Businesses operating out of commercial rental property in Florida (retail stores, offices, warehouses, industrial space, etc.) should be aware of upcoming changes that will impact their business operations. Effective December 1, 2023, the sales tax rate on commercial rental property will decrease from 5.5% to 4.5%. This article explains the new sales tax rate, how it applies to rent, and the compliance steps businesses need to take.
Beginning December 1, 2023, all rental payments for commercial real estate in Florida will be subject to a reduced sales tax rate of 4.5%. This rate applies regardless of whether any prepayments were made before the implementation date. For example, if a commercial tenant pays January 2024 rent in October 2023, it will be taxed at the new reduced 4.5% rate. However, November 2023 rent will be taxed at the previous rate of 5.5% even if it is paid in December 2023. Landlords and property management companies should promptly update their records to reflect this sales tax rate reduction on invoices related to occupancy periods beginning on or after December 1, 2023.
Commercial property rentals in Florida are subject to a state sales tax rate of 5.5% plus applicable discretionary sales taxes. Taxable rental properties include commercial office or retail space, warehouses, convention and meeting rooms, and self-storage units. Discretionary sales tax rates vary by county. Payments for services required by the tenant, such as maintenance of common areas, customer parking, and cleaning services, are also subject to sales tax and surcharges. In addition, payments made by the tenant on behalf of the landlord, such as mortgage payments and insurance, are included in the total rent charged and are subject to sales tax and surcharges.
Anyone who rents, leases, or licenses commercial property must register with the Florida Department of Taxation. Agents who accept rent payments on behalf of property owners or renters must also register. A separate registration is required for each place of business.
It is important for businesses to comply with Florida sales tax requirements for commercial rental property. Failure to properly register, collect, report and pay sales taxes and discretionary sales surcharges can result in criminal and civil penalties. Businesses must prominently display their certificate of registration at the commercial property address and keep accurate records of rental and related taxes.
Businesses operating out of commercial rental properties in Florida should be aware that the sales tax rate will decrease from 5.5% to 4.5% effective December 1, 2023. This change applies to all rent payments, regardless of any amounts prepaid before the implementation date. Landlords and property management companies should update their records accordingly. Additionally, businesses should understand the taxable nature of commercial property rentals, available exemptions, and the registration process with the Florida Department of Taxation to ensure compliance with sales tax obligations.