Prepare for Florida to exempt commercial rent from state sales tax

In a major shift in tax policy, Florida will eliminate the state sales tax on commercial rent effective Oct. 1, 2025. This long-anticipated change will significantly reduce the cost of leasing commercial space across the state and bring Florida into closer alignment with most U.S. jurisdictions that don’t impose a tax on commercial leases.

The upcoming elimination of Florida’s state sales tax on commercial rent is a significant win for Florida businesses. With the effective date of Oct. 1, 2025, now set, landlords and tenants have time to prepare systems, leases, and tax filings to comply with the updated law.

As one of the most impactful tax policy shifts in Florida in recent years, this change enhances Florida’s competitiveness in attracting and retaining commercial tenants. While local taxes still apply, the overall burden on businesses will decline meaningfully.

What to expect

As of Oct. 1, 2025, the state portion of sales tax — currently 2% — on commercial rent will be fully repealed. This means landlords will no longer be required to collect and remit Florida state sales tax on commercial lease payments made on or after that date.

However, local discretionary sales taxes imposed by counties will remain in effect. These local surtaxes range from 0.0% to 2.0% depending on the county and continue to apply to commercial rent. The Florida Department of Revenue (DOR) will continue to publish updated surtax rates annually.

History of Florida’s commercial rent tax

For decades, Florida stood alone as the only U.S. state that levied a sales tax on commercial rent. Under Florida Statutes § 212.031, the tax applied to leases of commercial real estate such as office buildings, retail stores, industrial warehouses, and storage facilities. The law required landlords to collect and remit sales tax on all amounts charged for the use of commercial property, including base rent, common area maintenance (CAM), and other pass-through costs.

Originally imposed at a 6% state rate, the tax was long criticized by businesses and economic development groups as an outdated burden that increased the cost of doing business in Florida. Beginning in 2018, the legislature began reducing the tax incrementally. The most significant shift came in 2021, when lawmakers tied future reductions to the health of the state’s Unemployment Compensation Trust Fund. Once the fund reached pre-pandemic levels, the final phase-out would be triggered.

Scope of the exemption

The change applies broadly to commercial leases, including:

• Office space
• Retail storefronts
• Warehouses and distribution centers
• Industrial/manufacturing facilities
• Self-storage units used for business purposes

Taxable amounts that will no longer be subject to the state portion of sales tax include:

• Base rent
• Property tax reimbursements
• CAM charges
• Insurance reimbursements
• Parking and janitorial fees, if required under the lease

Any of these charges will still be subject to local taxes, so landlords must continue collecting and remitting the applicable county-level tax until and unless local jurisdictions choose to repeal or modify their surtaxes.

Florida joins the majority of states

With this repeal, Florida will no longer be the only state with a general sales tax on commercial lease payments. The repeal not only reduces costs for Florida businesses but also helps level the playing field for economic development.

Only two taxing jurisdictions in the U.S. will continue to subject commercial rent to a tax:

• Arizona. Arizona imposes a Transaction Privilege Tax (TPT) on commercial leases. While technically a tax on the landlord for the privilege of doing business, it’s usually passed through to the tenant, making its practical impact similar to a sales tax.
• New York City. New York City levies a Commercial Rent Tax (CRT) on tenants renting commercial property in Manhattan below 96th Street. This tax is separate from state and city sales taxes and is calculated as a percentage of rent paid, with various exemptions and filing requirements based on income thresholds.

With Florida exiting this space, the commercial rent tax landscape in the U.S. will be nearly uniform, with 49 states and most local taxing jurisdiction imposing no tax on commercial leases.