The Miami Association of Realtors and Florida Realtors will be fighting to repeal sales tax on commercial leases at the upcoming legislative session in Tallahassee.

Florida imposes a 6% state sales tax on commercial rent and is one of the few, if not only, states to do so, said Danielle Blake, senior vice president of housing and government affairs for the Miami Association of Realtors. Ms. Blake said state sales tax for commercial rent generates about $ 1.5 billion annually.

Ideally, the association would like this tax repealed, Ms. Blake said, and if not, significantly lowered.

Commercial leases, she said, are subject to double taxation, with landlords separately invoicing a portion of ad valorem taxes, maintenance charges and insurance premiums to tenants. These charges are called pass-through expenses.

Ms. Blake said the association would like legislation to clarify that pass-through expenses are not taxable as rent.

Another issue the association is closely monitoring is the Department of Revenue’s drafted rules on taxing commercial leasehold improvements as rent. The department, according to the association, believes leasehold improvements are taxable as
rent unless the taxpayer can demonstrate:

•The improvements are needed to put the property in a condition for operation of tenants ‘ business.
•There is no requirement to spend a specific or minimum amount on improvements.
• No credit is given against rental payments.
•The improvements are not classified as rent, additional rent, rent in kind or in lieu of rent.
•There is no evidence that there was an attempt to reclassify rental payments to avoid tax.

“The issue that we have with that is the burden is on the taxpayer to prove these points,” she said. “We believe that it should be on the Department of Revenue to prove these points.”

Starting in March, the Tallahassee team will have 60 days for the legislation to be passed by both the House and the Senate and to reach the governor’s desk, she said.

Source:  Miami Today