Eliminating the Florida sales tax on commercial leases could save shopping center owners $220 million in tax savings.
On Sept. 12, Florida Governor Rick Scott hosted a listening tour in Jacksonville, Fla., to discuss the various tax reduction strategies he plans to implement in the upcoming legislative session. Due to a budget surplus, Gov. Scott has called for an election-year cut of $500 million in taxes and fees. Amongst the proposed tax cuts is the opportunity to eliminate the sales tax on commercial leases.
While entirely eliminating the 6 percent sales tax on commercial leases is not feasible, the governor did suggest that the opportunity to reduce the sales tax by 1 percent annually has gained growing support throughout Florida.
Employers in the retail sector are responsible for approximately 800,000 jobs in Florida, yet these employers pay taxes on their commercial leases, significantly preventing their expansion. Multiple retailers believe that this tax has, in some instances, prevented the expansion of three to five additional business locations. Each of these locations could be responsible for the addition of 40 to 50 new jobs and new tenants in your shopping center. For instance, one grocer reported that they could open five new stores if this tax was not in place.
Florida remains the only state in the country that continues to impose a tax on commercial leases. If the state were to begin the process of phasing out this tax by 1 percent per year — an approximate $220 million in savings — it would incentivize employers to open new locations in Florida and thus create more jobs and opportunities for shopping center owners to gain new business.
In addition, the elimination of this tax would allow current businesses more capital to hire new employees and expand. Imagine the law firms, manufacturing plants and other businesses that could put more people to work if this tax was not imposed.
As a result, those new employers and employees would require homes, which would increase the property tax base and they would be capable of buying various goods and services — thus creating even more tax revenue.
Eliminating the sales tax on commercial leases over the years to follow is a great step in the right direction for Florida retailers and shopping center owners. With Governor Rick Scott’s support, we can return $220 million dollars in tax savings to shopping center owners and retail employers. This will strengthen Florida’s retailers and shopping center owners by: lowering the cost of expansion, removing the barrier to out of state retailers, creating jobs and disposable income to consume more goods and services locally, and creating an increased housing demand and real estate tax base for local Florida communities. It’s encouraging to hear the governor is behind this great opportunity and I’m sure that retailers and shopping center owners will welcome these savings with open arms.
— Nick Prevolos is an investment associate with Franklin Street, based in the firm’s Jacksonville office. He specializes in commercial investments sales and can be reached at [email protected].