As you’ll soon be receiving Operating Expense reconciliation statements, we wanted to bring to your attention a frequently overlooked sales tax charge on electric. Florida, as you may recall, imposes a sales tax on rent. Most leases provide that the tenant reimburses the landlord for electric utility charges. As part of that pass-thru of electric charges and where the landlord has already paid the electric charge with sales tax, the landlord cannot seek sales tax from the tenants.
The relevant language in the Florida statutes (i.e., section 212.031 (7)) can be found here:
“Utility charges subject to sales tax which are paid by a tenant to the lessor and which are part of a payment for the privilege or right to use or occupy real property are exempt from tax if the lessor has paid sales tax on the purchase of such utilities and the charges billed by the lessor to the tenant are separately stated and at the same or a lower price than those paid by the lessor.”
Most tenants are unaware of this issue. Many landlords act as if they are.
Don Wenig
Blackacre Advisors LLC
info@blackacreadvisors.com
312-345-4778
DISCLAIMER. Our writings are from a real estate transaction perspective and for informational purposes only. Nothing herein shall be considered legal, accounting, tax, or architectural advice. Please consult with the appropriate professional(s).