State of Florida Reduces State Sales Tax on Commercial Real Estate Leases

Florida lawmakers passed House Bill 7063, which will decrease the state sales tax rate on rent and license fees for commercial properties, such as office and retail spaces, warehouses, and certain self-storage units from 5.5% to 4.5%, effective December 1, 2023. However, this does not apply to agricultural properties, those rented to exempt, nonprofit organizations, and government agencies. Property owners should take into account that the Senate also passed Senate Bill 50 in 2021, meaning that this is the first decrease in sales tax on commercial rent until the rate is permanently reduced to 2%.

Even though there is this drop in state sales tax on commercial real estate, tenants must not forget that there is still discretionary sales surtax, or county tax, on top of the state rate. The new combined sales tax and discretionary sales surtax rate for certain Florida counties for 2023 are listed here. The tax that tenants must pay depends on their base rent and any ancillary fees they must pay as a condition of occupying the property.

Tenants should be aware of the change in the state tax rate, which has decreased from 5.5% to 4.5%, based on the date they began occupying the property, not the month or year they pay their rent. For instance, if a tenant pays November 2023 rent after December 1, 2023, they are still responsible for the 5.5% tax rate that was in effect when they were occupying the space. This applies in reverse as well. Rent paid in advance before December 1, 2023, that allows the tenant to use the space after this date is subject to a 4.5% state sales tax.