Gov. Ron DeSantis and the Florida Cabinet approved a reduction in the state’s Commercial Lease Sales Tax from 4.5 percent to 2.0 percent.

Gov. Ron DeSantis and the Florida Cabinet voted on Wednesday to decrease the state’s Commercial Lease Sales Tax in a move expected to provide an estimated $1 billion in tax relief.

The ratification reduces the state sales tax rate on commercial rentals from 4.5 percent to 2.0 percent, effective June 1, 2024, and stems from 2021 legislation mandating a tax reduction once the Florida reemployment tax trust fund returned to pre-pandemic levels, a metric reached in April 2024. Consequently, the Florida Department of Revenue set the June 1 effective date for the tax cut. This revision impacts rents for office space, retail locations, warehouses, and self-storage units.

“This reduction in the Commercial Lease Sales Tax is a huge win for Florida businesses,” said Florida Chief Financial Officer Jimmy Patronis in a prepared statement following Wednesday’s Cabinet meeting. “This is especially helpful to small business who often do not own their facilities like the big box stores. While Washington will tax and spend you to death, in Florida we work to keep more money in your pocket to help you grow your business.”

According to Patronis’ office, Florida initiated the replenishment of the state’s Reemployment Assistance Trust Fund in 2022 following the near depletion caused by increased reemployment assistance payments in 2020. Under the direction of the Florida legislature, the Florida Department of Revenue allocated $90 million monthly to restore the trust fund, which reached the $4.1 billion threshold in March.

As a preliminary action in the 2023 legislative session, the tax was decreased from 5.5 percent to 4.5 percent , coinciding with the onset of the fiscal year.

A February study released by the Regional Economic Consulting Group (REC Group) highlighted potential economic benefits of entirely eliminating Florida’s tax on commercial leases, suggesting a significant boost to the state’s economy.

According to the findings, doing away with the state’s commercial rent tax could lead to more than $19.7 billion in new developments statewide over five years, creating approximately 59,000 jobs in construction and related operations. The study projected an initial revenue loss of $976.8 million from the tax cut, which could be offset by increased tax revenues generated from the ensuing economic activities — $193.8 million from construction and $24.1 million from operations and maintenance.

“Eliminating this tax, even from the expected lower rate, would result in significant returns to the state economy,” reads the report. “While the full elimination presents a reduction to the State’s coffers, the full economic benefits to Florida’s economy more than exceeds the loss to the government.”

The analysis utilized a combination of static and dynamic models to assess both the immediate and long-term impacts of this policy change. It suggested that for every dollar lost in revenue, the state’s economy could grow by $6.52, a figure that improves to $8.39 when accounting for the new tax collections that would mitigate the initial losses.

“Nearly one thousand people move to Florida every day,” the report continues. “It is essential to remove this tax burden to allow for more investment in housing, retail, and development to support growth and keep Florida one of the top-performing economies in the world’s largest economy.”