Reminder: Florida Sales Tax For Commercial Leases Rate Reduction

UPDATED MAY 20204 - This article is being posted to alert Landlords, Property Managers and Tenants as a Reminder: Florida sales tax for commercial leases rate reduction. 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 rate was reduced from 5.5% to 4.5%. In March 2024 the Florida Unemployment Compensation Fund was replensished to pre-pandemic levels triggering another Florida sales tax rate reduction on commercial property leases.

Effective June 1, 2024 the State of Florida, at the state level, will reduce 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 4.5% to 2.0% for payments received during occupancy periods beginning on or after June 1, 2024. 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 June 1, 2024, regardless of when rent is paid.

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

• On the contrary, rent due in May 2024 will continue to be subject to the previous rate of 4.5%, even if paid after June 1, 2024.

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 June 1, 2024, 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 county's sales tax rates (including both state and local surtax) for certain Central Florida (Orlando Metro) counties as of June 1, 2024:

1. Orange County: 2.5%

2. Seminole County: 3.0%

3. Lake County: 3.0%

4. Osceola County: 3.5%

5. Volusia County: 2.5%

6. Brevard County: 3.0%

7. Polk County: 3.0%

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.

Read the Florida Department of Revenue Press Release Here

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