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Florida Again Reduces State Sales Tax on Commercial Real Estate Leases in 2020 by Karen A. Lake, CPA, CFST

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Posted on November 12, 2019 by Karen Lake

The Florida legislature recently voted to again reduce the sales tax that commercial real estate owners charge and receive from tenants to 5.5 percent in 2020 from its current rate of 5.7 percent. Real property rentals subject to the reduced rate include commercial office space, retail, warehouses and certain self-storage units, excluding storage for motor vehicles, boats and aircraft.

It is critical that commercial real estate owners in the state recognize the applicable sales tax rate is based on the timing of when a tenant occupies or has a right to occupy the property and not the month or year in which the tenant pays the rent. Therefore, the 5.5 percent tax rate will apply only to rental charges a tenant pays for occupancy on or after Jan. 1, 2020. Should a tenant pay rent after that date for a rental period prior to the New Year, the applicable sales tax rate would be 5.7 percent plus any applicable discretionary sales surtax. Similarly, rent a tenant pays in December 2019 for occupancy in 2020 would be subject to the new, reduced rate of 5.5 percent.

Real property leases are taxed on base rent as well as other payments tenants must make as a condition of their occupancy. This includes common-area maintenance fees, property taxes and utilities that a lease agreement specifies are the responsibility of the tenants. In addition, it is the responsibility of the property owner to collect from tenants any county-imposed local-option sales surtax on the total rent charged.

Property owners who send invoices to tenants for rental periods after Jan 1, 2020, must account for both the 0.2 percent reduction in state tax rates as well as any changes in local option tax rates for 2020.

About the Author: Karen A. Lake, CPA, CFST. is a state and local tax (SALT) specialist and an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she helps individuals and businesses navigate complex federal, state and local tax laws, and credits and incentives. She can be reached at the firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.