Florida Commercial Real Estate Gets a Boost: State Eliminates Sales Tax on Commercial Leases Starting October 2025
In a landmark decision that positively impacts Florida’s commercial real estate market, Governor Ron DeSantis has signed Florida House Bill 7031 (HB 7031), which will eliminate the State Business Rent Tax and County Surtax on commercial leases effective October 1, 2025. This legislative change is set to reduce occupancy expenses significantly for commercial tenants across the state, enhancing the affordability of office, industrial, and retail spaces in Florida.
What Is the State Business Rent Tax and County Surtax?
Since 1969, Florida landlords have been required to pay sales tax on commercial lease payments. This tax applies not only to base rent but also to additional charges often passed on to tenants, such as:
- Common area maintenance (CAM) fees
- Utilities
- Insurance
- Real estate taxes
- Property management fees
Typically, landlords pass these taxes on to tenants, increasing overall occupancy costs. While the state sales tax rate on commercial leases has decreased over the years—from 6% in 2017 to the current 2%—Florida remained the only U.S. state to impose such a tax until the repeal announced in HB 7031.
On top of the state tax, a discretionary County Surtax is charged by counties, typically ranging from 0.5% to 1.5%, depending on location.
Key Highlights of Florida HB 7031
- Full Repeal Effective October 1, 2025: The bill repeals Section 212.031 of the Florida Statutes, ending the sales tax on commercial lease rental payments statewide.
- County Surtax Eliminated: Alongside the state tax, the county-level surtax on commercial leases is also removed.
- Exemptions Remain: Taxes on rental income from motor vehicle, boat, or aircraft storage and short-term residential leases (less than six months) are not affected.
Implications for Commercial Tenants
Commercial tenants should prepare for the impact of this shift to optimize financial planning:
- Review 2025 annual reconciliations thoroughly to ensure no sales tax is applied to rent charges incurred on or after October 1, 2025, even if paid earlier.
- Coordinate with landlords regarding HB 7031 to verify reconciliations reflect the tax reduction properly.
- Update any automatic payment systems to exclude sales tax starting in October 2025.
“This repeal marks a major win for Florida’s business community, helping ease operational costs and fostering economic growth,” says industry observers.
Considerations for Landlords
Landlords also face important administrative adjustments due to HB 7031:
- Cease collecting sales tax on commercial rent payments for periods on or after October 1, 2025.
- Continue collecting taxes on rent through September 30, 2025.
- Update accounting, invoicing, and billing systems to comply with the new tax regulations.
- Notify tenants proactively about the repeal and how it affects their monthly payments.
- Prorate sales tax on annual reconciliations for rent charges applicable only to the first three quarters of 2025.
- Assess if any leases (such as for motor vehicle or aircraft storage) remain taxable and adjust billing practices accordingly.
What This Means for Florida’s Commercial Real Estate Market
By eliminating the sales tax burden on commercial real estate leases, Florida becomes more attractive to businesses, promoting expansion and new developments. Reduced occupancy costs particularly benefit industries dependent on large-scale office, retail, or industrial spaces by improving profitability.
This legislative change places Florida among the most business-friendly states nationwide in terms of commercial lease taxation.
Summary: Preparing for the Tax Repeal
| Action Item | For Tenants | For Landlords |
|---|---|---|
| Lease Agreement Review | Verify tax application post-Oct 2025 | Evaluate leases to identify taxable residuals |
| Payment Systems Update | Remove sales tax from automated payments | Stop collecting sales tax starting Oct 2025 |
| 2025 Reconciliation | Confirm correct tax proration | Prorate tax only until Sept 30, 2025 |
| Communication | Discuss changes with landlords | Inform tenants about tax repeal |
Additional Resources
- Learn more about Florida Business Taxes
- Understanding the Impact of Sales Tax on Commercial Leases.
- For professional advice, consult commercial real estate legal experts or tax advisors specializing in Florida real estate law.
Eliminating the State Business Rent Tax and County Surtax on commercial leases marks a transformative moment for Florida’s economy, contributing to a more vibrant and competitive commercial real estate landscape starting in late 2025. Businesses and property owners are encouraged to plan now to take full advantage of this new era in Florida leasing.