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Florida FINALLY Reduces the Sales Tax on Commercial Rent


Effective January 1, 2018, Florida has (finally) reduced the sales tax rate on commercial rent. Because Florida is the only state in the country that has a sales tax on commercial rent, many people have felt that the tax put Florida at a disadvantage when trying to attract new businesses considering Florida. A long time goal of Governor Scott, the first step in eliminating the tax on commercial rent has finally become law. The step, however, is a small one with a reduction only going from 6% to 5.8% at the state level.

For those of you tax savvy enough to try to take advantage of the new, lower rate by delaying rent payments until after December 31, 2017, nice try. The law specifically provides that the tax rate applicable to a rent payment is based on the date the property is occupied, not when the payment is due or paid.

Section 212.031(1) has been amended as follows effective January 1, 2018:

(c) For the exercise of such privilege, a tax is levied at the rate of 5.8 in an amount equal to 6 percent of and on the total rent or license fee charged for such real property by the person charging or collecting the rental or license fee. The total rent or license fee charged for such real property shall include payments for the granting of a privilege to use or occupy real property for any purpose and shall include base rent, percentage rents, or similar charges. Such charges shall be included in the total rent or license fee subject to tax under this section whether or not they can be attributed to the ability of the lessor’s or licensor’s property as used or operated to attract customers. Payments for intrinsically valuable personal property such as franchises, trademarks, service marks, logos, or patents are not subject to tax under this section. In the case of a contractual arrangement that provides for both payments taxable as total rent or license fee and payments not subject to tax, the tax shall be based on a reasonable allocation of such payments and shall not apply to that portion which is for the nontaxable payments.

(d) When the rental or license fee of any such real property is paid by way of property, goods, wares, merchandise, services, or other thing of value, the tax shall be at the rate of 5.8 6 percent of the value of the property, goods, wares, merchandise, services, or other thing of value.

(e) The tax rate in effect at the time that the tenant or person, occupies, uses, or is entitled to occupy or use the real property is the tax rate applicable to the transaction taxable under this section, regardless of when a rent or license fee payment is due or paid. The applicable tax rate may not be avoided by delaying or accelerating rent or license fee payments.

For landlords, this change in law means you can share the good news with you tenants that their leases need to be amended to reflect the lower tax rate for occupancy after January 1, 2018. For leases that reflect pre-payments of rent made before January 1st but for occupancy after December 31st, there may be a 3.3% overpayment of sales tax rent reflected in the payment if this change in rate was not taken into account before the payment.

The Law Offices of the Law Offices of Moffa, Sutton, & Donnini, P.A. has a primary practice area representing business owners against the Florida Department of Revenue for sales and use tax controversy. The firm handles sales and use tax audits, protests, litigation, appellate cases, collection matters, revocation hearings, criminal investigations, and representation before the criminal courts for sales tax fraud cases. The firm also handles IRS controversy, probate/estate matters, and wholesale tobacco/alcohol tax matters. With offices in Fort Lauderdale, Tampa, and Tallahassee, the firm represents taxpayers and business owners throughout the state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help.

Need to learn more about Florida Sales Tax? Click HERE to see a list of up and coming speaking events!

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