Florida Eliminates Sales Tax on Commercial Rents

Currently, Florida is the only state in the United States to charge a statewide sales tax on commercial rents. This unique tax was enacted by Florida’s Legislature in 1969 in an effort to increase the state’s revenue. Despite receiving heavy criticism that it could deter businesses from locating to or remaining in Florida, the sales tax has remained in effect to date. Pursuant to Section 212.031, Fla. Stat., every person exercises a taxable privilege when engaging in the business of renting, leasing, letting, or granting a license for the use of any real property. In recent years, the Florida Legislature has signaled an interest in the incremental elimination of this tax. On June 1, 2024, at the beginning of the 2024 fiscal year, Florida’s state sales tax on commercial rents was reduced from 4.5% to 2%; however, the reduction in state sales tax did not affect local discretionary sales surtax imposed by various Florida counties.

On June 30, 2025, House Bill 7031 (HB 7031) was signed into law. HB 7031 focuses on, among other tax-related issues, providing significant tax relief for businesses by repealing the current state sales tax on commercial rents. Effective Oct. 1, 2025, Florida’s state sales tax on commercial rents will be completely eliminated. HB 7031 also includes the elimination of local discretionary sales surtax imposed by Florida counties, thereby eliminating all taxes owed in connection with commercial rents at both the state and local levels. It is important to note that sales tax on various short-term residential rentals under Section 212.03, Fla. Stat., and on tangible personal property will still be subject to sales tax. Rents for boat slips, self-storage units, and parking facilities shall also remain taxable. Finally, all sales taxes on commercial rents accruing prior to Oct. 1 must still be paid.

Despite the large amount of revenue generated by the sales tax on commercial rents—which was almost $2.3 billion in 2024, even after the mid-calendar year reduction of the tax rate—the tax elimination was motivated by the Florida Legislature’s efforts to boost the state’s business economy and make it more competitive with other states, as the tax has acted as a deterrent to businesses since its enactment in 1969. The elimination of Florida’s state sales tax on commercial rents aligns Florida with the rest of the country’s states that do not charge a statewide sales tax on commercial rents and incentivizes businesses to move to Florida, as they will no longer face this unique sales tax burden. The elimination of the tax can also be expected to benefit not only tenants but also consumers, as those costs would presumably no longer be passed through by businesses.

From a leasing perspective, and despite this favorable change in law, with tenants no longer paying and landlords no longer collecting and remitting these taxes to the government, landlords will likely hesitate to revise their building standard lease forms. Many commercial lease forms already only refer generally to a tenant’s obligation to pay any and all applicable sales and similar taxes (other than income or other similar taxes) levied on rent by any governing authorities without any specific reference to Section 212.031, Fla. Stat. Revising lease forms to omit this language could leave landlords financially exposed if sales tax on rent is reimposed during a tenant’s multiyear lease term. Conversely, tenants may push to remove this boilerplate language for the exact same reasoning: a reversal would result in an unanticipated tax burden for a tenant who may already be many years into the term of their lease.

Furthermore, purchasers of commercial property in Florida need to be mindful of potential successor liability for sales tax obligations of sellers, since the Florida Department of Revenue has three years from the time a sales tax return is filed to audit for potential taxes owed. This can be avoided if purchasers require and sellers obtain a certificate of compliance from the Florida Department of Revenue. Finally, landlords should ensure they do not charge tenants sales tax on commercial rents after Oct. 1, 2025, by updating their billing systems or administrative teams, and tenants should verify that they are no longer paying the same.

Carlee G. Mattison, a member of Jones Foster’s real estate team, focuses her practice in the areas of acquisitions, dispositions and commercial leasing. John J. Campo is a member of the firm’s real estate practice group and represents clients in transactions concerning acquisitions and dispositions as well as commercial leasing projects. Shareholder L. Ben Alexander Jr. is a Florida Bar Board Certified real estate attorney who represents clients in high-end residential and commercial real estate transactions and facilitates partnerships between equity funds and developers.

Reprinted with permission from the July 30, 2025, edition of the Daily Business Review © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

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