A Reduction in the Sales Tax on Commercial Leases is Coming to Florida
A reduction in the state tax on commercial leases could begin earlier than anticipated, perhaps as early as the summer.
The earlier estimate is due to the replenishing of the state’s Unemployment Compensation Trust Fund, which was all but emptied during the COVID-19 pandemic. A report just released by the State Legislature’s Office of Economic and Demographic Research showed that the unemployment fund should be refilled to its pre-pandemic level of $4 billion by March. This would be earlier than expected. This would trigger the reduction in the commercial lease tax to begin in June, rather than in August, the expected month for the tax reduction to take effect.
According to Tallahassee-based, Florida Tax, the reduction in the business rent tax from 4.5% to 2.0%, two months earlier, would result in about one billion annual tax savings for taxpayers.
And a new study, commissioned by Florida Realtors claims that if Florida spent $976.8 million to eliminate the Business Rent Tax altogether (BRT), it would bring a return on investment of $4 billion into the state’s economy in new business growth in the first year and more than $19 billion in five years.
That investment would lead to 58,000 new construction, operations, and maintenance jobs over its initial five-year period. A mathematical breakdown shows that for every dollar invested to eliminate the BRT, would in turn, bring back $6 dollars in new business activity.
“We’ve known for some time now that eliminating the Business Rent Tax would be beneficial to our state, but until now, we lacked solid data to help prove that,” says Gia Arvin, 2024 Florida Realtors president and broker-owner of Matchmaker Realty in Gainesville. “This study shows that if our state were to invest in getting rid of this tax, the return on that investment would be a tremendous boom to our economy and result in significant community growth throughout Florida.”
It is an irony that Florida, which is widely recognized as a low tax state, is the only state that taxes businesses renting commercial space. And within the state some localities levy further BRT taxes.
Small businesses are disproportionately hurt by this tax, as they are far mor likely to rent rather than own the space they are doing business in. Further, small businesses comprise the overwhelming majority of Florida employers.
Reductions in BRT taxes in the past from over 6% to 4.2% resulted in business expansion, the hiring of more employees, improved benefits, and raised salaries. According to the study, continuing the cutting of BRT taxes would result in greater and greater business expansion.