Recently, Florida officially scheduled the elimination of its sales tax on commercial real estate leases. In the U.S., commercial real estate sales tax is fairly rare: previously, Florida was one of the last states to impose one. The decision comes after several years of gradually lowering rates.
As a commercial real estate owner or investor, what do you need to know about Florida’s sales tax elimination? Below, we’ll go through the specifics, review the importance of sales tax knowledge, and discuss tools that can help you manage transactions.
What are the Details of Florida’s Commercial Real Estate Sales Tax Elimination?
First, let’s dive into Florida’s new regulations around selling commercial property. Though the sales tax elimination is definitely a positive for commercial real estate businesses, it’s important to take a close look at the details. Making sure you know important dates and exceptions means you can maintain compliance with the rules and make the most of new benefits.
Timing You Need to Know
The new policy goes into effect on October 1, 2025. It’s important to understand that this date refers to the occupancy period on the lease, not payment dates.
This means that rent payments for December 2025 (for example) are not subject to tax, even if they are paid before October 1, since the payment period falls after that date. Rent payments for August 2025, on the other hand, will be taxed, regardless of if they are paid before or after October 1. Be sure to check key lease and payment dates to see what this means for your business.
Important Exceptions
A few types of commercial real estate properties remain subject to Florida sales tax:
- Short-term residential rentals
- Vehicle parking spaces
- Boat docking facilities
- Aircraft hangars
These unique property types technically fall under a different section of the sales tax law (Sec. 212.03) that was not repealed.
Why is it Important to be Aware of Sales Tax in Commercial Real Estate?
Though most states do not impose a sales tax on commercial real estate, it’s still crucial to know the laws where you do business. Mix-ups can lead to loss of profit and unwanted audits. Do not assume that the rules are the same everywhere: stay alert and check for unique laws in each location.
Potential Legal and Financial Issues
At STRATAFOLIO, we have seen firsthand the struggles with not catching or fully capturing the sales tax. This is problematic for a few major reasons. When you don’t correctly calculate sales tax on your transactions, you may end up paying the wrong amount. Mistakes can lead to audits and more expenses down the road.
As always, it’s best to comply with regulations from the beginning. This way, you avoid unpleasant and potentially expensive legal issues. Make use of technology that can help you track sales tax rates.
Different Rules for Different Places
While Florida’s commercial real estate sales tax is now mostly gone, some parts of the U.S. still use some version of one. One other example is Arizona, which uses a “Transaction Privilege Tax” that includes commercial real estate. Both the state and local governments in Arizona apply this tax.
Other cities and towns throughout the country may require their own sales or transfer taxes for property, so it’s always smart to check local rates. This is especially true if you hold properties in multiple places, since the rules will likely vary.
How Can You Successfully Keep Track of Sales Tax?
With all this information and changing rules, it might seem overwhelming to keep track of sales taxes for commercial real estate. However, there are a few simple steps that make a big difference.
First, stay organized. As obvious as it may seem, make sure you know where your properties are and your plans to buy or sell. To help keep track of information about your portfolio, use a property management software specifically designed for commercial real estate, like STRATAFOLIO.
QuickBooks Sales Tax Tool
Second, use the technology available. QuickBooks, which many small and medium businesses use to manage accounting needs, offers a sales tax calculator. This calculator automatically takes location and type of sale into account. Using this tool for QuickBooks Desktop and Online eliminates human error to provide an accurate result every time.
Tackle All Your Transactions with STRATAFOLIO
Stay prepared to buy and sell by easily keeping track of crucial financial details for each of your properties with STRATAFOLIO. Using this comprehensive commercial real estate software, you can manage information about leases, property performance, and even maintenance in one convenient location.
Complete two-way integration with QuickBooks Desktop and Online means that you don’t waste time transferring your financial information. You’ll also have easy access to the QuickBooks sales tax tool. When it’s time for a transaction, you’ll have everything you need on hand to make informed decisions.
To learn more about how STRATAFOLIO can help you manage your commercial real estate portfolio, schedule a 1:1 demo today.
