Understanding Florida Commercial Rent Sales Tax

Navigating the intricacies of taxes is challenging, and for business owners in Florida, the Florida commercial rent sales tax is an important one to understand. 

Effective June 1, 2024, Florida's state sales tax on commercial rentals, including office spaces, retail units, warehouses, and self-storage, decreased from 4.5% to 2.0%.

As the only state in the U.S. that imposes a specific sales tax on commercial rent, Florida requires businesses leasing commercial properties to account for this tax in their financial planning. 

If you’re a landlord, tenant, or business owner, staying informed about the sales tax on commercial rent in Florida is crucial to avoid surprises and ensure compliance with state regulations. 

In this blog, we'll explain the Florida commercial rent sales tax, discuss recent changes to the tax rate, and explore its impact on landlords and tenants alike.

What is Commercial Rent Sales Tax?

The commercial rent sales tax in Florida is a tax imposed on rental payments for commercial properties. This includes spaces like:

• Office buildings

• Retail stores

• Warehouses

• Specific industrial properties, and more.

The tax applies to the total amount of rent payment, including any additional charges such as maintenance fees or property taxes passed on to the tenant.

Unlike residential leases, which are exempt from sales tax, commercial leases in Florida are subject to this unique taxation. Understanding what constitutes taxable rent is essential for businesses to ensure they comply with the law.

Recent Changes to the Sales Tax Rate

One of the most significant updates to the sales tax on commercial rent in Florida is the reduction in the tax rate. As of June 1, 2024, the state sales tax on commercial rent decreased to 2.0%, down from the previous rate of 4.5%.

This move is part of Florida's ongoing efforts to reduce the tax burden on businesses and promote economic growth. Historically, the state has lowered this tax incrementally over the years, signaling an effort to phase it out entirely. However, it's crucial to note that while the state tax rate is being reduced, local discretionary sales surtaxes (discussed below) still apply.

Applicability of the New Sales Tax Rate

The new 2.0% sales tax rate applies to commercial rental payments made after June 1, 2024. This includes payments for base rent as well as other taxable charges such as:

• Common area maintenance (CAM) fees.

• Real estate taxes or insurance passed through to tenants.

• Any additional recurring payments under the lease agreement.

Landlords need to calculate the correct tax rate based on the timing of payments and ensure they're remitting the appropriate amounts to the Florida Department of Revenue.

Local Discretionary Sales Surtax

In addition to the state's base tax rate, many Florida counties impose a local discretionary sales surtax, which varies by county. As of January 1, 2025, these surtax rates range from 0.5% to 2.0%.

For example:

• Miami-Dade County: 1.0% surtax.

• Broward County: 1.0% surtax.

• Hillsborough County: 0.5% surtax.

• Orange County: 0.5% surtax.

• Pinellas County: 1.0% surtax

• Duval County: 0.5% surtax

• Palm Beach County: 1.0% surtax

• Leon County: 1.5% surtax

• Alachua County: 1.0% surtax

• Polk County: 1.0% surtax

Businesses should factor in these additional surtaxes when calculating their total rental tax obligations. Landlords must ensure they're applying the correct local surtax rate based on the property's location.

Implications for Landlords and Tenants

The Florida commercial rent sales tax significantly impacts both landlords and tenants. Here's how:

For Landlords:

• Landlords are responsible for collecting and remitting the sales tax to the state.

• Precise records of rental income and tax payments are essential for avoiding penalties.

• They must also clearly outline any taxable charges in lease agreements to ensure transparency with tenants.

For Tenants:

• Tenants should account for the tax as part of their overall rental costs.

• Understanding the components of taxable rent helps tenants budget more effectively.

• Staying informed about tax changes ensures tenants are not caught off guard by unexpected increases or decreases.

Common Misunderstandings

There are a few common areas of confusion regarding the sales tax on commercial rent in Florida. Businesses can avoid compliance issues and better understand their tax obligations by addressing these misunderstandings. These misunderstandings include:

Taxable rent encompasses not only the base rent but also additional charges like common area maintenance (CAM) fees, property taxes, and insurance costs passed on to tenants, all of which are subject to sales tax. 

While certain businesses may assume they are exempt from this tax, exemptions are exceedingly rare and generally limited to specific government or nonprofit organizations. Ultimately, although landlords are responsible for collecting the sales tax, the financial obligation falls on tenants, who must bear the full cost.

Issues and Challenges with Non-Compliance

Non-compliance with Florida’s commercial rent sales tax regulations can result in serious consequences. The Florida Department of Revenue (DOR) frequently includes this tax in broader sales tax audits.

Businesses found non-compliant may face steep penalties, interest charges, and substantial back taxes. For instance, unpaid taxes over several years can quickly add up, alongside additional fines.

Both landlords and tenants share responsibility. Landlords are liable if they fail to collect and remit the tax, while tenants without proof of payment may also incur penalties.

Wrapping Up

Understanding the Florida commercial rent sales tax is essential for landlords and tenants in the state. The state sales tax rate has reduced to 2.0% effective June 1, 2024, giving businesses an opportunity to save on their rental costs. 

However, it's important to remember that local discretionary sales surtaxes can still apply, making it vital to calculate taxes accurately based on the property's location. By staying informed and prepared, businesses can better manage their expenses and ensure they remain on the right side of the law. 

If you're a landlord or tenant with questions about the sales tax on commercial rent in Florida, consider consulting a tax professional or visiting the Florida Department of Revenue's official website for additional resources. 

Staying proactive is the key to navigating this unique tax landscape effectively.