Sales Tax Removed on Commercial Rent Starting October 1st, 2025

Table of Contents

1. Breaking News: Florida Ends 56-Year Commercial Rent Tax Era
2. Understanding Florida’s Commercial Rent Tax History
   1. The 56-Year Journey
   1. Recent Rate Reductions Leading to Elimination
3. What HB 7031 Means for Florida Commercial Real Estate
   1. Comprehensive Tax Elimination
   1. Properties and Leases Affected
   1. Important Exceptions
4. Critical Implementation Details: What You Need to Know
   1. The October 1, 2025 Effective Date Explained
   1. Landlord Responsibilities and Action Items
   1. Tenant Benefits and Considerations
5. Economic Impact and Market Implications
   1. Statewide Business Benefits
   1. Competitive Advantage Enhancement
   1. Real Estate Market Effects
6. Compliance and Transition Management
   1. For Property Managers and Owners
   1. For Commercial Tenants
   1. Professional Guidance Recommendations
7. Long-Term Strategic Considerations
   1. Market Positioning Opportunities
   1. Regional Development Impact
8. Preparation Timeline and Action Steps
   1. Immediate Actions (August-September 2025)
   1. October 1, 2025 Implementation
   1. Post-Implementation (Q4 2025 and Beyond)
9. The Elkpenn Advantage: Your Commercial Real Estate Partner
   1. Why Choose Elkpenn for Your Commercial Real Estate Needs
   1. Take Action on Florida’s Historic Opportunity

Breaking News: Florida Ends 56-Year Commercial Rent Tax Era This October

After more than half a century, Florida is making history by becoming the first and only state to completely eliminate its sales tax on commercial rent. Effective October 1, 2025, Governor Ron DeSantis’ signature on House Bill 7031 officially ends Florida’s unique business rent tax (BRT) that has been in place since 1969—marking the first time in 56 years that commercial tenants will be free from this financial burden.

This groundbreaking change represents the most significant commercial real estate tax reform in Florida’s modern history, delivering an estimated $2.5 billion in annual savings to businesses statewide. For commercial property owners, tenants, and real estate professionals, this elimination creates unprecedented opportunities and requires immediate preparation.

Understanding Florida’s Commercial Rent Tax History

The 56-Year Journey

Florida first imposed sales tax on commercial rent in 1969, making it the only state in the nation to tax commercial lease payments. What began as a 4% tax rate eventually climbed to match the general sales tax rate of 6% by the 1980s and remained there for decades.

The tax applied comprehensively to:

• Base rent payments
• Additional rent charges (CAM, utilities, insurance)
• Real estate taxes passed through to tenants
• Property management fees
• License fees for commercial space occupancy

Recent Rate Reductions Leading to Elimination

The business rent tax has been steadily reduced each year since 2017, dropping incrementally from 6% to 5.8%, then 5.7%, 5.5%, 4.5%, and finally reaching 2% in 2024. This systematic approach culminated in the complete elimination we’re witnessing today.

Combined with local discretionary sales surtaxes ranging from 0.5% to 1.5%, the total tax burden on commercial rent typically reached 3% to 3.5% statewide. Now, both state and local portions are being eliminated simultaneously.

What HB 7031 Means for Florida Commercial Real Estate

Comprehensive Tax Elimination

HB 7031 fully repeals Section 212.031 of the Florida Statutes, which imposed sales tax on commercial lease rental payments, effective October 1, 2025. This repeal includes:

• State sales tax elimination: The 2% state rate disappears entirely
• Local surtax elimination: County discretionary surtaxes also eliminated
• Immediate effect: Applies to all rent for occupancy periods beginning October 1, 2025

Properties and Leases Affected

The elimination applies to all commercial real estate rentals, including:

• Office buildings and spaces
• Retail centers and storefronts
• Industrial warehouses and manufacturing facilities
• Storage and distribution centers
• Convention and meeting rooms
• Parking and docking facilities
• Self-storage units

Important Exceptions

HB 7031 does not affect sales tax on rental income from motor vehicle, boat, or aircraft storage, or on short-term residential rentals with terms less than six months, which are imposed under separate statutes.

Critical Implementation Details: What You Need to Know

The October 1, 2025 Effective Date Explained

The elimination date is crucial to understand properly:

Period-Based Application: The October 1, 2025 date relates to the period of rental, not the date of payment. This means:

• Rent for October 2025 = No sales tax (even if lease was signed earlier)
• Rent for September 2025 = Sales tax still applies (even if paid in October)
• Late payments for pre-October periods = Sales tax still due

Pre-Payment Scenarios: If rent for October or any later period is prepaid before October 1, 2025, sales tax would not be due.

Landlord Responsibilities and Action Items

Commercial property owners must take immediate action:

1. Update Billing Systems

• Confirm invoicing and payment systems are updated to remove sales tax from rent charges for occupancy after September 30, 2025
• Review billing templates and lease administration tools
• Update financial systems to prevent erroneous charges

2. Final Tax Remittance

• Continue collecting and remitting sales tax through September 30, 2025
• File “zero return” sales tax returns after October 1
• Consider closing sales tax accounts if no other taxable activities exist

3. Tenant Communication

• Send written notices explaining the change
• Update lease agreements for new transactions
• Clarify pro-ration for 2025 annual reconciliations

Tenant Benefits and Considerations

Immediate Cost Savings The financial impact can be substantial:

• A $10,000 monthly lease previously taxed at 2% would yield annual savings of $2,400
• A business paying $5,000 monthly rent will save at least $1,200 annually
• In high-surtax counties, savings exceed $3,000 annually per $10,000 in monthly rent

Administrative Simplification

• No more sales tax calculations on rent payments
• Simplified accounting and bookkeeping
• Reduced compliance burden for multi-location businesses

Cash Flow Improvement Businesses can redirect tax savings toward:

• Operations expansion
• Equipment purchases
• Employee hiring and retention
• Facility improvements
• Market growth initiatives

Economic Impact and Market Implications

Statewide Business Benefits

The removal of the BRT means commercial tenants in Florida will save a total of $2.5 billion annually, representing significant capital that can be reinvested in business growth, job creation, and economic expansion.

