On 1 October 2025 Florida stopped charging sales tax on commercial rent. Not another rate cut. The tax is gone. Florida had been the last state in the country that taxed a business simply for occupying space, and as of that date it no longer does.
I have had this conversation with tenants many times since, and the reaction splits cleanly. Some saw their rent invoice drop the following month and knew exactly why. Others saw nothing change and quietly assumed the news did not apply to them. Both groups are usually wrong about what it means for their next negotiation, and that is the part almost nobody wrote about. The law firms covered this as a compliance memo. Fine. But compliance is not where the money is. The money is in what you now ask for across the table.
One thing up front, because this is a tax subject and I want to be honest about my lane. I am a broker, not a CPA or a tax attorney. What follows is how I read this as someone who negotiates leases for a living, and before you act on any of it you should put your own lease and your own returns in front of your accountant and let them confirm it.
What ended, and what the number actually was in South Florida
Right before repeal, the state rate on commercial rent was 2%. On top of that sat a county discretionary sales surtax, which ran roughly 0.5% to 1.5% depending on where the building was. For 2025, Miami-Dade County, Broward County and Palm Beach County each carried a total discretionary surtax of 1.0%. That put a South Florida commercial tenant at about 3% on rent. Three percent is what disappeared.
The Department of Revenue was explicit that both pieces went away together. Its guidance states that no state sales tax or discretionary sales surtax applies to rent or license fees for rental or occupancy periods beginning on or after 1 October 2025.
Here is an illustration, and I want to be clear this is arithmetic rather than a market rent quote. On a hypothetical $500,000 a year lease in a county with a 1.0% surtax, the old 2% state rate plus the 1.0% county surtax came to roughly $15,000 a year. Across a five year term, about $75,000 that used to leave the business every cycle and now stays in it. Swap in your own rent and the math scales straight.
What is still taxable
The repeal is narrower than most of the headlines let on. Sales tax and any applicable surtax still apply to:
- Rentals of living, sleeping or housekeeping accommodations for six months or less, meaning transient and short-term residential
- Parking or storage spaces for motor vehicles in parking lots or garages
- Docking or storage spaces for boats at docks and marinas
- Tie-down or storage space for aircraft at airports
So a restaurant operator leasing a building is clean. A tenant who leases office space and separately contracts for a block of garage spaces is not entirely clean, and I would look hard at how that parking line is papered. If parking is bundled into the premises versus billed as a separate license, the treatment is not obviously the same, and that is a question for your accountant rather than for me.
The rule people get backwards: occupancy, not payment
This is the one that generates real disputes, so I will state it the way the state states it. Tax is owed based on the period of occupancy, not the date the payment was made. The Department of Revenue put it plainly: "Rent or license fee payments for rental or occupancy periods through September 2025 are taxable even if payment is made on or after October 1, 2025."
Run that in both directions. A tenant who was behind and paid September 2025 rent in November 2025 still owed the tax on it. A tenant who prepaid in September for October occupancy did not. Neither result has anything to do with when the money moved.
The version that still bites people is the year-end true-up. If your 2025 operating expense reconciliation landed in 2026 and covers periods that include months before October, the pre-October portion of that reconciliation carries tax and the post-October portion does not. I have seen reconciliations that applied one rate across the whole year because it was easier for the property manager. That is exactly the kind of error a careful line-by-line lease audit is built to catch, and it is worth catching, because nobody is going to hand the money back unprompted.
Whether you felt this at all depends on your lease structure
Two tenants in the same building could have experienced this completely differently, and the reason is structure.
If you are on a triple net or a modified gross lease where the tax was itemized and passed through, you saw it. Your invoice has a line that used to say sales tax and now does not. Straightforward.
If you are on a full service gross lease, you may have seen nothing at all, because your landlord was the one remitting the tax on the gross rent and absorbing it inside a single number quoted to you. The savings landed on their side of the ledger. Your rent did not move. That is not necessarily wrong of them, and depending on how your lease is drafted they may be under no obligation to pass anything along. But it is leverage you did not know you had, and I would rather a tenant walk into a renewal knowing that their landlord's carrying cost on the space just dropped about three points. If you have never traced how your structure actually pushes costs around, the mechanics of a triple net structure are worth an hour of your time before you sit down with anyone.
The mistake I see is tenants assuming their landlord will volunteer the adjustment. Some do. Most restate the same number and move on.
It was never just base rent
Under the old regime the tax reached well past base rent. Florida treated payments required as a condition of occupancy as rent, which pulled in common area maintenance charges, real estate tax reimbursements paid to the landlord, and in certain cases the portion of an insurance premium that protected the landlord. Any consideration paid for the right to occupy or use the property was in the base.
That matters more than it sounds. If you are a retail tenant with a percentage rent clause, sales-based rent was consideration for occupancy under the same principle, so the tax followed it. If you are an industrial tenant in a building where the tax reimbursement is a large slice of your total occupancy cost, the repeal touched that slice too, not only your base. Ask your accountant to confirm how each of your charge categories was treated, then compare that against what your landlord is actually invoicing you now.
A tenant renewing today is negotiating against a different cost base
This is my favorite part of the story and the one that is genuinely actionable.
