United States

Florida state sales tax and the rental of real property

INSIGHT ARTICLE  | 

Has your club verified it is either paying or collecting the correct amount of Florida state sales tax on the rental of real property?

As you may be aware, Florida Governor Rick Scott, signed House Bill 7109, effective Jan. 1, 2018, reducing the state sales tax rate from 6 percent to 5.8 percent on the total consideration for the privilege or right to use or occupy commercial real property. The 5.8 percent state sales tax rate is in addition to any local discretionary surtax, as the reduction of the state sales tax rate on commercial real property rentals does not impact the local discretionary surtax. For example, the rental of retail space in Palm Beach County beginning Jan. 1, 2018, would include the state sales tax rate of 5.8 percent and the local discretionary surtax rate of 1 percent, for a total of 6.8 percent.

Rental property affected

The state sales tax imposed under section 212.031, Florida statues, is levied on the total consideration charged for renting, leasing, letting or granting a license to use real property. The state sales tax rate reduction on commercial real property applies to the rental of office space, retail space, self-storage units, lockers, restaurants, banquet rooms, meeting rooms and other comparable real property.  

Furthermore, it is important to note that the reduction of the state sales tax rate on the rental of commercial real property does not apply to the parking or storage of vehicles, boats or aircraft. The state sales tax rate remains at 6 percent in addition to any local discretionary surtax for these types of payment.

Timing of payments

The rate of state sales tax, in effect, is determined by the date the tenant occupies, or is entitled to occupy the commercial real property, regardless of when the rental payment is made. Accordingly, rental payments made prior to Jan. 1, 2018, which entitle the tenant to occupy the real property on or after Jan. 1, 2018, are subject to the 5.8 percent state sales tax rate, in addition to any local discretionary surtax. Rental payments made after Jan. 1, 2018, for rental periods prior to Jan. 1, 2018, are subject to the 6 percent state sales tax rate, in addition to any local discretionary surtax.

To whom could this apply?

Private clubs that either pay or collect Florida sales tax on the rental of commercial real property should review their rental payments to confirm that the correct amount of sales tax is being charged and remitted based on their location. Please contact us if you would like to discuss this, or any other sales or use tax concern with one of our state and local specialists.

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