Florida is set to eliminate its long-standing sales tax on commercial leases, effective October 1, 2025. This historic move, signed into law by Governor Ron DeSantis, is expected to save businesses an estimated $2.5 billion annually, significantly boosting the state’s commercial real estate market and enhancing its appeal as a business-friendly environment.
Key Takeaways
- Florida’s Business Rent Tax (BRT) will be fully eliminated on October 1, 2025.
- The elimination includes both the state sales tax rate and discretionary sales surtaxes levied by counties.
- This tax relief is projected to save commercial tenants $2.5 billion annually.
- Florida was previously the only state to impose a statewide sales tax on commercial leases.
A Decades-Long Tax Comes to an End
Since 1969, Florida has imposed a sales tax on commercial leases, a unique burden among U.S. states. Initially set at 4%, the rate fluctuated with the general sales tax, reaching 6% at its peak. The tax applied to various commercial properties, including land, buildings, office and retail spaces, convention rooms, and even parking and docking spaces. Payments made by tenants on behalf of property owners, such as mortgage, ad valorem taxes, or insurance, were also subject to the tax.
Phased Reduction and Final Elimination
The journey to eliminate the Business Rent Tax has been a gradual process, initiated by the Florida Legislature in 2017. The tax rate has seen several reductions over the years:
- 2017: Reduced from 6% to 5.8%
- 2018: Reduced to 5.7%
- 2019: Reduced to 5.5%
- 2021: Reduced to 2% (effective June 2024)
- 2023: Reduced to 4.5% (ahead of the 2% cut for additional relief)
- 2025: Reduced to 0% (effective October 1, 2025)
This final cut, part of a broader $1.3 billion tax relief bill (House Bill 7031), marks a significant victory for business advocacy groups like the Florida Chamber of Commerce and Florida Realtors, who have long campaigned for its removal.
Economic Impact and Business Competitiveness
The elimination of the BRT is anticipated to have a profound positive impact on Florida’s economy. Businesses will retain more capital, which can be reinvested into expansion, hiring more employees, purchasing new equipment, improving benefits, and increasing salaries. This move is expected to make Florida significantly more competitive in attracting and retaining businesses.
Commercial real estate experts, such as Gary Tasman of Cushman & Wakefield Commercial Property Southwest Florida, believe this change will make Florida "much, much more competitive when recruiting new businesses and starting new businesses." Stan Stouder of CRE Consultants noted that the savings, though seemingly small at 2%, will be particularly helpful for sectors like the office market, which has languished since the pandemic.
Broader Tax Relief Measures
Beyond the BRT elimination, House Bill 7031 includes other significant tax relief measures:
- Permanent removal of sales tax on many disaster and hurricane preparedness supplies.
- Permanent removal of sales tax on several safety and health-related items.
- Creation of a permanent annual Back-to-School Sales Tax Holiday in August.
- Introduction of a new sales tax holiday for hunting and fishing supplies.
This comprehensive tax relief package underscores Florida’s commitment to fostering a business-friendly environment and supporting its residents.
Sources
- Florida Eliminates Burdensome Business Rent Tax, | Florida Realtors.
- Florida eliminates business rent tax on commercial leases, Gulfshore Business.
- Wealthy migration drives retail surge in West Palm Beach since pandemic, Fox Business.