Signed into law on June 30, 2025, House Bill 7031 eliminates the sales tax on commercial leases in Florida. Effective October 1, 2025, Florida will no longer be the only state in the country that imposes such a tax on commercial leases, a change expected to save commercial tenants billions of dollars annually. While the repeal is a welcome change for businesses, landlords and tenants should prepare to ensure a smooth and efficient transition.

Historical Background

Florida enacted Chapter 212.031, Florida Statutes, in 1969, imposing a 4% sales tax on rent charged under a commercial real estate lease. The rate fluctuated over the years, at times reaching 6%. Since 2016, the Florida legislature has focused on lowering the tax rate, reducing it to as low as 2% in July 2024. HB 7031 completes this process, permanently eliminating the tax on commercial leases.

What Does HB 7031 Do?

House Bill 7031 repeals both the state-level tax, currently at 2%, and optional local surtaxes, typically 1% – 1.5%, saving commercial tenants across Florida an estimated $2.5 billion annually. The repeal applies to office, retail, and industrial leases. Supporters expect the change to lower tenant costs, simplify compliance for landlords, and strengthen Florida’s business climate.

Importantly, the bill only affects rent due after October 1, 2025. Rent due on or before September 30, 2025, remains taxable, even if the payment is made after the October 1 deadline. However, prepaid rent for amounts due on or after October 1, 2025, will fall under the scope of the bill, and the sales tax should not be incorporated into the payment.

What Remains Taxable?

The repeal applies only to commercial leases governed by Chapter 212.031. Other property-related rentals remain subject to sales tax under Chapter 212.03, including:

• Short-term residential rentals (less than 6 months)
• Parking space rentals
• Self-storage rentals
• Boat slips and docking facilities
• Aircraft hangar leases

Landlords should confirm their lease does not fall under one of these categories before eliminating sales tax charges.

Key Considerations for Landlords and Tenants

Landlords and tenants should review current leases to determine the portion of rent subject to sales tax and ensure no tax is charged or paid after October 1, 2025. Lease templates and existing agreements should be updated to remove references to the commercial lease tax, unless relating to one of those leases that remain subject to tax. Landlords may want to issue notices to tenants to prevent confusion during the transition. Landlords and Tenants should also monitor their annual reconciliations for 2025 additional rent to confirm that sales tax is not applied to periods on or after October 1, 2025. Landlords should also confirm which parts of their portfolio, if any, remain subject to tax.

Final Considerations

The repeal of the tax provides commercial tenants with significant annual savings on their leases. Landlords and tenants should take action now to maximize benefits and ensure a smooth transition.