Phase out the state sales tax on commercial leases
"Demand the Florida Legislature phase out the 6 percent sales tax on commercial leases."
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"Demand the Florida Legislature phase out the 6 percent sales tax on commercial leases."
As chief executive of the only state to tax commercial leases, Florida Gov. Rick Scott has repeatedly tried to eliminate this business cost.
As Scott campaigned for re-election, he promised to push the Legislature to repeal the 6 percent sales tax on commercial leases. The tax comes off of the total rent paid for any commercial property, including storefronts, offices and warehouses. It does not affect rentals for agriculture, nonprofits or government agencies.
With Scott's final legislative session behind him, we wanted to size up the state of this promise.
Here's the headline: The tax remains in effect.
Legislators did agree to pare it back a bit, but it's a fraction of what Scott hoped for.
Kurt Wenner, the vice president of research at Florida TaxWatch, said the initial 6 percent tax was cut to 5.8 percent in 2017, and taken down another notch to 5.7 percent with passage of SB 620 in 2018.
Florida TaxWatch has disapproved of the commercial lease tax for years.
"We do see it as a competitive disadvantage for Florida businesses that don't own their own property," said Kurt Wenner, TaxWatch's vice president of research.
Scott spokesman McKinley Lewis told us the reduced tax on commercial leases cost the state $90 million a year. Amy Baker, the chief economist for the Legislature, said in the 2019-20 fiscal year, when both reductions are fully implemented, business savings will be roughly $100 million. Baker said she wasn't sure where Scott's office got the $90 million number.
Scott initially asked the Legislature to shave off a half-percentage point of the tax in 2014, but it did not pass.
The tax has not been eliminated though Scott has signed legislation that lowered the tax rate by 0.03 percent. So we rate this Promise Broken.
Interview with Kurt Wenner of Florida TaxWatch, April 4, 2018
Email interview with Scott spokesman McKinley Lewis, April 2, 2019
As part of his $1 billion tax-cut wish list, Gov. Rick Scott has again recommended the Florida Legislature whittle down the state's sales tax on commercial leases.
This time he's got several lawmakers behind him.
Florida is the only state to levy this tax, a 6 percent charge on the total rent paid for any commercial property, including storefronts, offices and warehouses. Rentals for agriculture, nonprofits or government agencies are exempt.
In 2014, Scott asked the Legislature to shave a half a percentage point off the tax, which he has long advocated for eliminating entirely. The reduction wasn't in his budget proposal in 2015, but he revived it for his 2016-17 recommended budget. It's part of a package of suggested tax reductions that includes permanently repealing corporate income taxes on retailers and manufacturers and repealing the sales tax on manufacturing equipment.
Scott's proposal recommends dropping the state sales tax on rent to 5 percent for the 2017 calendar year. After that, the rate would be 5.64 percent. Over two years, that would reduce state revenue by $339 million, according to Scott's figures.
Several business and industry groups have rallied behind Scott, calling for the Legislature to pass the 1 percentage-point reduction. Florida TaxWatch has repeatedly opposed the tax, saying it "creates a disincentive for businesses to operate in Florida."
Scott had promised to phase out the tax entirely, which his proposed budget doesn't recommend. His office wouldn't elaborate for us about plans for the tax past 2017. But other lawmakers have their sights set on the tax, too.
State Sen. Dorothy Hukill, R-Port Orange, filed a bill last session to winnow the tax down to 5 percent, but it died in committee when the Legislature melted down during a deadlock over Medicaid expansion. In August 2015 she filed SB 116, which again aims to trim the rate to 5 percent. It has a companion bill in the House, HB 247, filed by state Rep. Heather Fitzenhagen, R-Fort Myers.
There's also a bill that would repeal the sales tax for good.
Rep. Larry Ahern, R-Seminole, filed HB 215 in September. His bill would allow exemptions to the tax retroactive to Jan. 1, 2016, reducing the taxable amount on rents until the tax is eliminated entirely in 2025.
Scott is again asking for a reduction in the commercial lease sales tax, and some state legislators are suggesting ways to make it happen. One of the bills would phase out the tax entirely. But until the Legislature takes action, we'll continue to rate this promise In The Works.
