By Peter M. Lopez, Esq.
Florida’s commercial real estate market will see a significant change next month. Effective October 1, 2025, Florida House Bill 7031 repeals the State Business Rent Tax and the County Surtax on commercial lease rentals, removing a longstanding cost for commercial tenants and reshaping the state’s competitive landscape.
WHAT YOU NEED TO KNOW
For more than 50 years, Florida was the only state to impose a statewide sales tax on commercial lease payments. HB 7031 eliminates:
- The existing 2% state sales tax on commercial real property leases.
- Any applicable local discretionary surtax, typically ranging from 0.5% to 1.5% depending on the county.
This repeal applies to a wide range of commercial rentals, including office, industrial, and retail spaces.
Effective Date and Transition Rules
- Effective October 1, 2025, landlords may not collect sales tax on commercial rent attributable to periods on or after the Effective Date.
- Rent for periods prior to October 1, 2025 remains taxable, even if paid after the Effective Date.
- If rent for October 2025 or later is prepaid before the Effective Date of October 1, 2025, no sales tax is required.
Why It Matters for Businesses and Investors
- Reduced Occupancy Costs - tenants will see an immediate drop in rental expenses, improving cash flow and potentially enhancing profitability.
- Increased Property Demand - lower leasing costs could drive higher occupancy rates and property values, benefitting landlords and investors.
- Market Competitiveness - this change eliminates a unique tax disadvantage, strengthening Florida’s appeal to new and relocating businesses.
ACTION STEPS
For Tenants:
- Review your leases and annual reconciliations to ensure sales tax is removed from rent charges due after October 1, 2025.
- Coordinate with your landlord to adjust automatic payments and avoid overpayments.
For Landlords:
- Update accounting and billing systems to stop collecting sales tax for rents due after October 1, 2025.
- Prorate 2025 reconciliation statements so that sales tax only applies to rents due for periods prior through September 30, 2025.
- If your sales and use tax account with the Department of Revenue is used only to report and remit sales tax on commercial rentals, you will no longer need to file returns, according to the Florida Department of Revenue.
For Investors and Purchasers:
- Remain aware of potential successor liability for unpaid pre-October 2025 taxes.
- Request compliance certificates when acquiring commercial properties.
ADDITIONAL INSIGHTS
The law did not eliminate sales taxes In all situations and in some scenarios, sales tax will still apply to certain lease payments.
Leases Still Subject to Sales Tax
- Short-term residential transient rentals (less than six months).
- Parking and garage facilities.
- Boat slips and docking facilities.
- Aircraft hangar rentals.
- Equipment or other tangible personal property leases.
HB 7031 represents a milestone for Florida’s commercial real estate sector, offering significant savings for tenants and creating a more competitive environment for attracting and retaining businesses. Early planning and clear communication between landlords, tenants, and investors will ensure a smooth transition and full benefit of the repeal.
If you are interested in knowing whether sales tax applies to your tenants or if you wonder whether you are required to continue to pay sales tax, please reach out to me to discuss.