Commercial Rent Tax Will Be Further Reduced As of January 1, 2020.

On May 15, 2019, Florida Governor Ron DeSantis signed HB 7123 into law, which will prospectively reduce the statewide sales tax on commercial real property rents from 5.7% to 5.5%, effective as of January 1, 2020. This represents a cumulative 1/2% reduction from the previously and otherwise applicable statewide sales tax rate of six percent (6%) . You are reminded that, as with the prior rate reductions, this reduction does not apply to sales tax on parking fees, sales tax on aircraft tie-down fees, or sales tax on vessel docking fees.

Link to HB 7123 (see page four, revising Section 212.031, Florida Statutes):

http://laws.flrules.org/2019/42

Please note that the local option sales tax has not been reduced. Depending on what county the property is located in, the applicable sales tax rate will continue to vary.

Link to Florida Discretionary Sales Surtax Rates, by County:

http://floridarevenue.com/Documents/DR-15DSS%20R.%2011-18%20FINAL%2011-19-2018.pdf

Sales tax applies to both base rent and additional rent. If a tenant pays property taxes and other expenses directly, those will generally be treated as additional rents.

While there may be tax planning opportunities with regard to scheduling of rent concessions, Boston PLLC also cautions parties to leases to be careful not to overreach and artificially structure deals to disassociate payment dates from rental accruals in order take advantage of the lower rates.

Legal matters are fact specific, and governing law may have changed since the date of this post. The information in this post is not legal advice, should not be relied upon, and is not a substitute for hiring an experienced attorney to provide legal advice.