Bill Herrle: Cutting commercial rent tax is good; repealing it would be better

Financial tax cuts or reduce concept, miniature people businessmen handshaking standing on TAX minus button on calculator with background of blurred US Dollar bills, discuss tax overhaul policy.

By now, Florida businesses should have received letters from their landlords saying the tax rate on their commercial rents and leases will be cut to 2% on Saturday, June 1.

My organization, the National Federation of Independent Business, strongly supported the 2023 legislation that slashed the sales tax on commercial leases from 5.5% to 4.5% effective Dec 1, 2023,  and will further reduce it to 2% on June 1 of this year.

We’d like to see it fall to zero in 2025.

When lawmakers return to Tallahassee in January, our small business members will encourage them to eliminate this onerous tax once and for all.

Under the legislation taking effect on June 1, the average Florida Class A commercial lease is going to save $900 a year on every 1,000 square feet that’s rented. The savings for a Class B commercial will be $670, while employers with Class C commercial leases are going to save $475.

That might not sound like a lot, but it adds up.  Every 1% rate cut of the sales tax on commercial leases returns approximately $400 million to Florida small-business owners. That’s a lot of money, especially now, when small businesses are contending with inflation that continues to drive up the cost of everything from raw materials to shipping to shopping bags.

And it’s a burden that’s unique to businesses that operate in Florida. There isn’t another state in the union that makes businesses pay a tax on their monthly rent. Even a business owner who owns their business property under another legal entity must pay the tax when they pay rent from one wholly owned entity to another.

Imposing a sales tax on commercial leases hinders a common asset-building strategy for our local job creators, making it more difficult for them to expand their operations, create new jobs and raise wages. That’s why NFIB has been key-voting this issue in Tallahassee for years.

NFIB will not stop until the sales tax on commercial leases is eliminated. It’s estimated that repealing the business rent tax would save Florida businesses and consumers over $1 billion a year.

This is a tax that the Florida Legislature could eliminate. The last few years have seen record revenues coming into the state coffers. It’s more than past time to take a small portion of those record revenues and return them to the job creators.

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 Bill Herrle is the executive state director of NFIB in Florida.