Early this year, the news in Florida’s business rent tax, the sales tax applicable to commercial leases in Florida, was that there is no news. After several straight years of reductions in the sales tax rates on commercial leases, the rates for 2021 held steady at 5.5% plus the applicable discretionary surtax.
Today, only a few months later, the headlines are remarkably different. The business rent tax reductions are coming back – and stronger than ever.
Senate Bill 50, passed by the Florida legislature and signed by Governor DeSantis on April 19, 2021, provides a pathway to reduce the current state sales tax rate on commercial leases from 5.5% to 2%. Once in effect, this will be one of the largest single tax cuts on Florida business rent tax in recent history. Senate Bill 50 is an initiative of “e-fairness legislation,” set in motion by the 2018 U.S. Supreme Court case of South Dakota v Wayfair. The Wayfair case gave states the authority to collect sales tax from out-of-state online retailers, helping to level the playing field for in-state brick and mortar retailers. Through the passing of Senate Bill 50, Florida has become one of the last states to pass legislation to collect the tax authorized by Wayfair. The funds collected from the tax will be added to the State’s Unemployment Trust Fund, which was severely depleted from effects of COVID-19. Beginning this year, approximately $1 billion of uncollected sales tax annually is estimated to be collected from out-of-state retailers to replenish the fund. Under the new law, once the fund obtains pre-pandemic levels, the business rent tax will be automatically reduced to 2%. This change will not be immediate however. More than $4 billion was in the fund before the COVID-19 pandemic and, as unemployment claims continue to draw upon the fund, an even greater amount will be needed for the fund to be fully replenished.
Additionally, for those with leases in Hillsborough County, effective March 16, 2021, the combined state and local tax rate on commercial leases in Hillsborough County dropped from 8% to 7%. In late February, the Florida Supreme Court declared Hillsborough County’s 1% discretionary surtax unconstitutional. The surtax was passed by general election in 2018 and earmarked funds for transportation improvements. The Court held the tax to be unconstitutional because it was passed by a group of private citizens instead of being made by the Hillsborough County Commissioners.
Winderweedle, Haines, Ward & Woodman, P.A. continues to monitor the changing landscape of business rent tax reductions in Florida. If you have questions regarding sales tax payments on your commercial leases, please contact Heather S. Moraes, Esq. at (407) 246-8412.