Competitive Advantage Enhancement

Florida’s commercial rent tax repeal should enhance the state’s competitiveness as a destination for corporate relocation and expansion, as it eliminates one of the few remaining friction points in Florida’s business-friendly tax environment.

The elimination positions Florida more favorably against competing states for:

• Corporate headquarters relocations
• Manufacturing facility investments
• Distribution center development
• Regional office expansions

Real Estate Market Effects

Increased Demand: Lower occupancy costs make Florida commercial real estate more attractive to out-of-state businesses and expanding local companies.

Property Value Enhancement: Reduced operational costs for tenants can support higher rental rates and improved property valuations.

Development Incentives: New construction becomes more feasible as projected tenant costs decrease.

Compliance and Transition Management

For Property Managers and Owners

Immediate Actions Required:

1. System Updates: Modify property management software to exclude sales tax for post-September billing
2. Staff Training: Ensure leasing and accounting teams understand the new requirements
3. Documentation Review: Update standard lease forms and rental agreements
4. Reconciliation Planning: Prepare for complex year-end 2025 reconciliations with partial-year tax application

For Commercial Tenants

Pre-October Preparation:

1. Lease Review: Examine existing agreements for sales tax language
2. Payment System Updates: Modify automated payment systems to reflect new amounts
3. Budget Adjustments: Incorporate savings into 2026 financial planning
4. Sublease Management: Update sublease agreements and tenant notifications

Professional Guidance Recommendations

Given the complexity of implementation and potential audit considerations, both landlords and tenants should consider:

• Legal review of lease agreements
• Accounting system updates and staff training
• Tax compliance consulting for transition period
• Real estate advisory services for optimization opportunities

Long-Term Strategic Considerations

Market Positioning Opportunities

For Property Owners:

• Leverage tax savings as a marketing advantage
• Consider rental rate adjustments to capture partial tax benefit
• Explore portfolio expansion opportunities
• Evaluate refinancing options with improved cash flows

For Business Tenants:

• Reassess space needs with reduced occupancy costs
• Consider Florida expansion or relocation
• Negotiate lease renewals incorporating tax savings
• Explore additional location opportunities

Regional Development Impact

The elimination creates particular advantages for:

• Industrial corridors benefiting from reduced distribution costs
• Office markets competing against other southeastern states
• Retail centers with improved tenant retention economics
• Mixed-use developments offering comprehensive business solutions

Preparation Timeline and Action Steps

Immediate Actions (August-September 2025)

• Review and update all lease agreements
• Modify billing and payment systems
• Train staff on new procedures
• Communicate with tenants and stakeholders

October 1, 2025 Implementation

• Cease sales tax collection on qualifying rent
• Begin modified billing procedures
• Monitor compliance and documentation

Post-Implementation (Q4 2025 and Beyond)

• Complete year-end reconciliations with tax pro-rations
• File final sales tax returns
• Optimize lease structures and rental strategies
• Evaluate market opportunities created by tax elimination

The Elkpenn Advantage: Your Commercial Real Estate Partner

As Florida’s commercial real estate landscape transforms with this historic tax elimination, navigating the opportunities and complexities requires experienced professional guidance. The elimination of the commercial rent tax creates unprecedented opportunities for businesses to expand, relocate, or optimize their real estate strategies—but success depends on expert navigation of this changing market.

Why Choose Elkpenn for Your Commercial Real Estate Needs

At Elkpenn, we understand that the elimination of Florida’s commercial rent tax represents more than just cost savings—it’s a strategic opportunity to transform your business real estate approach. Our comprehensive commercial real estate services are designed to help you maximize the benefits of this historic change:

Market Expertise: Our deep understanding of Florida’s commercial real estate markets, combined with insight into the tax elimination’s implications, positions us to identify the best opportunities for your business.

Strategic Advisory: We help businesses and property owners develop strategies that leverage the new tax environment for optimal real estate decisions, whether you’re looking to expand, relocate, or optimize existing holdings.

Transaction Excellence: From lease negotiations that incorporate tax savings to property acquisitions that capitalize on improved market dynamics, our team delivers results that maximize your competitive advantage.

Comprehensive Services: Whether you need tenant representation, landlord services, investment advisory, or market analysis, Elkpenn provides the full spectrum of commercial real estate solutions.

Take Action on Florida’s Historic Opportunity

The elimination of Florida’s commercial rent tax won’t just save your business money—it opens doors to strategic real estate decisions that were previously cost-prohibitive. Don’t let this historic opportunity pass by without expert guidance to maximize your advantage.

Ready to capitalize on Florida’s commercial real estate transformation? Contact Elkpenn today to discover how the elimination of the commercial rent tax can benefit your business real estate strategy. Our experienced team is ready to help you navigate this changing landscape and identify the opportunities that align with your business goals.

Contact Elkpenn now to schedule your consultation and learn how we can help you leverage Florida’s new commercial real estate advantage. Your strategic real estate partner is ready to help you succeed in Florida’s newly transformed commercial market.

The information in this article is for general informational purposes only and should not be construed as legal or tax advice. Businesses should consult with qualified legal and tax professionals regarding their specific situations and compliance requirements.

About The Author