Reduction of Florida Sales Tax on Commercial Real Property Leases to Commence January 2018

With the turn of the new year, Florida’s sales tax rate imposed on the total rent charged for renting, leasing, letting, or granting a license to use commercial real property will be reduced. The general state level tax will drop from 6 percent to 5.8 percent for rental payments received on or after January 1, 2018, and for occupancy periods beginning on or after January 1, 2018. Many Florida counties also impose a local option surtax, varying between 0.5 percent and one percent. The local tax rates will not be reduced for 2018.

The tax is imposed not only on the base rent, but also on any additional rent, or any consideration required to be paid by the tenant as a condition of occupancy. As a result, the tax is also due on the tenant’s share of common area maintenance charges, real property taxes, and most other charges required under the lease.

The reduced tax rate is applicable to the lease period to which the rent relates. For example, if a landlord receives rent payments in 2018 for December 2017 occupancy, the 6 percent state level rate would still be applicable. However, if a tenant pays rent for January 2018 in December 2017, the new 5.8 percent rate would apply.

Unless a rental is under a bona fide written lease for 6 months or longer, the lease of residential property is subject to the sales tax on transient rentals. The tax rate on transient rentals will remain unchanged at the 6 percent rate (plus local option surtax) for 2018. The local tourist development taxes that are also applicable to transient rentals will not receive a rate reduction either (GreenbergTraurig Alert, Marvin A. Kirsner & Tax Information Publication, No. 17A01-14, Florida Department of Revenue, November 13, 2017).

Posted on January 2, 2018