Florida Reduces Sales Tax on Commercial Property Leases for 2018
For commercial property owners, much of the attention this tax season has been on changes to federal law under the GOP tax bill passed late last year. But changes in Florida law will also impact how much commercial owners will pay in taxes going forward. Specifically, the state sales tax rate for rental payments received has been reduced from 6 percent to 5.8 percent for payments received after January 1 of this year for occupancy periods beginning on or after that date.
Here are key points about the adjustment and some tips for commercial property owners and managers about how to ensure that they reap the benefits of this reduction:
- While the state sales tax rate was reduced, no reduction was made in the local option surtax imposed by many counties in Florida. In Santa Rosa County, a 0.5% local government infrastructure surtax and 0.5% school capital outlay surtax are added to state sales taxes. These rates remain unchanged, so the total sales tax rate in Santa Rosa County for 2018 is now 6.8%.
- Florida sales taxes on commercial property leases are imposed on all sums which the tenant is required to pay as a condition of occupancy. This includes base rent, additional rent, the tenant’s share of common area maintenance charges, and share of real property taxes to be paid under the lease.
- Although the new 5.8 percent state level tax rate is effective Jan. 1, 2018, it only applies to lease periods after that date, not the date of payment. So, a lease payment made in December 2017 for January 2018 rent would be taxed at the new 5.8% rate, while a payment made in January for December 2017 rent would be taxed at the old 6% rate.
- The reduced sales tax rate does not apply to charges for parking a motor vehicle, docking a vessel, or hangaring an aircraft.
Owners or managers of commercial property in Florida should adjust their invoices to reflect the 0.2% reduction in the state tax rate and take whatever additional steps necessary to ensure that they reap the benefits of this modest, though not inconsequential, reduction in their tax burden.
If you have questions about these changes in state tax law or any other questions involving taxation and commercial property, please call one of the Pensacola commercial real estate attorneys at McDonald Fleming Moorhead today.
Our lawyers understand the issues commercial property owners and investors face in Florida and have experience working with investors from Florida and out-of-state. Our knowledge of specific real estate development issues helps us better understand our clients’ needs, and we can walk you through the entire process.
Board Certified Real Estate Attorney Stephen R. Moorhead has been general counsel to the Home Builders Association of West Florida, Inc. for nearly 20 years and has represented a host of commercial buyers, sellers, and investors. builders and developers. R. Todd Harris has significant experience in land use approvals having appeared before the following counties in Northwest Florida: Bay, Escambia, Okaloosa, Santa Rosa and Walton, as well as numerous other governmental agencies.