Florida State Sales Tax on Commercial Real Property Leases Decreases on Dec. 1, 2023

Florida Gov. Ron DeSantis signed House Bill (HB) 7063 into law on May 25, 2023, which provides short-term and long-term tax relief for Florida taxpayers. (See Holland & Knight's previous alert, "Florida Gov. Ron DeSantis Signs 2023 Tax Bill into Law," May 30, 2023.) Among the changes to certain state-level taxes was a decrease to the state-level sales tax rate on commercial real property leases.

Florida is one of the few states that assesses sales tax on commercial leases of real property. The current Florida sales tax rate on such leases is 5.5 percent. However, the legislation cuts the Florida sales tax rate on commercial leases from 5.5 percent to 4.5 percent as of Dec. 1, 2023. The reduction will not apply to any local tax imposed at the county level, which varies between 0.5 percent and 1.5 percent. Previous legislation provided for a reduction of the commercial sales tax rate to 2 percent once the Florida Unemployment Compensation Trust Fund has been replenished to pre-COVID-19 levels. While that date is uncertain, HB 7063 lowers the rate in the interim.

Rental charges paid on or after Dec. 1, 2023, for rental periods prior to that date, are subject to the current 5.5 percent sales tax, plus any discretionary local tax. Rental charges paid prior to Dec. 1, 2023, for rental periods on or after Dec. 1, 2023, are subject to the lower 4.5 percent sales tax, plus any discretionary local tax. It should be noted, however, that the Florida sales tax rate on short-term residential accommodations (transient rentals) is not impacted by this change.

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