In a major win for Florida's commercial real estate market, Gov. Ron DeSantis signed Florida House Bill (HB) 7031, eliminating both the State Business Rent Tax and County Surtax on commercial leases effective Oct. 1, 2025. This change will significantly reduce occupancy costs for commercial tenants statewide, making office, industrial and retail space throughout Florida more affordable and business-friendly.
Since 1969, Florida has required landlords to pay sales tax on commercial lease payments. These taxes apply not only to base rent, but also to additional rent charges passed through to tenants, such as common area maintenance, utilities, insurance, real estate taxes and property management fees. Landlords generally require these taxes to be paid by tenants, increasing the overall cost of occupancy.
Although the state sales tax rate on commercial rent has steadily decreased over the years – from 6 percent in 2017 to the current 2 percent – Florida has remained the only state to impose such a tax. HB 7031 will bring that practice to an end beginning in fourth quarter 2025, and its repeal will also eliminate the discretionary County Surtax, which typically ranges from 0.5 percent to 1.5 percent, depending on the county.
Scope of the Repeal
HB 7031 fully repeals Section 212.031 of the Florida Statutes, which imposes the sales tax on commercial lease rental payments, as of Oct. 1, 2025. However, HB 7031 does not affect the sales tax on rental income from motor vehicle, boat or aircraft storage or on short-term residential rentals with a term of less than six months, which are imposed by Section 212.03 of the Florida Statutes.
Landlords and tenants should carefully evaluate their lease structures and the nature of the premises to determine whether the rent will remain subject to tax after Oct. 1, 2025.
Key Considerations for Tenants
Tenants should closely review their 2025 annual reconciliation of additional rent to confirm that sales tax is not applied to rent charges incurred on or after Oct. 1, 2025, even if those amounts were paid prior to such date. Tenants should also communicate with their landlords about HB 7031 and confirm that reconciliations for the 2025 calendar year will properly reflect the tax reduction.
Tenants who have set up automatic rent payments should ensure that their systems are updated to remove the sales tax component starting in October 2025.
Key Considerations for Landlords
Landlords must cease collecting sales tax from tenants on commercial rent payments attributable to periods on or after Oct. 1, 2025. However, sales tax will continue to be due on rent charges incurred through Sept. 30, 2025. Landlords should update their accounting and invoice systems to reflect this change and should consider notifying tenants of the repeal and how it will affect their monthly payments.
For reconciliations of additional rent, landlords should ensure that sales tax is properly prorated for 2025, applying only to amounts allocable to the first three quarters of the year.
Landlords should also evaluate whether any portion of their lease portfolio remains subject to tax post-repeal (e.g., vehicle storage or short-term rentals) and adjust practices accordingly.
Conclusion
HB 7031 represents a significant shift in Florida's tax treatment of commercial leases and presents both an opportunity and administrative responsibility for landlords and tenants alike. Early coordination between the parties will help avoid confusion and ensure a smooth transition.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
