In the News

Jul 22

Florida To End Sales Tax on Commercial Leases

July 22, 2025 By: Perlow Kornik Dorot & Bensimon

Effective October 1, 2025, the State of Florida will permanently eliminate the sales tax on commercial leases.  This repeal applies to the current state-level sales tax of 2% as well as any applicable local discretionary surtaxes on commercial leases.

Why is a lease subject to “sales” tax?

Despite the name, Florida law defines a sales tax broadly and is not limited to the sale of goods.  It applies to certain leases, rentals and services.  This is based on the concept that a lease of property is treated like a sale of a temporary right to use it, and therefore, subject to tax.

How does this apply to commercial leases?  

The landlord is responsible for collecting the sales tax from the tenant and remitting it to the Florida Department of Revenue.  The Tenant bears the cost in addition to the base rent, and additional rent such as common area maintenance (CAM) charges, real estate taxes and property insurance, similar to how consumers pay sales tax on retail purchases.

Why is this change important?  

Florida is currently the only U.S. state that imposes a sales tax on commercial lease payments.  Starting October 1, 2025, that will change.  Commercial leases for occupancy periods beginning on or after that date will be exempt from the tax. 

What qualifies as a commercial lease?  

The tax repeal applies to commercial real property leases such as: buildings, office or retail space, warehouses, and self-storage units, among others.

Are residential leases affected?

No.  Residential leases for homes, apartments or condos are not subject to sales tax in Florida and will not be impacted by this change.

What about Airbnb or short-term rentals? 

Transient residential rentals will continue to be subject to sales tax.  These are rentals for six months or less, typically offered to guests or tenants who do not have a permanent residence at the property.  This includes vacation rentals, Airbnb, VRBO, seasonal rentals, hotels, motels or bed & breakfast stays.

How is rent handled on existing leases?  

The determining factor is not when the rent is paid but rather the occupancy period.  If rent is paid in advance, the portion that covers periods on or after October 1, 2025, is exempt from the sales tax.  Landlords must prorate rent and apply the sales tax only to the portion that relates to occupancy prior to October 1, 2025.

For example, if a tenant pays rent for the entire year in July 2025, the landlord must collect and remit sales tax on the portion of rent that covers occupancy before October 1, 2025.  The portion covering periods beginning October 1 and thereafter is not subject to tax.  However, rent covering periods before October 1, 2025, remains taxable even if it is paid after that date.

If a tenant pays rent (and tax) in advance, will they get a refund?

Not automatically.  The Landlord could consider filing a refund request with the state for the overpaid amount.  However, approval is not guaranteed, and the process may be time-consuming.

What should landlords and tenants do now?

1. Review lease agreements to distinguish taxable periods (pre-October 1, 2025) from exempt periods.
2. Update invoicing and billing systems to remove commercial lease tax charges beginning October 1, 2025.
3. Inform tenants and property managers about the charge to promote transparency and avoid confusion.
4. Continue remitting tax on other rentals not affected by the repeal.
5. Consider filing “zero returns” to maintain compliance and monitor updates from the Florida Department of Revenue regarding the repeal.
6. Consult with a business and tax attorney.

If you have questions or need help reviewing your lease terms, please contact our firm. We are here to assist.

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