, the State of Florida, at the state level, made a change to its sales tax rate for commercial real property lease payments. The occupancy period tax rate on these lease payments, which includes both base rent and additional rent, will be reduced from 5.5% to 4.5% for payments received during occupancy periods beginning on or after December 1, 2023. The reduced sales tax for commercial tenants aims to provide relief while maintaining the state’s revenue stream.

Key Points:

1. Scope of the Change:

• The reduced sales tax rate applies to only periods of occupancy after December 1, 2023, regardless of when rent is paid.

• For example, a Florida commercial tenant who pre-pays January 2024 rent in October 2023 will be taxed at the reduced rate.

• On the contrary, rent due in November 2023 will continue to be subject to the previous rate of 5.5%, even if paid after December 1, 2023.

2. Tax Implications for Landlords and Management Companies:

• Commercial landlords and property management companies should promptly update their records to reflect the new sales tax rate reduction.

• Invoices sent for occupancy periods beginning on or after December 1, 2023, must accurately account for the revised tax rate.

3. Local Discretionary Sales Surtax:

• It’s important to note that the reduction applies to the state-level tax rate only and does not impact any local discretionary sales surtax that may be imposed by various Florida counties.

4. New Rates for Central Florida Counties:

• Below are the combined Florida counties sales tax rates (including both state and local surtax) for certain Central Florida (Orlando Metro) counties as of December 1, 2023:

1. Orange County: 5.0%

2. Seminole County: 5.5%

3. Lake County: 5.5%

4. Osceola County: 6.0%

5. Volusia County: 5.0%

6. Brevard County: 5.5%

7. Polk County: 5.5%

5. Other Considerations:

• Tax implications for Tenants: Florida commercial real estate Tenants should check their leasing invoices to ensure their landlords have implemented this change and reduced their sales tax accordingly.

• The reduced sales tax for commercial tenants specifically applies to rent payments of commercial real property.

• Some examples of commercial real estate properties affected are Office, Medical Office, Industrial, Warehouse, Retail, Restaurants, and Self-Storage.

• Florida Tax Rate Update: Under Senate Bill 50, the state-level sales tax rate on commercial lease payments is expected to be further reduced to 2% by mid-2024. This second reduction will occur three months after Florida’s Unemployment Trust Fund is replenished to the pre-pandemic level (currently expected to occur in March 2024). Check back for future updates.

This article is for informational purposes only and does not provide legal advice. Please contact your accountant and/or attorney for consultation before implementing any legal or tax-related changes to your business.