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Florida Is the Only State to Tax Commercial Leases

May 24, 2017

Florida Is the Only State to Tax Commercial Leases on morrissegroup.com

Politicians, business owners, realtors, and lobbyists are all baffled

While this notoriety can be blamed on ease of access to police blotters thanks to the state’s open records law, there’s another item that is uniquely Florida: We are the only state that imposes a sales tax on commercial leases.

The monetary benefit of the Business Rent Tax

Written into the state’s tax code in the late ‘60s, the Business Rent Tax (BRT) means businesses must pay a 6% state sales tax on their rent and any added costs to that lease, such as property taxes, maintenance fees, and insurance costs. On top of this, local governments can add an additional 1.5%.

In terms of the bottom line, the tax generates a lot of money for Florida. While the bulk of state revenue comes from the state sales tax, about $25 billion dollars in fiscal year 2015-2016, the BRT also contributes its share. Current estimates place the amount at $1.7 billion dollars, with a projection of $2 billion dollars by 2020.

These numbers are important to keep in mind since Florida’s constitution prohibits a personal income tax and we are state with many needs.

How the business rent tax hurts the state

Those opposed to the tax, including Governor Rick Scott, Florida TaxWatch, and the Florida Chamber of Commerce, believe the BRT puts Florida at a unique disadvantage. With the tax in place, there is little incentive for businesses to relocate to Florida.

For smaller businesses and start-ups, there is a disproportionate financial hardship. Some local retailers, for example, could pay more than $100,000 a year in taxes on their leases. Not only do these costs lead to a sluggish economy and suppressed job growth, the costs are passed down to consumers.

Florida realtors also oppose the BRT

Not surprisingly, the BRT hurts commercial real estate in Florida. Small businesses with limited capital, for example, are less likely to expand and more likely to lease spaces too small for their needs. They’re also less likely to hire employees and to provide competitive salaries for staff.

Florida Realtors has added its voice to that of the Governor and other groups to begin cutting the BRT. The organization’s findings indicate that in the first year of a complete repeal of the BRT, 185,000 jobs would be created and there would be a $20 billion economic impact.

Florida sits in the middle, and that’s unacceptable

To further illustrate the impact the BRT is having on the state, one only has to look at various rankings. Florida’s business ranking – determined by competitiveness, business costs, labor supply and other factors – placed the state in 13th place in Site Selection magazine and in 22nd place by Forbes.

In 2016, a small business friendliness survey placed Florida 15th among 35 states. That’s a B minus. Texas received an A plus, and neighboring Georgia, an A. In other words, businesses are more likely to turn to those states for opportunities, rather than the Sunshine State.

Morris Southeast Group responds to the BRT

For more than 25 years, Ken Morris has been dealing with the impact of the BRT on the commercial real estate market. It has been a headwind; stifling growth, innovation, and jobs. While the state, at the moment, may not be in a financial position to enact a complete repeal of the tax, it is in a position to begin reducing the tax so businesses and the Florida economy can grow and be competitive with other states.

It is our belief that Florida has so much to offer businesses – from our beautiful climate to cultural enrichment; from vibrant communities to a strong and eager workforce.

For a free consultation about commercial real estate opportunities in the area, contact Morris Southeast Group at 954.474.1776 or reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com

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