CBS Miami, "Bill Seeks To Cut Commercial Lease Tax," Sept. 28, 2015
Fort Myers News-Press, "Fort Myers Rep. Fitzenhagen seeks to cut lease tax," Sept. 28, 2015
Florida TaxWatch, "Analyzing the Governor's FY2016-17 Budget and Tax Recommendations," November 2015
Miami Herald, "Gov. Rick Scott will seek $1B in tax cuts from Florida Legislature," Nov. 5, 2015
Miami Herald, "Gov. Rick Scott's proposed 'Florida First' budget: $79.3 billion, tax cuts," Nov. 23, 2015
Sunshine State News, "Business Community Rallies Behind Rick Scott's Proposal to Cut Commercial Lease Tax," Dec. 17, 2015
Tampa Bay Times, "Bousquet: Gov. Rick Scott's $1B in tax cuts met with skepticism," Dec. 28, 2015
FloridaFirstBudget.com, "Tax Cuts Totaling Over $1 Billion for Florida Families," accessed Dec. 28, 2015
FloridaFirstBudget.com, "Policy and Budget Recommendations," accessed Dec. 28, 2015
FloridaFirstBudget.com, "Governor's Budget Recommendation — Implementing Bill," accessed Dec. 28, 2015
Florida House of Representatives, HB 215, accessed Dec. 28, 2015
Florida House of Representatives, HB 247, accessed Dec. 28, 2015
Florida Senate, SB 116, accessed Dec. 28, 2015
Florida Department of Revenue, "Sales and Use Tax on Commercial Real Property Rentals," accessed Dec. 28, 2015
Interview with Michael Williams, Florida House of Representatives communications director, Dec. 28, 2015
Interview with Jeri Bustamante, Scott spokeswoman, Dec. 29, 2015
With all of Gov. Rick Scott's focus on tax cuts, he left one out of his 2015-16 budget proposal: Florida's sales tax on commercial leases.
Scott asked for other tax cuts: He called for a major bite out of the communications services tax and asked the Legislature to make a current suspension of a manufacturing equipment sales tax permanent. But eliminating the commercial lease sales tax went unmentioned.
Lucky for Scott, it's possible the Legislature will end up cutting the sales tax on commercial leases anyway.
The state currently charges 6 percent on the total rent paid for any commercial property, including storefronts, offices and warehouses. Rentals for agriculture, nonprofits or government agencies are exempt.
Scott had asked for a half-a-percentage point reduction in 2014, but not this year. Instead he asked for a $470 million reduction in the communications services tax, which he may not get from lawmakers. The lease tax brings $1.4 billion into state coffers annually, which would leave a big hole in the budget, so any reduction would likely be gradual.
Scott's office has said he opted for the communications services change over the leases because it would help more Floridians directly. The lease tax only benefits commercial property owners.
State Sen. Dorothy Hukill, R-Port Orange, thinks both taxes can be downsized, although she has proposed a smaller reduction in the communications services tax (SB 110, filed in November 2014, cuts the communications services tax 2 percent vs. Scott's 3.6 percent) in order to allow a 1 percent reduction in the commercial leases tax (SB 140, also filed in November).
Bringing the lease tax down to 5 percent would be a first step, Hukill told PolitiFact Florida, because like Scott, she would like to see it phased out entirely. Reducing the tax, which Hukill said was the only one of its kind in the nation, would be especially helpful to the economy because employers could use the saved money to buy more equipment, expand businesses and hire workers.
If the Legislature wants to modify how much her bill lowers the tax, especially if it's to accommodate changes in the communications services tax, Hukill said she's open to that.
"I think it has a good chance to pass, but the most important thing is that it raises people's awareness about this tax," she said. "If it ends up being modified, I'll take a look at that when it comes up."
On Scott's promise, he didn't mention the commercial lease sales tax in his budget proposal, but Hukill did introduce a bill to cut it a percentage point. It's up to the Legislature to sort out which cut wins when the session begins March 3. We rate this promise In The Works.
Sarasota Herald-Tribune, "Lawmakers working on tax cut plans," Nov. 21, 2014
Governor's press office, "Gov. Scott Announces $100 Million Tax Cut on Business Rents as part of the 'It's Your Money Tax Cut Budget'," Jan. 28, 2014
Tampa Bay Times, "Gov. Scott proposes $77 billion budget with $673 million in tax cuts," Jan. 28, 2015
Tampa Bay Buzz blog, "Scott's tax cuts get early boost in Senate," Feb. 2, 2015
Tampa Bay Buzz blog, "Faceoff: Tax breaks for cell phone users, or commercial landlords?," Feb. 3, 2015
Florida TaxWatch, "Analyzing the governor's budget recommendations for FY2015-16," February 2015
Florida Department of Revenue, "Sales and Use Tax On Commercial Real Property Rentals," accessed Feb. 25, 2015
TrackBill.com, SB 110, accessed Feb. 26, 2015
TrackBill.com, SB 140, accessed Feb. 26, 2015
Interview with state Sen. Dorothy Hukill, R-Port Orange, Feb. 26, 2015
Interview with John Tupps, Scott spokesman, Feb. 26, 2015