Florida is set to eliminate its long-standing business rent tax (BRT) on commercial leases starting October 1, 2025. This move, signed into law by Governor Ron DeSantis, marks a significant shift in the state’s tax landscape, aiming to boost economic competitiveness and provide substantial relief to businesses across the state. Florida was notably the only state to impose such a tax on commercial rentals.
A Historic Tax Relief Bill
Governor DeSantis signed House Bill 7031, a $1.3 billion tax relief package that includes the complete repeal of the BRT. This elimination is projected to save Florida businesses approximately $2.5 billion annually. The tax had been in place since 1969, with rates gradually decreasing from 6% to the current 2% since 2017. The repeal includes both the state sales tax and any discretionary sales surtaxes levied by counties on commercial leases.
Key Takeaways
- Economic Boost: The elimination of the BRT is expected to free up capital for businesses to invest in expansion, hiring, equipment, and employee benefits.
- Competitive Advantage: Florida aims to enhance its business-friendly reputation and attract more companies by removing a tax unique among states.
- Tenant Savings: Businesses leasing commercial spaces will see a direct reduction in their operating costs.
- Broader Tax Relief: The bill also makes permanent the sales tax holiday for back-to-school shopping and includes exemptions for disaster preparedness items.
Impact on Businesses and Leases
The removal of the BRT is anticipated to have a significant positive impact on businesses of all sizes. Commercial tenants will no longer have to pay the 2% sales tax on their rent, effectively lowering their monthly expenses. This is particularly beneficial for sectors like the office market, which has faced challenges in recent years. Real estate professionals note that this change makes Florida’s commercial spaces more competitive when attracting new businesses and supporting existing ones.
The Road to Repeal
The journey to eliminate the BRT has been a gradual process. Lawmakers began reducing the tax rate in 2017, with incremental cuts leading to the current 2% rate. The final repeal represents a culmination of efforts by various business advocacy groups, including the Florida Chamber of Commerce and Florida Realtors, who have long argued that the tax hindered economic growth and competitiveness.
Broader Tax Relief Measures
Beyond the BRT repeal, HB 7031 also enacts other significant tax relief measures. These include making the back-to-school sales tax holiday a permanent annual event in August. Additionally, the bill provides sales tax exemptions for various hurricane preparedness items, such as batteries, tarps, and gas cans, aiming to support residents in preparing for severe weather events. A new sales tax holiday for hunting and fishing supplies is also introduced.
Financial Implications for the State
While the elimination of the BRT offers substantial benefits to businesses, state estimates indicate a significant impact on government revenue. The Office of Economic and Demographic Research projects that the ending of the tax could cost the state’s general fund and local governments over $1.5 billion annually by 2030. Despite these revenue shifts, the move is widely seen as a strategic investment in Florida’s long-term economic prosperity.
Sources
- Florida Eliminates Burdensome Business Rent Tax, | Florida Realtors.
- Florida eliminates business rent tax on commercial leases, Gulfshore Business.
- Scott Shalley: Business rent tax — Florida’s unwanted distinction, Florida Politics.
- Commercial rent phaseout could cost state budget more than $1B per year | Florida, The Center Square.
- Budget heads agree to kill business rent tax, make back-to-school tax holiday permanent, Florida Politics.