A tenant who signed in 2023 underwrote a deal where roughly 3% of every rent dollar went to the state and the county. A tenant signing today does not. That means the all-in occupancy number that felt like a stretch in 2023 is materially cheaper at the same headline rent in 2026. It also means that if your landlord opens a renewal at your existing rate plus an escalation, they are proposing that you absorb an increase on top of a cost reduction you already earned by law.
I would rather the conversation start from total occupancy cost than from base rent per square foot. That reframing is most of what good renewal and renegotiation work is, and the repeal handed tenants a clean, defensible reason to force it.
The other place I use this is with clients weighing whether to keep leasing or go buy their own building. Removing 3% from the annual cost of leasing narrows the gap a little in leasing's favor, so it is worth re-running rather than assuming. My own dataset of recorded arm's-length commercial sales from 2021 onward gives the buy side of that comparison a real floor. Miami office: 221 sales, $347 to $607 per square foot, median $447/SF. Fort Lauderdale office: 80 sales, $208 to $492, median $322/SF. West Palm Beach office: 101 sales, $199 to $538, median $314/SF. Those spreads are wide for a reason, and where a specific building falls inside them is the whole conversation.
On the industrial side the numbers are tighter and the decision is often cleaner. Doral industrial: 217 sales, $250 to $364 per square foot, median $307/SF. Hialeah industrial: 244 sales, $162 to $257, median $207/SF. When I work with warehouse and distribution tenants across those two submarkets, that gap is usually the first thing on the table, and post-repeal lease economics now sit next to it.
What I would do this month
- Pull your lease and find out whether sales tax was itemized to you or buried in a gross number. That single fact determines whether you already got the benefit or your landlord did.
- Pull twelve months of invoices. Confirm no tax has been charged on any occupancy period from October 2025 forward, including on CAM and tax reimbursements, not just base rent.
- Check your most recent operating expense reconciliation for a blended rate applied across a split year.
- If a renewal or an expansion is anywhere in the next twenty-four months, rebuild your occupancy budget without the tax before you respond to any landlord proposal.
- If you find an overcharge, raise it in writing, and have your CPA quantify it before you negotiate anything else.
None of this requires a lawsuit or a hard conversation. It requires reading your own documents with a specific question in mind, which most busy operators simply do not have time for. That is a fair share of what representing tenants looks like in practice.
Nothing has changed since the repeal took effect. It is still fully repealed, at both the state and county level, and I am not aware of any serious move to bring it back. What has changed is that a cost line every Florida business quietly accepted for decades is now gone, and the tenants who go re-open their numbers because of it will do better than the ones who read a headline and filed it away. If you want a second set of eyes on your lease or on where your building sits against the Miami-Dade sales data, that is the easy part.
Frequently Asked Questions
When exactly did Florida stop taxing commercial rent?
1 October 2025, under HB 7031. The repeal is based on the rental or occupancy period, not the payment date. Rent covering periods beginning on or after 1 October 2025 carries no state sales tax and no county discretionary surtax. Rent covering September 2025 or earlier remained taxable even if the tenant paid it months later.
What was the rate before the repeal in Miami-Dade, Broward and Palm Beach?
The state rate on commercial rent was 2% immediately before repeal, down from 6% at its peak. County discretionary surtax stacked on top, generally running 0.5% to 1.5% statewide. For 2025, Miami-Dade, Broward and Palm Beach each carried a total discretionary surtax of 1.0%, putting South Florida tenants at roughly 3% combined on rent.
My rent did not go down. Did my landlord do something wrong?
Not necessarily. On a full service gross lease the landlord remitted the tax on the gross rent and absorbed it inside one quoted number, so the savings landed on their side. Your invoice never itemized it and it did not drop. Whether they owe you an adjustment depends on your lease language, which is worth reading closely before your next renewal.
Did the tax apply to CAM and property tax reimbursements, or only base rent?
Florida treated payments required as a condition of occupancy as taxable rent, which reached common area maintenance charges, real estate tax reimbursements paid to the landlord, and in some cases the landlord-protecting portion of insurance. So the repeal touches more of your invoice than base rent alone. Confirm the treatment of each charge category with your accountant.
What commercial rentals are still subject to sales tax in Florida?
Four categories remain taxable: accommodations rented for six months or less, parking or storage for motor vehicles in lots and garages, boat docking or storage at docks and marinas, and aircraft tie-down or storage at airports. If your deal includes separately licensed parking or hangar space, that portion may still carry tax even though your premises rent does not.
How does the repeal change how I should negotiate a renewal?
Negotiate from total occupancy cost, not base rent per square foot. A tenant who signed in 2023 was paying roughly three percent more all-in at the same headline rate. If a landlord opens at your current rent plus escalation, they are asking you to absorb an increase layered on top of a statutory cost reduction. Say so.
Should I recheck my 2025 operating expense reconciliation?
Yes. Reconciliations covering calendar 2025 span both sides of the 1 October change, and the pre-October portion is taxable while the post-October portion is not. I have seen property managers apply one blended rate across the full year because it was simpler. Verify the split, and put any overcharge in writing once your CPA has quantified it.
