When examining Florida’s tax landscape, the Business Rent Tax (BRT) stands out as a tax that creates a clear competitive disadvantage for the state’s businesses. Florida is the only state that levies a statewide sales tax on commercial rents. This creates a government-mandated increase in occupancy costs of up to 7.5 percent, which does not exist in other states. Occupancy costs are one of the top factors cited by executives and site selection consultants in making location decisions.
A reduction in the BRT would be broad-based, benefiting a large number of businesses. All businesses that rent commercial real estate pay the sales tax on those rents, regardless of their profitability or financial shape. Reducing the sales tax would help be a significant help to struggling companies. It would also help new businesses, who may find that other startup costs rule out purchasing real estate as an option.
Eliminating the BRT tax would be a long-term proposal, due to the large revenue loss. Florida relies very heavily on transaction taxes—especially the sales and use tax—to fund government. The sales tax provides 77 percent of all GR. Eliminating the BRT would take some major restructuring of the state’s revenues and expenditures. However, under the current budget outlook, and with the stated intention of both the Governor and Legislature to provide significant tax relief this upcoming session, there is an opportunity to at least reduce the BRT.
Florida TaxWatch recommends that the Legislature enact a reduction of at least 1 percent in the 2016 Regular Session, lowering the rate from 6 percent to 5 percent. We also recommend that future legislatures continue to work to eliminate this tax.
Among all the options for tax reductions that will be considered by the 2016 Legislature, reducing the business rent tax, along with making the sales tax exemption for manufacturing machinery and equipment permanent, are the best options.