Florida governor signs business rent tax rollback, the third in recent years

Florida is the only state in the U.S. that collects sales tax on commercial leases

Miami /
May.May 16, 2019 11:30 AM
Govorner Ron DeSantis (Credit: Getty Images)

Govorner Ron DeSantis (Credit: Getty Images)

UPDATED, May 16, 3:07 p.m.: Gov. Ron DeSantis signed a law that will reduce the tax on commercial leases in Florida.

House Bill 7123, known as the business rent tax, lowers the commercial lease tax by 0.2 percent to 5.5 percent. Although the reduction is small, it marks the third such cut since 2018.

Florida is the only state in the U.S. that collects sales tax on commercial leases, according to NAIOP, the national commercial real estate development association. The state is otherwise considered a tax haven due to its lack of a state income tax.

In Florida, the commercial tax is imposed on the base rent, plus any additional rent or consideration the tenant is required to pay, said Darcie Lunsford, who has spearheaded reductions in the tax on behalf of the South Florida chapter of Herndon, Virginia-based NAIOP. It’s also applied to the tenant’s share of common-area maintenance fees and property taxes. Some Florida counties also tack on a local surtax, including Miami-Dade, Broward and Palm Beach counties.

The tax reduction becomes effective on Jan. 1, 2020 and is expected to generate annual savings of $64.5 million, according to the governor’s office. DeSantis, who won the endorsement of the Florida Realtors in his race for governor, was elected in November.

The tax applies to retail, office and industrial leases and does not include hotel or apartment leases.

Lunsford, a senior vice president at Butters Realty & Management, said reducing the tax helps to level the playing field when Florida competes for headquarters or major companies. It also “releases investment capital that companies can now use to grow our businesses, hire people, and invest in equipment,” she said.

Marvin Kirsner, a shareholder at Greenberg Traurig, said the reduction is minor. A previous bill, which did not pass, called for reducing the tax to 3.5 percent, which would have had a much bigger impact, in addition to taxing e-commerce, he said.

Still, Steven Hurwitz of Colliers International South Florida said that over time, additional rollbacks would have an impact on tenants reinvesting in their businesses and the local economy. “Any future movement definitely supports that sort of investment in our economy,” he said.

NAIOP’s Florida chapter has been lobbying the state to ratchet back the commercial lease tax for years and is hoping to wipe it out completely. Kirsner said that former Gov. Rick Scott attempted to eliminate the rent tax altogether.

“It’s definitely a senseless tax that we need to work on eradicating over time, which is what NAIOP’s been doing,” Lunsford said.

Other real estate-related bills are awaiting the governor’s signature. The Florida Legislature recently passed a bill that would make remote online notarizations legal, a move that could speed up foreign and out-of-state real estate investment in the Sunshine State.


Related Articles

arrow_forward_ios
Robert Finvarb and Abraham “Abie” Hidary with the site at 2534 North Miami Avenue (Koniver Stern Group)
Hidrock Properties, Robert Finvarb pay $13M for Wynwood site
Hidrock Properties, Robert Finvarb pay $13M for Wynwood site
Aventura Mayor Enid Weisman (Facebook via Weisman, Getty)
Aventura votes to require HOAs to submit critical reports within 48 hours
Aventura votes to require HOAs to submit critical reports within 48 hours
The current Miami Beach North Shore library with Mayor Dan Gelber (Google Maps, Gelber)
Miami Beach seeks buyers for city-owned development sites
Miami Beach seeks buyers for city-owned development sites
Developer David Edelstein and Robert Levine of RAL Development with the project (Getty, RAL)
David Edelstein, partner close on missing piece of Wynwood assemblage for office towers
David Edelstein, partner close on missing piece of Wynwood assemblage for office towers
David Grutman and Pharrell’s Goodtime Hotel had received nearly 30 noise violations (Carma Connected, Getty)
Too much of a good time? David Grutman and Pharrell’s Goodtime Hotel could lose entertainment permit
Too much of a good time? David Grutman and Pharrell’s Goodtime Hotel could lose entertainment permit
Related Companies Chairman Stephen Ross with One Flagler (Related, Getty)
Prayers answered? Related Companies closes on church site for planned office tower in downtown West Palm
Prayers answered? Related Companies closes on church site for planned office tower in downtown West Palm
Grover Corlew principal Mark Corlew with Bank of America Tower in Boca Raton (Grover Corlew)
Grover Corlew buys Bank of America Tower in Boca Raton for $45M
Grover Corlew buys Bank of America Tower in Boca Raton for $45M
The partially collapsed 12-story Champlain Towers South condo building (Getty)
Inside the tug-of-war over the Surfside condo site’s future
Inside the tug-of-war over the Surfside condo site’s future
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...