POOF: FLORIDA'S SALES TAX ON COMMERCIAL LEASES IS NOW HISTORY

In a bold move to boost Florida’s business climate, Governor Ron DeSantis signed House Bill 7031 on June 30, 2025, abolishing the state’s sales tax on commercial property leases, often called the Business Rent Tax (BRT). Effective October 1, 2025, this repeal ends a tax that has weighed on Florida businesses for over five decades. This post dives into the tax’s history, the repeal’s details, its impact on tenants and landlords, and actionable steps for navigating the change.

The Business Rent Tax: A Historical Overview

Since 1969, Florida has been the only U.S. state to impose a statewide sales tax on commercial real estate leases, codified under section 212.031 of the Florida Statutes. This tax applied to rents for office spaces, retail shops, warehouses, self-storage units, and other real property. It covered not just base rent but also additional charges like common area maintenance fees, property taxes, or insurance passed through to tenants, significantly increasing costs for businesses.

The tax’s roots go back to 1949, when Florida began taxing certain property rentals. By the late 1960s, it expanded to cover commercial spaces.. The BRT generated roughly $900 million annually for the state, but it made Florida less competitive, as no other state had a comparable tax. Over time, pressure from businesses led to gradual reductions. By June 1, 2024, the state rate had dropped to 2%, with county-level surtaxes (0.5% to 2%) bringing the total to 2.5%–4% in most areas. Despite these cuts, the tax remained a hurdle for businesses, especially those operating across state lines.

Repeal Details: Scope, Timing, and Legislation

House Bill 7031, enacted on June 30, 2025, eliminates section 212.031, Florida Statutes, removing the state’s 2% sales tax and local surtaxes on commercial leases starting October 1, 2025. This repeal erases the combined 2.5%–3.5% tax rate applied in most counties. For instance, a business paying $15,000 monthly in rent at a 3% tax rate will save $5,400 per year, unlocking funds for expansion or other priorities.

The tax exemption applies to rent for occupancy periods beginning on or after October 1, 2025. Prepayments for October or later made before this date are tax-free, but payments for earlier periods (e.g., overdue September rent paid in October) remain taxable. The repeal does not affect taxes on short-term residential rentals (six months or less), boat docks, parking lots, or aircraft hangars, which fall under other statutes.

Included in Florida’s $115.1 billion fiscal year 2026 budget, the repeal is expected to save businesses $2.5 billion annually, making it one of the state’s most significant tax cuts since the 2006 intangibles tax elimination. It reflects Florida’s push to reduce business costs while maintaining its low-tax reputation.

Impacts and Insights

• Boost for Businesses: Industry groups like the National Federation of Independent Businesses and real estate advocates estimate the repeal could generate $20 billion in economic activity and create tens of thousands of jobs over the next few years. Lower lease costs make Florida more attractive for startups, retailers, and corporations. Compare this to the imposition or threat of imposition of new or additional business taxes in other states.
• Level Playing Field: By removing a tax unique to Florida, the state aligns with competitors, simplifying lease negotiations for businesses operating in multiple states and reducing compliance complexities.
• Streamlined Operations: Landlords benefit from simplified billing, as they no longer need to collect or remit sales tax on leases after September 30, 2025, cutting administrative costs and risks of errors.

Challenges to address include:

• Transition Complexity: Businesses must adjust accounting systems to stop charging tax for post-September 30 occupancy. Past compliance remains subject to audits by the Florida Department of Revenue, requiring robust recordkeeping.
• Budget Considerations: The state’s loss of $900 million in annual revenue has sparked discussions about future fiscal strategies, though tourism-related taxes help offset the impact.

Practical Steps for Tenants, Landlords, and Advisors

To capitalize on the repeal and ensure compliance, stakeholders should act strategically:

• Tenants:
  • Check lease terms to confirm tax charges cease for October 2025 occupancy. Inform subtenants to avoid overbilling.
  • Keep records for pre-repeal periods, as audits may target historical tax filings for up to three years.
• Landlords and Property Managers:
  • Revise billing systems, lease software, and payment processes by October 1, 2025, to eliminate sales tax charges. A simple tenant notice can clarify the change.
  • Close sales tax accounts with the Florida Department of Revenue if no other taxable activities apply.
  • Add clauses in new leases to address potential future tax reinstatement, protecting against policy shifts.
• Tax Professionals:
  • Guide clients through the transition, ensuring accurate reporting for pre-repeal periods and clarity on occupancy-based tax rules.
  • Stay updated on Florida Department of Revenue guidance, expected before October 2025, for compliance details.
  • Support clients in audits for prior BRT payments, drawing on expertise from firms specializing in Florida tax disputes.

Moving Forward

The elimination of Florida’s Business Rent Tax is a pivotal step toward a more competitive business environment, easing financial and administrative burdens for tenants and landlords. By acting now to update systems, review contracts, and prepare for potential audits, businesses can fully harness this tax relief. The repeal strengthens Florida’s position as a top destination for commerce, promising long-term economic benefits.

Sources: Florida House Bill 7031, signed June 30, 2025; Greenberg Traurig, “Florida Legislature Repeals Sales Tax on Commercial Leases,” June 22, 2025; National Law Review, “Florida Ends Business Rent Tax Effective in October 2025,” June 16, 2025; RSM US, “Florida budget eliminates business rent tax,” July 1, 2025; Moffa Tax Law, “Florida to End Sales Tax on Commercial Rent,” June 17, 2025; Florida Realtors, “Florida Eliminates Burdensome Business Rent Tax,” June 30, 2025.