Cost of Leases Coming Down
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Thanks to the Florida Legislature
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Sales Tax Rate Drop: Effective December 1, 2023, Landlords and Tenants in SRQ Region will see the sales tax on their leases drop from 6.5% to 5.5%.
Sales tax on Leases: Sales tax on commercial leases is made up of two parts. The bulk currently goes to the state and an additional portion is contributed to the county. In Sarasota and Manatee Counties the County rate is currently 1% and no change is currently anticipated. Therefore, when you see reference to reductions you may see one number, 5.5% or 4.5% from the state, but will see the ultimate cost to the tenant and collected by the Landlord at a higher rate of 6.5% or 5.5%.
Rate: The State of Florida will reduce its state sales tax rate on commercial leases from 5.5% to 4.5%. This reduction is a result of House Bill 7063. For the SRQ Region (Sarasota and Manatee Counties) the 1% tax assessed by the County will bring the tax rate up to 5.5% instead of the current 6.5%.
Further Reduction: Another reduction of the State Tax to 2% is expected by late 2024, as per Senate Bill 50. The Senate is looking toward the balancing of the budget and requires that the Unemployment Trust Fund that was utilized during the pandemic be fully replenished to the pre-pandemic level before the second reduction be in place.
Forecast for 2024: Based on current forecasts, the Unemployment Trust Fund is expected to reach the required level in May 2024, making the 2% rate effective in August 2024.
Explanation: Florida is the only state in the United States that charges sales tax on commercial leases. It is also one of the few states that has no income tax. The Realtor Association and Business Organizations have been diligently working with the legislature to change this. It has been a long and slow process. Prior to the upcoming change on December 1, the reduction was whittled down piece meal by .5%. Our Legislature needed to find sources to replace the revenue currently provided by the Business Tax. The first 1% came as part of the recent budget. The additional change was funded by the internet sales tax. This was redirected to the Unemployment Trust Fund during the pandemic. That is why the Trust Fund needs to be naturally replenished to it’s pre-pandemic rate before the reduction in the Commercial lease or Business Tax can be reduced.
https://floridarevenue.com/taxes/tips/Documents/TIP_23A01-20.pdf