The commercial rent sales tax in Florida has been reduced from 6 percent to 5.8 percent starting on Jan. 1, 2018. This is intriguing news for clients of Front Street, and especially for tenants in the commercial properties or multi-family communities we manage. On the surface, a 0.2 percent reduction might seem modest, but those of us in Florida property management see the long-term implications of this reduction.
Why Sales Tax Reduction Matters
Florida has always been a curious case when it comes to its sales tax on commercial rents, because ours is the only state in the country that has such a tax. For years, some of the people who work in business and property management in Florida have been arguing that a 6 percent commercial rent sales tax may be more trouble than it is worth. While the sales tax increases the state’s budget, that added cost could also discourage new businesses from coming to Florida, especially since no other state has such a tax. Well, one person who agreed with that logic is the current Florida governor. In an effort to attract new business to the state, as well as to reward businesses that are already here, Governor Scott is pushing for the elimination of the commercial rent sales tax. Of course, down 0.2 percent to 5.8 percent still leaves quite a bit to get to zero, but commercial tenants will still observe savings on their 2018 rent payments. And perhaps more consequentially, the tax reduction could be a harbinger that Florida will join the rest of the country and shed its sales tax for commercial renters.
What the Change Means for Commercial Renters
The new tax rate will not apply to rent payments in 2017, because only tenants who are occupying a commercial building on or after January 1, 2018 are eligible. For example, by waiting for the new year to pay December’s rent, a commercial renter would not receive the benefit of the lower 5.8 percent sales tax and would instead have to wait until January’s rent was due. For their part, property management companies will have to adjust the language of their leases to reflect the lower sales tax. As for tenants of commercial properties, the only responsibility is to keep paying rent on time and enjoy the 0.2% savings on sales taxes.
The County Surtax Remains
Although the state sales tax for commercial renters has gone down, the county surtax is unaffected by this change. While the lower state commercial rent sales tax will appear differently, tenants will still see the same surtax rate mandated by their local county. But even though the county surtax has not changed, the reduction in the state-level tax has given Florida property management companies a reason to suspect further changes may be on the horizon for businesses that rent commercial property in the state.
Florida Property Management
Keeping tenants informed about issues affecting commercial real estate in Florida is just one of many ways Front Street serves our clients. As a full service firm with a boutique feel, we offer personalized solutions in service areas such as brokerage, property management, and insurance. Across north and central Florida and beyond, our team of real estate professionals is committed to serving the diverse needs of commercial clients and tenants. Contact us to learn more about Front Street.