Published: May 13, 2024

Florida Lease Taxability: A Complex Landscape

Florida Lease Tax

The Florida lease tax rules can be tricky to understand. Here’s a breakdown of how sales tax applies to commercial real property (CRP) and tangible personal property (TPP) leases.

Tangible Personal Property (TPP)

In Florida, leasing TPP is considered a sale for tax purposes. This means the lease is subject to the state’s 6% sales tax, plus any local surtax. You can find the definition of leased TPP in Florida §12A-1.071(1)(a)1. You can also find it in GT-800038 R.09/222. It includes “any rental or license to use tangible personal property that can be seen, touched, measured, and used by a business” and excludes bailments.

There are some exceptions to the TPP lease tax rule. Non-profit groups with a valid Consumer’s Certificate of Exemption (Form DR-14) don’t pay sales tax on TPP leases. Additionally, specific items are excluded by law, such as chartering a boat with a crew for fishing, movie rentals, and air taxi charters.

The rental tax for TPP is based on the total cost of the lease over the entire lease period.

Commercial Real Property (CRP)

Florida is unique in that it taxes CRP leases. The law defining taxable CRP leases is Florida §212.031(1)(a)3. It applies to “the exercising of a taxable privilege by every person who engages in the business to lease or rent any type of real property or grants a license use, enter, or occupy any real property” unless the property is exempt. Exempt properties include agricultural land, residential dwellings, parking/storage spaces, and those leased to exempt organizations with a valid Consumer’s Certificate of Exemption (Form DR-14).

The tax base for CRP rentals includes the base rent plus all other charges outlined in the lease agreement. This can include common area maintenance, janitorial services, utilities, insurance, payments made on the landlord’s behalf (mortgage, property taxes), leasehold improvements the tenant must pay for, and any cancellation fees recorded as rental income by the landlord.

The current state tax rate for CRP leases is 4.5%, but it will be reduced to 2% on June 1, 2024. There are also local surtaxes that may apply.

Get Help Navigating Florida Lease Tax

The Florida lease tax rules can be complex. Consider partnering with a tax professional who can help you avoid any tax pitfalls. Contact our team today!

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