Florida’s new sales tax law has big implications for commercial real estate
SB 50 requires out-of-state retailers to collect and remit sales tax, and these funds will allow the state to decrease a tax on businesses.
As online purchasing grows exponentially each year, sales tax on such purchases has become more important than ever. Anyone in Florida who has clicked to purchase something online knows that sales tax is collected by only some online retailers. But thanks to Senate Bill 50, signed into law by Gov. DeSantis in April 2021, that is all changing.
Under SB 50, out-of-state retailers are required to collect and remit the state’s 6% sales tax on online sales made to Florida residents. (Retailers generating less than $100,000 in annual sales are exempt.) Before this law, Florida was one of only two states that hadn’t exercised the right to collect such tax, as upheld in the South Dakota v. Wayfair Supreme Court case, which was decided in 2018.
Revenue from the new sales tax, estimated to be around $1 billion per year, will flow into Florida’s Unemployment Compensation Trust Fund, which pays for state unemployment claims. Due to the wave of unemployment caused by the pandemic and the associated economic downturn, the Unemployment Compensation Trust Fund has been severely depleted.
It is estimated that the trust fund will be back to its pre-pandemic level of $4.07 billion in 2024. When that happens, the state will be able to decrease the tax that currently funds the Unemployment Compensation Trust Fund – the tax on commercial rents.
Florida is the only state that taxes commercial rents, currently charging 5.5%. When the Unemployment Compensation Trust Fund stabilizes, SB 50 mandates, the commercial rent tax will be reduced to 2%.
Adding $1 billion per year to the trust fund from sales tax also allows the state to recalculate the amount of money it needs from reemployment taxes. Because the fund was so depleted during the pandemic, reemployment taxes (paid by employers) were set to automatically increase to finance the shortfall. Now, those numbers will be recalculated and likely decreased.
