Effective January 1, 2018, the State of Florida will lower the sales tax rate for commercial rent from 6 percent to 5.8 percent. There was some misconception, in the beginning, that the rates would only apply to new leases entered into after January 1, 2018, but this is incorrect. In fact, the rate applies to all existing and new leases as of January 1, 2018. The Florida Department of Revenue clarifies this information in one of their recent Tax Information Publications.
The reduction is the first step in Governor Rick Scott’s efforts to reduce (and potentially eliminate) the commercial rent sales tax. The plan was unveiled in 2014 as part of the governor’s “It’s Your Money Tax Cut Budget.” Since Florida is the only state in the nation that levies a commercial rent sales tax, the tax could be considered a hindrance in attracting new business.
The lower tax rate applies to rental payments for the dates on which property is occupied (as opposed to when the payment is due or paid). Real property rentals subject to such tax include commercial office or retail space, warehouses and self-storage units.
Remember that this reduction only applies to the state’s commercial rent sales tax and not to surtaxes levied by counties. It also does not affect tourist development taxes on transient rentals of less than six months (for example, rent on vacation homes, seasonal rentals, short-term rentals through services like Airbnb and HomeAway).
Contact your CPA if you have questions about whether the rental fees you collect are subject to the reduced tax rate.
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