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Impact of Reduction in Florida Sales Tax on Commercial Real Property Leases For 2019

Florida imposes a sales tax on rents under real property leases. In 2018, the general 6 percent state-level tax was reduced to 5.8 percent, but the Florida legislature enacted a law to further reduce the rate to 5.7 percent for occupancy periods beginning on or after January 1, 2019. It should be noted that these laws did not reduce the local option surtax that many Florida counties impose, so property owners need to adjust their expected lease payment revenues in the coming year.

While the new 5.7 percent tax rate is effective as of January 1, 2019, this reduced rate is applicable only as to the lease period to which the rent being paid relates. If a landlord receives rent payments in 2019 for December 2018 occupancy, the prior 5.8 percent rate would still apply (plus any applicable local option surtax).

It should also be noted that real property leases are taxed not only on base rent, but on any additional rent or other consideration paid by a tenant as a condition of occupancy. This means tax is also due on a tenant’s share of common-area maintenance charges, property taxes, and possibly other charges under the lease.

Landlords must collect, in addition to the 5.7 percent state tax, the local-option surtax imposed by many Florida counties, which can range between 0.5 percent and 2.5 percent. The new tax laws referenced above did not reduce these local option surtax rates, and in fact, some counties have increased their tax rates.

For example, Broward County implemented a tax rate of 1 percent, so that as of January 1, 2019, lease payments in Broward County will be taxed at a rate of 6.7 percent, being the Broward County local surtax of 1 percent, plus the state’s 5.7 percent tax. Below is a chart reflecting applicable changes in the surtax structure with respect to real property leases in various Florida counties:

 

County

2018 State
Rate

2018 County
Surtax

2018
Total

2019 State
Rate

2019 County
Surtax

2019
Total

Miami-Dade

5.8%

1%

6.8%

5.7%

1%

6.7%

Broward

5.8%

0%

5.8%

5.7%

1%

6.7%

Palm Beach

5.8%

1%

6.8%

5.7%

1%

6.7%

Hillsborough              

5.8%

1%

6.8%

5.7%

2.5%

8.2%

Orange                       

5.8%

.5%

6.3%

5.7%

.5%

6.2%

 

Landlords and management companies sending out invoices for rental periods commencing on or after January 1, 2019 should change their invoicing to account for the current 0.1 percent reduction in the state tax rate, while also accounting for the changes (if any) to the local option tax rates.

This Alert was prepared by James W. Carpenter, Esq. Questions about this information can be directed to:

• Thomas P. Angelo, Esq. | 954-766-9930 | tpa@angelolaw.com
• Gavin S. Banta, Esq. | 954-766-9930 | gsb@angelolaw.com
• James W. Carpenter, Esq. | 954-766-9930 | jwc@angelolaw.com

This alert is for general information purposes. The alert does not constitute or contain legal advice. This alert should not be considered as a legal opinion by the author or by the firm of Angelo & Banta, P.A., or as a substitute for legal counsel.