As part of its fiscal year 2025-2026 budget (H.B. 7031), signed June 30, Florida is fully eliminating its commercial rent tax (CRT), effective Oct. 1, 2025. The CRT is a sales tax imposed on the rental, lease, or license to use real property. Currently, real property rentals are subject to a 2% state tax rate plus any local discretionary tax rate.

Procedural implications

While H.B. 7031 eliminates the CRT in its entirety, the effective date creates procedural implications that should be considered. Under the current law, CRT is due based on the “tax rate in effect at the time that the tenant or person occupies, uses, or is entitled to occupy or use the real property…regardless of when a rent or license fee payment is due or paid.” Accordingly, CRT is due on any prepaid rent that covers the periods through Sept. 30, 2025. For example, rental charges paid on July 1, 2025, that cover the period from July 1, 2025, through Dec. 31, 2025, will be partially subject to tax. The portion of the rent from July 1 through Sept. 30 will remain subject to the state’s 2% CRT plus the applicable local discretionary rate. However, the prepaid portion covering Oct. 1 through Dec. 31 will not be subject to any sales tax. (Note, the local discretionary tax is a surtax that is only applicable when a state-level sales tax is imposed; accordingly, the local tax will also be eliminated effective Oct. 1, 2025.) 

Be aware, moving payment due dates to post-October 1 will not change the application of the CRT. The statutory language clearly prohibits using variable deadlines to avoid the CRT: “The applicable tax rate may not be avoided by delaying or accelerating rent or license fee payments.” If the rental payment applies to periods prior to Oct. 1 and the tenant occupies, uses, or is entitled to occupy or use the property, then the CRT will accrue. 

Transient rental tax

It is important to clarify that the repeal applies only to commercial real estate rental tax and does not affect the state sales tax on transient rentals – those rentals or leases of living, sleeping, or housekeeping accommodations for six months or less. Transient rentals, such as hotel stays or short-term vacation rentals, will remain subject to state and local tax.

What does CohnReznick think?

The repeal of CRT is a significant milestone for Florida businesses. Any businesses or taxpayers engaged in the rental, lease, or licensing of commercial real property in Florida should make note of the upcoming change. 

Keep in mind, obtaining a refund of any prepaid CRT applicable to periods after the effective date will likely require proof that the lessor has credited the tax back to the lessee. A close review of lease agreements, billing practices, and accounting systems will be critical to support proper handling of sales tax through and after the transition date.