On June 30, 2025, Governor Ron DeSantis signed H.B. 7031 (the “Budget Bill”), that includes several important tax changes. The Budget Bill would repeal the commercial rent tax in Florida as of October 1, 2025.
- It updates Florida’s conformity date with the Internal Revenue Code to January 1, 2025.
- It extends the time frame for data center sales tax exemptions and implements a permanent August sales tax back-to-school holiday.
Background
As part of its budgetary process, the Florida legislature’s budget for the coming fiscal year includes several important tax provisions.
Commercial Rent Tax
A significant change in the Budget Bill is the repeal of Florida’s commercial rent tax. The tax imposed by Fla. Stat. § 212.031 applies to most commercial rent transactions, with specific statutorily enumerated exceptions. The tax rate on these transactions has been reduced over time, most recently from 4.5% to 2.0% in 2024. The bill eliminates this tax effective October 1, 2025.
Parties to commercial property rental or lease agreements should consider relevant payment terms. For example, advance payments made for rental periods on or after October 1, 2025, are no longer subject to sales tax even if collected from the tenant prior to that date.
Businesses should also note that some commercial rental transactions remain subject to sales tax in Florida, including short-term residential accommodation rentals along with leases and rentals of boat docks, aircraft hangars and parking spaces. These transactions are taxed under other statutory sections that remain in effect.
Conformity Date
The Budget Bill updates the date that the Florida Income Tax Code conforms to the Internal Revenue Code of 1986 (the “IRC”) from January 1, 2024, to January 1, 2025, thus incorporating changes to the IRC for the intervening period. Fla. Stat. § 220.01(2)(c) further provides that, “[a]ny term used in [the Florida Income Tax Code] has the same meaning as when used in a comparable context in the Internal Revenue Code and other statutes of the United States relating to federal income taxes….”, meaning that any changes to the IRC are generally incorporated into Florida law absent specific provisions to the contrary within the Florida Income Tax Code.
Data Center Sales Tax Exemptions
Fla. Stat. § 212.08(r)(2), applicable to data center property constructed after July 1, 2017, provides a sales and use tax exemption for property purchased or leased for use in a data center by the data center’s owners or tenants. A “data center”, pursuant to the statute, is a facility “…used exclusively to house and operate equipment that receives, stores, aggregates, manages, processes, transforms, retrieves, researches, or transmits data…” or is necessary for the proper operation of equipment that performs these functions. “Data center property” is defined to include a whole host of tangible personal property and fixtures that is used exclusively “…at a data center to construct, outfit, operate, support, power, cool, dehumidify, secure, or protect a data center and any contiguous dedicated substations.”
To qualify for the exemption under the statute, taxpayers had to meet minimum capital investment thresholds of $150M, as well as minimum power capacity thresholds dedicated to operating servers and related equipment. The Budget Bill increases the minimum power capacity threshold (referred to in the statute as a “Critical IT Load”) to qualify from 15 to 100 megawatts; this threshold must be met no later than five years after the construction of the data center. To qualify for the data center exemption, taxpayers must apply for a temporary tax exemption certificate from the Department of Revenue (the “Department”). The Department would issue such a certificate provided the application met the requirements imposed by the statute. The Budget Bill extends the sunset date after which the Department would no longer issue exemption certificates by 10 years from June 30, 2027, to June 30, 2037.
Forvis Mazars Insight: The extension of these provisions highlights the ever-increasing need for servers and equipment that can provide data processing capacity in the age of artificial intelligence. However, the substantial increase in the minimum power capacity thresholds could place the state at a competitive disadvantage compared to other states offering data center equipment exemptions at a lower power capacity threshold.
Sales Tax Holiday
The Budget Bill implements a permanent back-to-school sales tax holiday during the month of August. Sales of the following items will be exempt during the holiday: clothing selling for $100 or less per item; footwear; school supplies selling for $100 or less per item; learning aids and jigsaw puzzles selling for $30 or less per item; and personal computers and computer related accessories purchased for non-commercial use selling for less than $1,500 per item.
How Forvis Mazars Can Help
Forvis Mazars can help you understand the impact of these legislative changes on your businesses and help you update your processes to account for these changes.