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Florida Sales Tax on Commercial Leases Eliminated Effective October 1st

Starting October 1, 2025, Florida will eliminate the sales tax on commercial real estate leases, marking a significant change for landlords and tenants alike. This repeal applies not only to the state-level sales tax but also to the local discretionary surtaxes that have historically added up to 1.5% in many counties. With this move, Florida becomes the only state in the nation to fully eliminate such a tax burden on business rent, signaling a shift toward a more pro-business tax environment.

Hooray!

Previously, commercial lease payments were subject to a 2% state sales tax rate, reduced from earlier years, along with a county-specific discretionary surtax ranging from 0.5% to 1.5%, depending on the jurisdiction. The combined tax rates were applied to the total rent charged for the right to use real property for commercial purposes, including base rent and common area maintenance (CAM) charges. Effective October 1, 2025, these taxes will no longer apply to commercial leases of office, retail, warehouse, and industrial space.

The repeal is occupancy-based, meaning that lease payments associated with periods of use on or after October 1, 2025, will not be subject to any sales tax—regardless of when the payment is made. For example, if a tenant prepays for October rent in September, no sales tax is due. However, rent or adjustments related to occupancy prior to October 1 will remain taxable, even if paid after that date. This ensures a clear cutoff aligned with usage rather than timing of payment.

This tax repeal does not extend to certain other types of real estate rentals. Short-term residential rentals, transient accommodations, parking or storage for motor vehicles, and docking or storage for boats and aircraft may still be subject to state and local sales taxes. Those exemptions remain in place and continue to be treated separately under Florida tax law.

The removal of both the state and local components of the commercial rent tax is expected to reduce costs for Florida businesses and streamline administrative reporting. Landlords will no longer need to collect and remit sales tax on commercial rent starting in October 2025, and tenants will see a direct savings on occupancy costs. For property owners and managers, this also simplifies lease administration and removes the need for future adjustments related to changing surtax rates at the local level.

Wins Abound

The repeal of Florida’s commercial lease sales tax offers meaningful wins for both tenants and landlords. Tenants will benefit from a direct reduction in occupancy costs, improving their bottom line and freeing capital for reinvestment or expansion. Landlords, meanwhile, gain greater pricing flexibility without taxation consuming part of their rentability, allowing them to negotiate based on market value rather than factoring in state and local tax layers. Additionally, landlords are relieved of the administrative burden and potential audit exposure that comes with collecting, remitting, and reporting sales tax—a significant nuisance that will no longer apply starting October 1, 2025.

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The information provided herein is for general informational purposes only and should not be construed as legal, tax, or investment advice. Laws and regulations are subject to change, and their application can vary based on specific circumstances. You should consult with a qualified attorney, accountant, or other licensed professional to obtain advice tailored to your particular situation. No warranties are made regarding the accuracy or completeness of this information, and reliance on it is at your own risk.

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