House Bill 7109 for Florida Sales Tax on Rent

From the desk of Jennifer Kobylarz, CPA, MST
Florida Statute §212.031 currently imposes a 6% sales tax on rents received for the right to use real property. The applicable sales tax rate for rents is currently 6% in all counties except for Miami-Dade, where the rate is 7% due to a 1% county add-on option. Over the past several years there have been multiple attempts by lobbyists to encourage the state to phase out the sales tax on rents. However, these attempts have failed. The likely reason for these failed attempts is that the State of Florida heavily relies on sales tax revenues to fund the annual budget. The National Law Review cites that sales tax revenue made up 78.5% of all the revenue supporting the 2016-2017 fiscal budget for the State of Florida. House Bill 7109 provides a light reprieve for renters.
House Bill 7109 was approved by Governor Scott on May 25, 2017. Part of this bill reduces the applicable sales tax rate on rents from 6% to 5.8% (or from 7% to 6.8% for Miami-Dade County).
This reduction will take effect on January 1, 2018. The language of the bill is being debated by many. For instance, the National Law Review has taken the stance that this rate reduction will only apply to leases executed on or after January 1, 2018. On the other hand, Williams Parker Harrison Diets & Getzen (Williams Parker), a law firm based in Sarasota, FL believes that the reduced rate will apply to current leases for periods after December 31, 2017. This is based on a direct discussion regarding the state’s interpretation of the bill with a representative of the Florida Department of Revenue.
The state has not yet issued guidance on the implementation of the reduced sales tax rate; however, based on the language and direct wording of the bill we tend to agree with Williams Parker’s conclusion. The bill states that the rate is effective “at the time that the tenant or person occupies, uses, or is entitled to occupy…” the property. The bill further states that this is true regardless of when rents are due or paid, meaning that rents cannot be delayed or accelerated in order to take advantage of or avoid the new tax rate. This means that rents due for January 2018 occupancy, regardless of when paid, will be subject to the lower rate.
Our team will keep you updated of any further developments.

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