Florida is the only state that imposes sales tax on the lease of commercial real property. Over the last several years, this tax rate has been reduced in increments from 6.0% to 5.5%. Under recently enacted legislation, this rate will be further reduced to 2.0%. However, this rate reduction will not go into effect until two months after Florida’s Unemployment Compensation Trust Fund is replenished to pre-pandemic levels. Depending upon future unemployment claims, Florida economists estimate this may occur in 2024 or 2025. The 3.5% reduction is estimated to save commercial tenants approximately $1.2 billion annually. The local sales tax portion of the commercial rent tax is not changed by the new legislation.
On April 19, 2021, Florida Senate Bill 50 was enacted into law. The legislation modernizes Florida’s sales and use tax system and imposes tax collection obligations on remote sellers and marketplace providers. Among the many reforms in the new legislation is the imposition of sales tax on “remote sales” and requiring tax collection by sellers lacking a physical presence in Florida. Remote sellers (seller with no physical presence in Florida) are required to collect Florida tax if they have in excess of $100,000 of retail sales for delivery into Florida in the previous calendar year. The new legislation also extends these sales tax collection obligations to marketplace providers that facilitate and collect payment for sales made by remote sellers utilizing their platform. In such instances, the marketplace provider, rather than the remote seller, would collect and remit Florida sales tax. These remote seller and marketplace provider obligations become effective July 1, 2021.
The new legislation also provides a “safe harbor” from potential past Florida tax liability. A remote seller required to collect and remit Florida tax under the new legislation will be relieved from liability for tax, penalty, and interest due on remote sales made before July 1, 2021, if they register with the Florida Department of Revenue before October 1, 2021. A similar safe harbor is provided for marketplace providers.
Governor Ron DeSantis signed House Bill 7123 on May 15, 2019, which reduces the state sales tax rate on commercial real property leases from 5.7 percent to 5.5 percent effective January 1, 2020. Prior legislation reduced the general 6 percent state sales tax rate for commercial real property leases to 5.8 percent for 2018 and to 5.7 percent for 2019. There is no reduction to the local option surtax, which is imposed in 0.5 percent increments by many Florida counties. So, for example, effective January 1, 2020, the applicable rate for commercial real property leases in Sarasota County would be 6.5 percent (5.5 percent level sales tax plus Sarasota County’s 1 percent local option surtax).
We previously blogged that the Florida Legislature enacted a reduction to the state sales tax rate on commercial real property leases from 6% to 5.8% effective January 1, 2018. The language of the new statute is unclear as to whether the rate decrease would apply to current leases. However, we have confirmed with a representative of the Florida Department of Revenue that they interpret the rate reduction as applying to current leases for periods after December 31, 2017.
Governor Rick Scott signed House Bill 7109 on May 25, 2017, which reduces the state sales tax rate on commercial real property leases from 6% to 5.8% effective January 1, 2018. However, this rate decrease will not apply to current leases, because the bill provides that the tax rate in effect at the time the tenant occupies or uses the property is applicable, regardless of when a rent payment is due or paid. The bill does not change the local option sales tax, which is imposed in 0.5% increments. So, for example, the applicable rate in Sarasota County for leases commencing on or after January 1, 2018, would be 6.8% (instead of the current 7%). Florida is the only state that charges sales tax on the lease of commercial real property.
The Florida Department of Revenue recently issued a Technical Assistance Advisement (“TAA”) clarifying the applicability of sales tax to certain equestrian supplies. The TAA explains that the sale of veterinary drugs, substances, or preparations that are required by federal or state law to be dispensed only by prescription are exempt from sales tax under the general prescription medicine exemption. Non-prescription substances or preparations are taxable. Feed for livestock, which includes all animals of the equine class (including racehorses), is also exempt from sales tax. Exempt feed includes equine joint supplements. Sales of equine insect and fly repellant are exempt as sales of pesticides used directly on livestock. Finally, sales of insect or fly masks and fly sheets are taxable.
A link to the ruling is here: https://revenuelaw.state.fl.us/LawLibraryDocuments/2015/09/TAA-120175_15A-011%20redacted%20_%20summay%20RLL.pdf Michael J. Wilson email@example.com 941-536-2043
Yesterday, in American Business USA Corp. v. Department of Revenue, the Fourth District Court of Appeal for Florida ruled that the Florida Department of Revenue could not impose sales tax on sales of flowers and other tangible personal property made by a Florida corporation over the internet to out-of-state customers for out-of-state delivery. The taxpayer would use “local florists” to fill the out-of-state orders, and so the flowers and other inventory items were never stored in or brought into Florida. The court concluded that the sales did not have “substantial nexus” with Florida, and therefore imposing tax on the sales violated the dormant commerce clause of the US Constitution.
A link to the case is below: