Major Tax Reform: Florida Repeals Commercial Lease Sales Tax

On June 30, 2025, Florida governor Ron DeSantis signed bills implementing the state’s $117.4 billion budget for fiscal year 2025-2026. The budget includes $2 billion in tax relief for Florida families, seniors, and businesses. Included in the budget was HB 7031 which permanently eliminates the sales tax on commercial leases beginning October 1, 2025.  It is estimated that this will save Florida businesses approximately $900 million per year.

Prior to the passage of HB 7031, Florida was the only state that levied a so-called business rent tax. This rent tax was imposed on the rent businesses pay for leasing commercial property. It applied not only to the rental of commercial property such as land, buildings, office or retail space, convention or meeting rooms, airport tie-downs and parking and docking spaces but also to payments tenants made on behalf of the property owner such as mortgage payments, ad valorem taxes and insurance.  It could also include licenses granting the use of property for the placement of vending, amusement, or newspaper machines.

The business rent tax has been around since 1969. Since 2017, the Legislature has gradually reduced the state tax rate from 6% to 2%. The most recent reduction to 2% occurred in March of 2024 when the Unemployment Compensation Trust Fund reached its pre-pandemic balance. In addition to the state tax rate there were local surtaxes imposed by counties (typically 0-1%).

HB 7031 eliminates both the state sales tax and local surtaxes on commercial leases related to periods of occupancy after October 1, 2025, regardless of when payment is made. Rent paid prior to this date for occupancy periods after this date will not be taxed. Rent paid after this date for occupancy periods prior to this date will be taxed at the 2% state rate plus the applicable local surtax rate. For example, if a tenant pays October 2025 rent in September, no sales tax would be due. However, if a tenant pays September 2025 rent in October 2025, sales tax would apply.

Not all property rentals will become tax-free. Sales tax will still apply to short-term residential rentals (leases shorter than 6 months), vehicle parking facilities, boat docking spaces, aircraft hangar rentals and self-storage units. Additionally, equipment rentals included in commercial leases will still be subject to sales tax as tangible personal property.       

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