Commercial property owners in Duval County, Florida, who manage rentals are all too familiar with the sales taxes associated with commercial property leases—especially since Florida is the only state that imposes sales tax on commercial rent. But as of December 1, 2023, there have been some significant changes in the commercial rental sales tax rate for Duval County, and you’ll need to adjust the amount you’re collecting from your business tenants.
The 2023 legislative session ushered in substantial tax changes through HB 7063, signed into law by Governor DeSantis on May 25, 2023. This legislation encompasses revisions across various taxes administered by the Department of Revenue, notably impacting commercial property owners and their tenants.
Florida’s commercial rent tax reduction
One of the key highlights of the new legislation involves a reduction in the state sales tax on commercial rentals from 5.5% to 4.5%, effective December 1, 2023. This tax isn’t solely applied to base rent; it extends to include “constructive rent,” encompassing pass-through expenses like insurance, mortgage payments, or property taxes handled by tenants on behalf of property owners.
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Impact on Duval County commercial rentals
For Duval County, the state rate reduction to 4.5% comes into play. However, local option sales surtaxes remain applicable, making the effective commercial rental rate fluctuate between 5% and 6%, taking the county’s surtax rate of 1.50% into account.
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Understanding timing and rates
It’s crucial to note that the tax rates correspond to the occupancy period rather than the payment date. For instance, charges for occupancy in November 2023 will be subjected to the 5.5% rate, while occupancy charges from December 2023 forward will follow the 4.5% rate.
Looking ahead, we can anticipate further reductions in the business rent tax state rate, poised to decrease to 2% in 2024. This substantial reduction is scheduled to take effect once the Unemployment Compensation Trust Fund reaches its pre-pandemic balance, which is projected to be around mid-2024.
If you have any questions, don’t hesitate to seek guidance and clarification from one of our professional advisors. Get in touch to schedule a consultation.