The Florida Legislature cut the state sales tax rate on commercial real property lease payments from 5.5% to 4.5% for leases with occupancy periods beginning on or after December 1, 2023. This reduction is applicable to real property such as commercial offices, retail, warehouse, and self-storage units. It is important for landlords and property management companies to be aware of this reduction and ensure records are up to date.
Calculation of Sales Tax Based on Occupancy Period
Sales tax is due at the rate in effect during the time the tenant occupies or is entitled to occupy the real property, regardless of when the rent is paid.
Specifics on Rental Charges and Payment Timing
• Rental charges paid on or after December 1, 2023, for rental periods prior to December 1, 2023, are subject to 5.5% state sales tax plus any applicable discretionary sales surtax.
• Rental payments made prior to December 1, 2023, that entitle the tenant to occupy the real property on or after December 1, 2023, are subject to 4.5% state sales tax plus any applicable discretionary sales surtax.
Exceptions to the Reduced Sales Tax Rate
The reduced state sales tax rate on commercial rentals does not apply to the tax rate imposed on parking or storage of motor vehicles, docking or storage of boats, or tie-down or storage of aircraft.
Local Discretionary Sales Surtax Implications
Note that the sales tax reduction does not affect the local discretionary sales surtax imposed by many Florida counties. The new combined sales tax and discretionary sales surtax rate for Hillsborough County is 6%; in Charlotte, Pasco, Manatee, Sarasota, and Pinellas Counties, it is 5.5%; and in Lee County, it is 5%.
Potential Further Reductions Under Senate Bill 50
Last but not least, under Senate Bill 50, the state rate may be reduced further to 2% by the third quarter of 2024 if Florida’s Unemployment Trust Fund is replenished to the pre-pandemic level.
As always, if you have questions about the new tax rates for commercial real property leases, reach out to your trusted real estate attorney to learn more.