Florida Repeals the Commercial Lease Tax: What Landlords and Tenants Need to Know

Big news for Florida’s real estate and business community: starting October 1, 2025, the state will eliminate the sales tax on commercial lease payments. This marks the end of the so-called Business Rent Tax, a unique levy that Florida was the only state to broadly impose on commercial tenants.

Why the Change Matters

For decades, tenants in Florida paid sales tax not just on their rent but also on many pass-through expenses like property taxes, insurance, and maintenance. While the rate has been gradually reduced in recent years, it still created a cost burden that made leasing more expensive compared to other states.

With the repeal, Florida businesses will see meaningful cost savings. That could encourage expansion, attract new investment, and improve the state’s competitiveness in industries ranging from retail to logistics.

Key Details of the Repeal

• Effective Date: October 1, 2025. Rent due for occupancy periods on or after this date will no longer be subject to state or local sales tax.
• Transition Rule: The tax is based on the occupancy period, not when payment is made. For example, October rent is exempt, but September rent remains taxable even if paid in October.
• Exceptions: The repeal does not apply to short-term residential rentals (less than six months), parking facilities, boat slips, aircraft hangars, or equipment leases. Those remain taxable.

Impacts on Landlords and Tenants

Tenants

• Lower occupancy costs mean potential for reinvestment in growth and operations.
• Easier budgeting and forecasting since rent no longer includes an added tax burden.

Landlords

• Must update billing systems to stop charging sales tax on exempt leases.
• Should review lease language to remove or revise tax provisions that reference the old Business Rent Tax.
• May face competitive pressure: while some landlords may try to recapture savings through higher rents, market forces will likely determine how much of the benefit stays with tenants.

Both Parties

• Be careful with 2025 reconciliations (like CAM charges). Expenses tied to pre-October periods remain taxable, while later charges are not.
• If tax is collected by mistake after October 1, landlords may need to issue refunds and work with the Florida Department of Revenue to correct filings.
• Maintain clear communication — notifying tenants in advance of billing changes will avoid confusion.

What to Do Now

1. Audit your lease portfolio to see which agreements are affected.
2. Update accounting and invoicing systems before October 1, 2025.
3. Review lease language for tax provisions and adjust in new negotiations.
4. Prepare for audits by keeping good records of tax collections through September 2025.

Zach’s Bottom Line

Florida’s repeal of the commercial lease sales tax is a landmark change that removes a long-criticized burden on businesses. While landlords and tenants will need to carefully navigate the transition, the long-term effect should be a more attractive, business-friendly climate across the state.