2023 Florida Sales Tax Reduction: Implications for Commercial Property Lease Payments

Beginning December 1, 2023, the State of Florida will reduce its sales tax rate on commercial real property lease payments, including base rent and additional rent. The previous rate of 5.5% will be lowered to 4.5% for payments received for occupancy periods starting from this date onwards. This adjustment applies to various types of commercial real property rentals, such as commercial offices, retail spaces, warehouses, and self-storage units.

This new sales tax rate applies to all rent payments attributed to periods commencing on or after December 1, 2023. This is applicable even if the payments are prepaid before this date. For instance, a commercial tenant in Florida who prepaid their January 2024 rent in October 2023 will still benefit from the new, reduced sales tax rate of 4.5%. Conversely, the rent due in November 2023 will be subject to the original rate of 5.5%, even if it’s paid in December 2023.

Commercial landlords and management companies are advised to update their records accordingly to reflect this sales tax rate reduction for invoices issued for occupancy periods starting on or after December 1, 2023.

It’s crucial to understand that this sales tax reduction doesn’t affect the local discretionary sales surtax that many Florida counties impose. Despite the statewide decrease in sales tax, the new combined sales tax and discretionary sales surtax rates for certain Florida counties for 2023 are as follows:

  • Brevard County: 5.5%
  • Hillsborough County: 6.0%
  • Lake County: 5.5%
  • Miami-Dade County: 5.5%
  • Orange County: 5.0%
  • Osceola County: 6.0%
  • Pinellas County: 5.5%
  • Polk County: 5.5%
  • Seminole County: 5.5%
  • Volusia County: 5.0%

In Florida, sales tax on commercial rent applies only to amounts paid as rent by commercial tenants. Other sales of tangible personal property and certain services provided by commercial landlords to their tenants are still subject to Florida’s standard 6.0% sales tax. This tax is not impacted by the aforementioned rate reduction.

With this in mind, businesses and commercial tenants can adequately plan for the forthcoming tax changes, ensuring smooth and compliant transitions as the changes take effect.

The reduction of the sales tax rate on commercial real property lease payments ushers in a fresh phase in Florida’s commercial sector. This pivotal fiscal adjustment could have a profound influence on Florida’s broader economic landscape, bringing beneficial opportunities for both landlords and tenants alike.

For tenants, the benefits are clear. The decrease from a 5.5% sales tax rate to a 4.5% rate could mean significant savings over the course of a lease. In turn, these savings could be channeled back into the tenants’ core business operations, potentially fueling growth, fostering innovation, or facilitating competitive advantages in the marketplace.

Simultaneously, landlords and property management firms can utilize this reduced tax rate as a potential attractor for more tenants. By effectively making commercial spaces more financially accessible, there is potential to stimulate an increase in demand. This increased demand could enhance the health and vibrancy of Florida’s commercial real estate market.

However, it’s essential to note that while there is a reduction in the state’s sales tax, the local discretionary sales surtax imposed by many Florida counties remains unaffected. As such, the total tax imposed on commercial rent would still fluctuate across different counties. Furthermore, the sales tax on transactions related to tangible personal property and specific landlord-provided services remains steadfast at 6.0%.

In summary, the decrease in Florida’s sales tax rate on commercial real property lease payments, which is set to take effect from December 2023, can be viewed as a strategic financial pivot. Although the state sales tax experiences a reduction, local surtaxes and other specific taxes remain unaffected. These changes carry far-reaching implications for both commercial tenants and landlords, opening up potential avenues for growth and development. As such, it is a crucial period for businesses to stay informed and strategize accordingly to reap the maximum benefits from these fiscal adjustments.

Legal Disclaimer

The information provided in this article is for general informational purposes only and should not be construed as legal or tax advice. The content presented is not intended to be a substitute for professional legal, tax, or financial advice, nor should it be relied upon as such. Readers are encouraged to consult with their own attorney, CPA, and tax advisors to obtain specific guidance and advice tailored to their individual circumstances. No responsibility is assumed for any inaccuracies or errors in the information contained herein, and John Montague and Montague Law expressly disclaim any liability for any actions taken or not taken based on the information provided in this article.

Contact Info

Address: 5422 First Coast Highway
Suite #125
Amelia Island, FL 32034

Phone: 904-234-5653

More Articles