Florida lawmakers have slashed the state’s Business Rental Tax (BRT) three consecutive years and, apparently, will seek to do so again in 2020.
While no bills proposing to trim the BRT had been formally filed and numbered as of Tuesday, the Legislature’s Office of Economic and Demographic Research (OEDR) factored in an anticipated half-percent cut Monday in its final revenue estimating conference before the 2020 session begins Jan. 14.
In 1969, the Florida Legislature adopted the BRT, the nation’s only sales tax on commercial leases. The state’s Revenue Department estimated at least 150,000 businesses collectively paid nearly $2 billion in BRT in 2018.
Since 2017, lawmakers have whittled the BRT back from 6 percent to 5.5 percent, including a reduction in the sales tax from 5.7 to 5.5 percent adopted during the 2019 session that goes into effect on Jan. 1.
That 0.2 percent decline will save Florida businesses more than $64.5 million, according to Gov. Ron DeSantis’ office.
The BRT applies to retail, office and industrial leases but does not include hotel or apartment leases. It is imposed on base rent, plus any common-area maintenance fees, property taxes and payments for services such as utilities, parking, and janitorial services.
The granting of a license to use property for placement of ATMs, kiosks, vending, amusement, or newspaper machines is also taxable under BRT provisions. In sub-leasing contracts, the lowest level of sub-leasing is required to pay the sales tax.
Commercial leases and business rents are also subject to applicable local option sales taxes, which can range from 0.5 percent to 1.5 percent. Among counties that tack on a local BRT surtax is Miami-Dade, Broward and Palm Beach counties.
During the 2019 session, numerous proposals surfaced seeking to slash the BRT to as low as 3.5 percent, if not eliminate it altogether. The House Ways & Means Committee ultimately produced House Bill 7123, which trimmed it from 5.7 to 5.5 percent.
A similar gaggle of BRT-related bills is likely to emerge during the 2020 session, which prompted the OEDR to review numerous scenarios during its revenue estimating conference update that concluded Monday, which will provide the dollar-and-cent forecasts for lawmakers to work with when they assemble the state’s fiscal 2021 spending plan.
The most likely scenario is a half-percent BRT cut, lowering the sales tax to 5 percent beginning Jan. 1, 2021. Apparently, in fact, a bill pending formal introduction from an as-yet unnamed lawmaker will seek to do just that, according to officials during revenue estimating conference deliberations last week.
If the Legislature adopted a 0.5 BRT cut, it would save business owners at least an anticipated $829 million in over the next five fiscal years, according to the state economists’ projections.
Other BRT-reduction scenarios in addition to the half-percent cut were also considered, including anticipated proposals to exempt small businesses, ranging from four, nine, 14 and 19 employees, from the sales tax altogether.
If a measure exempting commercial entities with 19 or fewer employees from the BRT is adopted, state economists project it would save eligible small businesses at least $1.3 billion over the next five years.
There is, apparently, a pending measure in the offing seeking to exempt small businesses from the BRT, Division of Revenue Chief Economist Bob McKee told the panel on Friday, but it is uncertain how some businesses would be categorized.
“If you’re seasonal,” McKee said, “and for nine months of the year you have 25 employees, and for one month of the year, you only have two or three employees” it is unclear when “you meet that test” to qualify for the exemption.