Starting June 1, 2024, Florida’s business commercial rent tax will be decreased from 4.5% to 2.0%. The commercial rental tax reduction is a direct result of the Wayfair legislation, passed in 2021, which utilized a legislative strategy to boost the state’s economy following the damaging effects of the COVID-19 pandemic. The 2021 legislation stipulated that a tax cut would occur when the state’s unemployment trust fund became replenished, reaching pre-pandemic levels. The overall purpose of this tax reduction is to stimulate the economy by decreasing the burden on businesses that lease commercial property as part of the post-COVID-19 economic recovery effort.
What is the scope of the business commercial rent tax decrease?
On April 8, 2024, Florida’s Department of Revenue released a Tax Information Publication (TIP 24A01-02) indicating that “the state sales tax rate imposed under section 212.031, Florida Statutes (F.S.), on the total rent charged for renting, leasing, letting, or granting a license to use real property (also known as “commercial rentals”) is reduced from 4.5% to 2.0%.” Thus, the publication indicates that the scope of the tax reduction covers rentals, leases, or licenses for commercial real property in Florida.
What is the purpose of the business rent tax decrease?
The purpose of the tax rate reduction is to stimulate business growth and stability by easing the financial burden on businesses that lease commercial property. Specifically, the legislation is part of a broader post-COVID-19 economic recovery strategy directed at supporting Florida businesses during the continuing recuperation period since the economic impacts of the pandemic. Therefore, this commercial rent tax should encourage business growth and become an addition to the broader policies that encourage the resurgence of business stability.
Were there previous business rent tax reductions and will there be future reductions of the business rent tax?
As previously indicated, the commercial rent tax decrease was contingent on the Florida Unemployment Compensation Trust Fund replenishment, specifically it was to be triggered if the Florida Unemployment Compensation Trust Fund reached its pre-pandemic levels. Although the Unemployment Compensation Trust Fund was greatly depleted during the pandemic, this condition was met, leading the Florida Legislature to create an automatic reduction of the state tax rate for the business rent tax from 4.4% to 2.0%. Although Florida is the only state that imposes a sales tax on commercial leases or licenses to use commercial real property, the Florida Legislature has continuously been acting to reduce the commercial rent tax since 2018, starting at 6.0% rate.
Do local county taxes still apply?
The reduction of the commercial rent tax was facilitated by House Bill 7063 and such a reduction applies at the state level. Nevertheless, local county taxes, which range from 0.5% to 1.5% will still be effective and applicable. Furthermore, any rental charges which would be paid on or after June 1, 2024, for periods prior to the effective date will be taxed at the 1.5% rate, and include local taxes. Rental charges paid before June 1, 2024, for periods on or after the effective reduction rate will be taxed at 2.0%, plus local taxes. Observing exclusions, the tax rate change will not affect short-term residential property and accommodations agreements that extend for a rental time of six months or less.
In order to prepare for Florida’s business rent tax decrease, which will become effective June 1, 2024, and to ensure your compliance with the changes in the regulation, make sure to contact an experienced Real Estate Law attorney at EPGD Business Law. The firm would be happy and willing to assist you in your needs, and a skilled attorney can help you with any questions or concerns to safeguard your interests and to assure your legal standing.
