Florida is currently the only state in the nation that requires business owners to pay a sales tax on commercial leases, which puts business owners at a competitive disadvantage with businesses in neighboring states. So as the state’s legislative session began this spring, reduction or elimination of this tax was high on NFIB/Florida’s priority list.
There are currently a number of ideas being debated. One proposal is a step-down approach that would cut the tax by 1 percent in the first year and revisit the rate in later years. Another option would eliminate sales taxes on commercial leases in which the building is owned by a business owner but is listed under a different LLC or corporation to limit the owner’s liability. Currently, state law forces the owner of the two corporations to pay sales tax on the lease he or she created between the two corporations, even though money may not actually be changing hands.
Though there may not be consensus on how to reduce or eliminate this tax yet, there is widespread support for finding a way to accomplish it.
Jonathan Moore, licensed real estate broker and president of Acquisition Consultants in Orlando, says the impact to his business and all businesses in Florida is simple and direct.
“Obviously there is a limit to how much rent a business can pay,” Moore says. “In Florida, we add 6.5 percent to 7 percent to someone’s rent as sales tax. Tenants feel this. In reality, this cost is also felt by landlords. For instance, if a tenant can only afford $3,000 per month, then 7 percent of this $3,000 goes to the state instead of the landlord. In the end, businesses can’t afford to expand as quickly as they would like and must live with less space instead of growing.”
