Florida's State Sales Tax on Real Property Commercial Leases to Decrease Effective June 1, 2024

The Florida Department of Revenue released Tax Information Publication (TIP) 24A01-02 on April 8, 2024, indicating that the state sales tax rate on the "total rent charged for renting, leasing, or granting a license to use real property ... is reduced from 4.5 percent to 2.0 percent" (hereinafter "commercial leases") as of June 1, 2024.

Florida is one of the few states that assesses sales tax on commercial leases of real property. The current Florida sales tax rate on such leases is 4.5 percent as of Dec. 1, 2023, due to House Bill (HB) 7063, which reduced the Florida sales tax rates on such leases from 5.5 percent to 4.5 percent. The TIP indicates that the Florida sales tax rate on commercial leases will decrease from 4.5 percent to 2 percent as of June 1, 2024. The reduction will not apply to any local taxes imposed at the county level, which vary between 0.5 percent and 1.5 percent. Previous legislation provided for a reduction of the commercial sales tax rate to 2 percent once the Florida Unemployment Compensation Trust fund has been replenished to pre-COVID-19 levels.

Rental charges paid on or after June 1, 2024, for rental periods prior to that date, are subject to the current 4.5 percent sales tax, plus any discretionary local tax. Rental charges paid prior to June 1, 2024, for rental periods on or after June 1, 2024, are subject to the lower 2 percent sales tax, plus any discretionary local tax. 

It should be noted, however, that the Florida sales tax rate on short-term residential accommodations with a duration of six months or less (transient rentals) is not impacted by this change. The Florida sales tax rate on such transient rentals was not previously reduced as a result of HB 7063.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.