Effective June 1, 2024, a significant change is coming to real estate rentals in Florida. The state sales tax rate imposed on rentals, leases, or licenses to use real property, commonly referred to as “commercial rentals,” will see a notable reduction from 4.5% to 2.0%.
Outlined in section 212.031 of the Florida Statutes (F.S.), this adjustment impacts various sectors, including rentals of commercial office or retail space, warehouses, and self-storage units or mini-warehouses.
The total rent charged for these real property rentals will include all consideration due and payable by the tenant for the privilege or right to use or occupy the space. Additionally, while the state sales tax rate undergoes a reduction, the local option discretionary sales surtax imposed by the county where the real property is located remains applicable to the total rent charged.
Lessors must understand the timeline for this change. Rental charges paid on or after June 1, 2024, for rental periods between December 1, 2023, through May 31, 2024, will still be subject to the previous 4.5% state sales tax rate, in addition to any applicable discretionary sales surtax. On the other hand, rental payments made before June 1, 2024, entitling the tenant to occupy the property on or after that date, will be subject to the new 2.0% state sales tax rate, plus any relevant discretionary sales surtax.
While this reduction applies to commercial rentals, certain types of rentals are exempt from this change. These include transient rentals of living, sleeping, or housekeeping accommodations for six months or less, parking or storage spaces for motor vehicles, docking or storage spaces for boats, and tie-down or storage space for aircraft at airports.
As this change takes effect, stakeholders are encouraged to stay informed and adapt accordingly to maximize its potential advantages. If you have questions, contact Jeff Dorris, CPA, Partner, Specialty Tax Leader today.
Click HERE to view the Tax Information Publication (TIP) issued by the Florida Department of Revenue.
