Tag Archive for: sales tax

UPDATE: Sales Tax On Commercial Leases

/in /by

The 2013 Session is in full swing and much of the discussion is about the tight budget.

While the Florida Legislature is not starting with a deficit as they have in the past many years, there is very little wiggle room.  As most everyone knows, a full repeal of the sales tax on commercial rents is scored as a cost of approximately $1.3 billion.  The Florida Realtors’ bill sponsors introduced a phase out of the tax over six years to minimize that fiscal impact.  They meet with legislators EVERY day about this priority and while the merits of the public policy are being embraced across the board, there are still concerns with the fiscal impact of a total phase out.  Knowing the state budget will only get better, they have raised the idea of lowering the sales tax from 6% to 5% this year and then they can come back next year and continue the work (it gets them the same short term positive impact but the fiscal is lower when not including  4%, 3%, 2%, 1% and then eventually total repeal in the current bill).  Legislative leaders do appear more open to this option for the current session, but they would still need to help them find the $90+ million that this would cost in year one.

No matter what they advocate this year, the Florida Realtors organization is laying the groundwork for a full repeal over the next few years.  They want to see some positive movement in the current session on this issue though.  Therefore, they have drafted four potential amendments to the current legislation with the hope of getting that positive movement.

You can read the current legislation by going to the organization’s Legislative Tracker and scrolling down to HB 629 or SB 656.  Again, as introduced, this legislation provides for a phase out of the sales tax on commercial leases over six years.

The four amendments they have drafted as potential back up options would replace the six year phase out with one of the following:

  1. Lowering the sales tax from 6% to 5%.  As mentioned above, this still costs over $90 million in the first year (with Jan 1, 2014 start date) and over $216 million in successive years.
  2. Repealing just the sales tax paid on property tax.  Legislative staff are assuming property taxes are approximately 4.5% of rent receipts.
  3. Removing the sales tax on CAM charges (legislative staff believe this costs more than option 2 or 4).
  4. Removing the sales tax on property insurance.

The sales tax on commercial rents issue WILL be one of the top talking points for Great American Realtor Days.  Join them at the Capitol on April 9 & 10.  It is expected that the House bill will be on the agenda of the House Finance & Tax Subcommittee prior to then.  There will be a call for action when it is cleared for the agenda.

 

Source:  Florida Realtors

Realtors Fight To Repeal State Sales Tax On Leases

/in /by

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