Florida is set to eliminate the state sales tax on commercial real estate leases, a significant move that will remove a substantial cost for businesses operating within the state. This legislative change, enacted through House Bill 7031 (HB 7031), will take effect on October 1, 2025, impacting both state and local taxes on these transactions.
Key Takeaways
- Florida’s sales tax on commercial property leases will be repealed starting October 1, 2025.
- This repeal eliminates both the state sales tax (2%) and local surtaxes (1%-1.5%), reducing the total tax burden by 3% to 3.5%.
- The tax is based on the period of occupancy, not the payment date.
- Certain other property-related rentals, such as short-term residential rentals and parking spaces, will remain taxable.
Effective Date and Tax Application
The new law, HB 7031, officially repeals the sales tax on commercial leases beginning October 1, 2025. It is crucial for businesses to understand that the tax liability is determined by the occupancy period. For example, rent payments made in advance for periods falling on or after October 1, 2025, will not be subject to sales tax, even if paid before the effective date.
What Remains Taxable
While the legislation targets commercial real estate leases specifically under Section 212.031 of the Florida Statutes, it does not affect other rental transactions. Consequently, the following will continue to be subject to sales tax:
- Short-term residential rentals (unless the lease term exceeds six months).
- Rentals of parking spaces.
- Leases for boat slips and docking facilities.
- Aircraft hangar leases.
These specific rental types fall under different tax regulations and will not benefit from the upcoming repeal.
Pre-Effective Date Transactions
It is important for businesses to note that any lease payments related to occupancy periods prior to October 1, 2025, will still be subject to sales tax, regardless of when the payment is actually made. This includes situations where tenants might pay overdue rent for August or September in October; those payments will still incur the existing sales tax. Similarly, any retroactive rent adjustments or charges for periods before the repeal date will also be taxable.
Successor Liability Considerations
Even after the repeal takes effect, parties involved in commercial real estate transactions, particularly sales, should exercise due diligence. The Florida Department of Revenue has the authority to audit past tax returns for up to three years. Buyers are advised to obtain a certificate of compliance from the seller, confirming that all prior tax obligations have been met to avoid potential successor liability.