The Sunshine State has made strides to be more pro-businesses, including completely eliminating sales tax on commercial real estate rentals. The move is expected to reduce state revenue by $1.146 billion annually but boost the coffers of small businesses and potentially lead to a building boom.
The only state in the U.S. to uniformly apply a commercial rent tax was Florida, where the tax was 5 percent just a few years ago. State legislators worked to reduce the tax from 4 percent to 2 percent in June 2024, then to eliminate it completely as of October 1, 2025.
The tax reduction for commercial real estate (excluding parking, aircraft space, and equipment rental) is part of a larger package of legislation that includes:
- An annual Back-to-School sales tax holiday,
- Elimination of sales taxes on aviation fuel,
- Elimination of entrance fees at state parks, and
- Reduction or elimination of taxes on some precious metals purchases.
The Florida Realtors Association calculated that nearly $20 billion will be saved by businesses in the first five years without the tax, resulting in 58,000 new construction jobs.
How to Take Advantage of the Tax Changes in Florida
Businesses renting commercial space will realize an immediate gain, but steps must be taken to change practices so the tax money is redistributed and put to its best use. Check your lease to make sure the landlord is the one responsible for collecting and filing the sales tax. If the lease does not specify, it could be your task.
Here are some steps to changing your procedures so they reflect the new law:
- Update or rewrite leases and other documents pertaining to the commercial space, specifically mentioning the change in laws and any related changes in responsibility for fees, such as taxes.
- Confirm that any space reserved and rented for conventions or special events held after October 1 is free of rental tax requirements or payments.
- If purchasing commercial space, avoid successor liability by getting a certificate of compliance from the state that clears your business of responsibility for taxes not paid by the previous owner.
- If your company prepaid the tax, contact the landlord or the state department of revenue for a refund as necessary.
- If you’ve been paying the tax directly to the state (rather than paying it with your rent), make adjustments to your accounting software to stop payments as of October 1.
- Determine how best to use the former tax money in ways that propel your business forward.
Landlords also have to take steps to reflect the new legislation and changes in their accounting procedures, such as:
- Rewriting or revising leases to reflect the elimination of the tax.
- Reducing quarterly taxes that are sent to the state.
- Helping prepaid tenants file for refunds.
How Lower Taxes Benefit Businesses
If your business has been paying 2 percent sales taxes on $40 per square foot Class A office space, you may pocket significant savings in the coming year. Likewise, if you’re a franchisee with multiple leased locations, your budget will have some space in it in the future.
What will you do with the savings? If you’ve been mulling over an expansion, relocation, or other major overhaul of your business plan, it’s a good time to discuss the future with an experienced business or real estate attorney. It helps to see things with a fresh set of eyes, someone who knows the business climate, regulations, and future outlook for Florida. The legal team at WKFK Law can be your ally for these and other important decisions, such as:
- Revamping hiring practices,
- Checking compliance of HR procedures,
- Identifying pitfalls experienced during expansion, and
- Changing your business identity (S-Corp, partnership, LLC) to better reflect the constitution of your business and potentially take advantage of more tax savings.
