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Commercial Rent Tax in Florida: Part 1


When a person thinks about sales tax, typically they will associate it with the purchase of an item of tangible personal property. Most Floridians will encounter Florida’s sales and use tax that way on a daily basis, after all. However, the scope of transactions on which Florida will impose its sales and use tax is much broader than one might expect. In fact, there are a variety of transactions subject to sales tax which include no tangible personal property at all. For example, Florida imposes its sales and use tax on certain services in the state. Ultimately, though, while Florida may impose its sales and use tax on a variety of transactions within the state (and even, in some cases, outside of it), it is Florida’s sales tax on commercial rent which seems to catch taxpayers off guard time and time again, particularly when those taxpayers are businesses from other states which have only recently begun operations within Florida.

Florida is the only state in the country which imposes its sales tax on commercial rental payments, though some other local governments are authorized to do so across the country. This three-part article will discuss what taxable commercial rent is, how DOR taxes commercial rent, who is responsible for tax on commercial rent, and why DOR so heavily audits this issue within the state. At the end, you should have a general, basic understanding of Florida’s sales tax on commercial rent.

What is rent?

It probably seems unnecessary to ask this question. Most people have made rent payments at some point in their life, and so understand the concept clearly. A lease is signed to pay X amount each month for Y period in order to occupy a place. However, in the tax world as well as in the legal field, there is the colloquial use, or plain meaning, of a word, the word as defined by statute, and then, sadly, how that definition if enforced by those in power.

Many taxpayers operating in the state of Florida are not aware that their rental payments are subject to tax. However, even in cases when these taxpayers do know their commercial rent is taxable, their failure to understand the definition of taxable rent by statute as well as the Florida Department of Revenue’s “definition” of taxable rent has resulted in unfair assessments.

Let’s start with an example. A bakery owner has been operating out of a shared kitchen for two years and finally has saved enough to open their own shop. Rent is normally $5,000 a month, but as the business is just getting started, and all parties are unsure if the bakery will make enough money to cover the rent each month, the landlord has agreed to an alternate arrangement. The first six months rent will be $4,500 plus 5% of sales made by the bakery, then the next six months of the lease the landlord will receive $5,000 only. The bakery owner is thrilled for the reduced rent and happy to share a percent of sales with the owner in exchange.

In describing this scenario, we might say, “In exchange for reduced rent, bakery owner was required to share 5% of sales for the first six months of the lease.” However, from a tax perspective, it cannot be thought of in those terms. Instead, the 5% of sales is additional rent. Therefore, total rent for one year is $57,000 plus 5% of sales in the first six months. It doesn’t stop there, unfortunately.

Let’s say that the lease also requires the tenant to pay $50 per month for the sign at the front of the parking lot where the bakery owner’s business name will be added to a list of other businesses. Even if the bakery owner does not want or need their name there, they are still required by lease to pay the $50. In such a case, the $50 per month is a mandatory payment in order to rent to space, and so the Florida Department of Revenue will likely consider that to be “additional rent” as well.

The list of what “additional rent” could be can go on and on. According to the Florida Department of Revenue, they have absolute authority to decide what your rent is even when there is no statute or rule in the Florida Administrative Code providing them with that authority.

Some of the confusion has originated in the statute. Section 212.031(1)(a), Florida Statutes, provides that “It is declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of renting, leasing, letting, or granting a license for the use of any real property…”

We will discuss “engaging in the business” in another section regarding who is responsible for the tax. However, for purposes of the definition of “rent,” it is important to note here that the words used are “renting, leasing, letting, or granting a license for use of any real property.” While a rental or lease agreement may clearly identify to all parties involved that a taxable event is occurring, the license for use of real property may be an informal arrangement which a taxpayer would not even consider to be a rental arrangement.

For example, a carnival operates across various cities in Florida. Artists from a local studio ask the organizers if they can set up a tent and sell facepainting with all proceeds going to charity. The carnival organizers think it is a great idea and agree right away. The cost for each vendor to operate at each carnival location is $1,000, which covers various expenses of hosting the event, including security, cleaning, etc. The event organizers do not want to upset other vendors by waiving the fee for one, so in lieu of waving the fee, the organizers promise to purchase $1,000 worth of facepainting at each carnival, and the artists will subtract $1,000 from their sales at each carnival to cover the mandatory fee before donating the remainder to charity. All the facepainting supplies, tent supplies, and time, are donated by the artists. 

At the end of the season, the carnival has operated at six different locations. The artists have spent a lot of their time and money to operate their facepainting tent, but a large sum was donated to charity as a result. A few months later, however, the carnival organizers are audited. The Department of Revenue wants sales tax on each $1,000 payment made by each vendor over the course of the season, including payments from the facepainting tent. When all parties involved explain that $1,000 of services were purchased by event organizers to cover the $1,000 fee, the Department does not care. When all parties explain the purpose of the event, the Department asks to see proof the artists are registered as an exempt entity. When records are provided showing zero profits, and substantial expenses incurred by the volunteers, the Department informs the parties that sales tax is on the sale price and has nothing to do with profitability.

It is unlikely this example is something the average taxpayer will encounter, as most of us are not volunteer face-painters. However, this fun hypothetical is filled with crucial lessons for every taxpayer. Rent is not just an amount agreed to on a clearly drawn-up rental agreement. Rent can be any amounts transferred between two entities when one entity operates on space owned by another.

Commonly taxpayers will argue that a transaction the Department assesses as rent is not rent, and they are usually correct. Sometimes, for a variety of reasons, “rental” or “license to use” payments are identified as such for bookkeeping purposes but offset by something else, such as the $1,000 in purchases in the above example. While the bottom line was the taxpayer did not have to pay even $1.00 for the license to use real property, the Department may still assess tax.

Ultimately, it is very important for the Florida taxpayer and Florida taxpayer representative to understand sales and use tax as it applies to commercial rental transactions, and all licenses for the use of real property within the state. The failure to properly understand how sales and use tax applies to licenses to use real property, and commercial rental transactions in particular, can result in a high assessment over a three-year period. As this tax is not common in other parts of the country, it is easily one of the most overlooked and can result in a devastating assessment when it is.

Florida sales tax audit; Florida sales tax audit help; Florida sales tax attorneyJeanette Moffa is a partner in the Fort Lauderdale office of Moffa, Sutton, & Donnini, P.A. She focuses her practice in Florida state and local tax, with an emphasis on sales and use tax. Jeanette provides SALT planning and consulting as part of her practice, addressing issues such as nexus and taxability, including exemptions, inclusions, and exclusions of transactions from the tax base. In addition, she handles tax controversy, working with state and local agencies in resolution of assessment and refund cases. You can learn more about Jeanette HERE.

At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.


Section 212.02, F.S. – Definitions.

Section 212.031, F.S. – Tax on rental or license fee for use of real property.

Rule 12A-1.070, F.A.C. - Leases and Licenses of Real Property.


DECEMBER 2023 – FL REDUCES SALES TAX ON COMMERCIAL RENT, published December 1, 2023, by Jackie Mustian, Esq.

2023 FLORIDA SALES TAX UPDATE PART I, published July 5, 2023, by David J. Brennan, Jr., Esq.

2023 FLORIDA SALES TAX UPDATE PART II, published August 14, 2023, by David J. Brennan, Jr., Esq.

PHONE CALL FROM FLORIDA DEPARTMENT OF REVENUE: SALES TAX, published October 15, 2022, by Jeanette Moffa, Esq.

FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.