Sales Tax on Commercial Rent in Florida

Florida is the only state to impose a statewide sales tax on commercial rent. A recent and substantial change in the tax law has altered the financial landscape for commercial leases, affecting the total rental costs and compliance obligations for many businesses.

The Commercial Rent Sales Tax Rate

A major change to Florida’s commercial rent tax structure took effect on June 1, 2024. On this date, the state-level sales tax rate on commercial leases was reduced from 4.5% to 2.0%. The timing of rent payments versus the occupancy period determines which rate applies; rent paid for occupancy on or after June 1, 2024, is subject to the new 2.0% rate, even if the payment was made before that date.

This 2.0% rate, however, is only one component of the total tax. Landlords must also collect the local discretionary sales surtax, which is determined by the county where the property is located. The total sales tax rate a tenant pays is the sum of the 2.0% state rate and the specific discretionary sales surtax for that county.

Determining the Taxable Rent Amount

The sales tax applies to the lease of “commercial real property,” a broad category that includes properties like office buildings, retail stores, warehouses, and self-storage units. The tax is triggered by the granting of a license or right to use such property, and a formal written lease is not required for the tax to be due.

The tax is calculated on the “total rent consideration,” which extends beyond the base rent amount listed in a lease agreement. The Florida Department of Revenue defines this to include any payment the tenant is required to make as a condition of their occupancy. This means that common pass-through charges are also subject to the sales tax.

Common examples of payments included in the taxable rent amount are Common Area Maintenance (CAM) charges, which cover the upkeep of shared spaces. Ad valorem property taxes and insurance premiums that are passed through to the tenant as part of the lease agreement are also considered part of the total rent.

Other operational costs required to be paid by the tenant to the landlord, such as charges for utilities or janitorial services, are also included in the taxable base.

Exemptions from the Commercial Rent Tax

Certain lease arrangements are specifically exempt from the commercial rent sales tax under Florida law. One of the primary exemptions is for leases to government entities, including federal, state, and local government agencies.

Another exemption applies to nonprofit organizations that have obtained a Florida Consumer’s Certificate of Exemption from the Department of Revenue. This includes qualifying religious, charitable, and educational institutions. To qualify, the nonprofit must present its exemption certificate to the landlord, and the property must be used for its nonprofit purposes.

The tax also does not apply to the lease of dwelling units, such as apartments or houses, that are used as a person’s residence. Furthermore, there is an exemption for the rental of property for six months or less when it is classified as transient accommodation, which is subject to its own distinct tax structure.

Complying with Collection and Remittance Rules

Landlords leasing commercial property have a legal obligation to collect and remit the sales tax. The first step in this process is registering with the Florida Department of Revenue as a sales tax dealer. This registration provides the business with the necessary credentials to file returns and remit the taxes collected from tenants.

Once registered, the landlord must add the correct sales tax amount as a separate line item on all tenant invoices for taxable rent. The landlord is responsible for collecting this tax at the time rent is paid. The collected taxes must be remitted to the Department of Revenue using the Sales and Use Tax Return, and the filing frequency is determined by the amount of sales tax collected.