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Three Reasons Why Florida Commercial Real Estate Owners May Want to Continue Filing State Tax Returns
Until recently, Florida was one of only a few states that imposed its sales tax on the rental of real property. Although there were exemptions for longer-term residential rentals and leases of agricultural properties, the law generally applied to any lease or license to use real property. This changed when the Florida Legislature repealed the sales tax on most real estate leases effective Oct. 1, 2025. (The tax remains in place on short-term residential rentals and amounts paid for parking motor vehicles, docking watercraft and hangaring aircraft.)
Some real estate projects may file a final sales tax return in October to report sales tax on rents related to September 2025 occupancy, the final month the sales tax on commercial leases was effective. However, there are three reasons why owners of commercial real estate projects may want to consider filing sales tax returns for three more years, even if they are merely “zero” returns. These reasons, in order of potential importance, are:
- Tax Clearance Certificate for Sale of Project: Although the sales tax on real estate rentals ended Oct. 1, the Department of Revenue has three years from the date a monthly sales tax return was filed to audit and assess back taxes, penalties, and interest. Therefore, liability for pre-October 2025 sales taxes might stretch out until mid-October 2028. When a Florida business is sold — including commercial real property — the buyer assumes liability for sales tax obligations as a successor, unless a certificate of compliance (commonly known as a tax clearance certificate) is obtained from the Department of Revenue. Consequently, the purchaser of Florida commercial property might still expect the seller to deliver a certificate of compliance. The potential sticking point is that the Department of Revenue might not issue a certificate of compliance if the seller has not been filing sales and use tax returns. The department might come out with guidance agreeing to issue a certificate for periods ending before October 2025 without the need to continue filing returns but has not yet done so. Consequently, until the department clarifies this issue, a seller of a project may want to file monthly tax returns showing “zero” taxable sales for the next three years to obtain a certificate of compliance.
- Separate Parking Fees: Although the sales tax on commercial real property rentals has been repealed, the sales tax on charges for parking motor vehicles remains in place. If a commercial project charges a separately stated fee for parking as part of the lease payment, the operator may be required to collect the sales tax on the parking fees. Accordingly, a real estate project such as this may still need to collect sales tax on the parking fees and file monthly sales tax returns.
- Late Rental Payments: Despite the Oct. 1 repeal of Florida’s tax on commercial rentals, the tax is still generally due on payments for occupancy periods prior to October 2025. Accordingly, if a tenant is behind in their rent, and makes a delinquent payment for a pre-Oct. 1 occupancy period, sales tax may be due, and a return may need to be filed.
While Florida’s repeal of the state commercial rent tax has recently gone into effect, owners of commercial real estate projects may still want to consider filing sales tax returns for a few more years. Even if no tax is owed, filing a sales tax return could be beneficial in the event a project is sold, and a certificate of compliance is required. In addition, collecting and filing sales tax may still be necessary for commercial projects that charge for parking in their leases, as well as any projects that receive late rental payments for a pre-Oct. 1 occupancy period.
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