fLoridAtAxonCommerCiALProPertYLeAsesreduCedAgAin
Tax law Section Chair : ChristopherDingman – Johnson , Pope , Bokor , Ruppel
The sales tax imposed on leases of commercial real property in Florida has been a topic of concern for businesses in the state since its introduction . Concerns often focus on both the tax ’ s high rate and the fact that no other state levies a similar tax on such commercial leases of real property . To address this concern , the Florida legislature has made a concerted effort to reduce the sales tax on commercial rent . The tax has been reduced several times over the last ten years , reflecting the state government ' s commitment to fostering a favorable business environment .
Florida has recently taken another step in the series of reductions to the sales tax on commercial leases of real property via House Bill 7063 , which was signed into law by Governor Ron DeSantis on May 25 , 2023 . This legislation , in addition to providing planned sales tax
floridahasrecently takenanotherstepin aseriesofreductions tothesalestaxon commercialleases ofrealpropertyvia HouseBill7063 .
holidays relating to things such as disaster preparedness and back-to-school shopping , reduces the sales tax on such commercial leases from 5.5 % to 4.5 %, effective December 1 , 2023 .
The Bill Analysis for this new legislation , however , notes this reduction is only “ temporary ” in light of Senate Bill 50 passed in April of 2021 . This prior legislation will allow for an eventual reduction of the sales tax on commercial leases to 2 %. This reduction is set to occur two months after Florida ’ s Unemployment Compensation Trust Fund ( the “ Fund ”) reaches its pre-pandemic balance of around $ 4,071,519,600 . Based on the Fund ’ s forecast summary published in March of this year , the legislature estimates this reduction to 2 % to become effective August 1 , 2024 .
Typically , commercial leases treat the sales tax as a tenant expense . Therefore , this development could have an immediate impact on clients who have leased property on a long-term basis . Additionally , the impact of the reduction on tenant cash flow will likely be a topic of discussion when negotiating terms of new leases . It either case , it will be important to make sure that the taxes are being appropriately remitted to the Florida Department of Revenue , and the rates must be closely monitored to avoid unintentional overpayments or underpayments . n
Author : Tyler Willis - Johnson Pope Bokor Ruppel & Burns LLP
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