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This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.

Picture a buyer acquiring a Florida services business that operates out of leased space — a few thousand square feet in a strip center, a standard five-year lease with a renewal option, nothing exotic. The buyer’s diligence team pulls the lease, builds the rent into the model, and ticks the box. For years, a careful reviewer would have caught a quiet extra: Florida charged sales tax on commercial rent, the only state in the country to do so, and that tax flowed through the tenant’s monthly obligation. As of October 1, 2025, that line item is gone. The instinct is to treat its disappearance as one less thing to worry about. On a deal that closes in 2026, the repeal is actually a reason to look harder, not less, at the lease.

What changed, precisely

House Bill 7031, signed at the end of June 2025, repealed the sales tax on commercial real property rentals imposed under Section 212.031 of the Florida Statutes. The repeal took effect for rental or occupancy periods beginning on or after October 1, 2025, and it eliminated both the state rate and the discretionary local surtax that rode on top of it. The rate had been falling for a while — Florida stepped it down in stages over several years before zeroing it out — so a tenant whose lease has been running since, say, 2022 has seen the rent tax charged at several different rates and then drop to nothing partway through the term.

That history matters because the repeal is not retroactive. Rent attributable to occupancy periods before October 1, 2025 stays taxable even if the tenant pays it late. So the cutover is clean going forward and messy looking backward, and an M&A deal is exactly the kind of transaction that has to look backward.

The repeal creates a pre-closing liability question

Here is the first thing the repeal changes for a deal. When the target is the tenant, every dollar of pre-October-2025 rent carried a tax obligation that the landlord was supposed to collect and remit, and that the tenant was supposed to pay. If the target failed to pay the tax on rent for periods before the cutover — or if the landlord collected it and never remitted — that is an unpaid sales-tax exposure sitting on the books, and it does not evaporate because the tax was later repealed prospectively.

On an equity deal, the buyer inherits that exposure directly, because the entity carries it. On an asset deal, the buyer can inherit it through the sales-tax successor-liability rules, which let the state look to a buyer of business assets for the seller’s unpaid sales-and-use tax unless the buyer withholds enough of the price or obtains a clearance. Either way, “the rent tax is gone” is the wrong takeaway in diligence. The right takeaway is: the rent tax is gone going forward, so confirm it was actually paid and remitted for every period before the cutover, and price or escrow anything that was not.

The repeal also changes how the lease economics read

The second thing the repeal changes is subtler and shows up in the rent roll. Many Florida commercial leases were drafted to pass the sales tax through expressly — the tenant pays base rent “plus all applicable sales tax” — and a lot of additional-rent and common-area-maintenance provisions grossed up the tenant’s payments to cover it. Now that the underlying tax is zero, those clauses should resolve to nothing, but lease language does not update itself.

So a buyer’s lease review in 2026 should confirm three things. First, that the landlord has actually stopped billing sales tax on rent for post-cutover periods, because a tenant still being charged a repealed tax is overpaying and the diligence model is overstating occupancy cost. Second, that any percentage-rent or CAM calculation that historically folded the tax into a gross number has been re-based, so the buyer is not projecting an inflated expense forward across the hold period. Third, that the estoppel certificate the buyer collects from the landlord reflects the current, tax-free rent rather than a stale figure, because the estoppel is the document the buyer will rely on if there is later a dispute about what is owed.

None of this changes the assignment mechanics

It is worth being clear about what the repeal does not touch, because a buyer can over-read a tax change and assume it loosened something it did not. The repeal has nothing to do with whether the lease is assignable. The landlord’s consent right, the conditions on assignment, the recapture or profit-sharing provisions, the personal guaranty the original tenant signed — all of that survives the repeal untouched. A buyer acquiring the business still has to get the lease across to the new owner on the lease’s own terms, and on a Florida deal that landlord-consent process is frequently the long pole in the closing tent.

If anything, the repeal makes the consent conversation marginally easier on the economics — the landlord is no longer collecting and remitting a tax on the rent, which removes one administrative wrinkle from the assignment — but it does not give the buyer leverage it did not have. The covenant the buyer wants in the purchase agreement is still the seller’s obligation to obtain landlord consent as a closing condition, plus a representation that the lease is in good standing and that all rent and, for pre-cutover periods, all rent tax has been paid. That representation is where the repeal quietly lands in the contract: it converts a former recurring tax into a discrete, bounded, pre-closing item that the seller reps to and the escrow can backstop.

The practical sequence for a 2026 closing

Put together, the repeal reorders the lease-diligence checklist rather than shortening it. First, read the lease for the assignment and consent mechanics, exactly as before — that has not changed. Second, separate the rent history at the October 1, 2025 line and confirm that all sales tax on pre-cutover rent was paid and remitted, treating any gap as a successor-liability item to escrow or offset. Third, confirm the post-cutover rent and any pass-through clauses now read to zero tax, and re-base the model so the buyer is not carrying a phantom expense across the hold. Fourth, pull the estoppel certificate and the seller’s tax representation into alignment with the current, tax-free number.

The likely outcome of doing this work is undramatic — most leases will check out, the pre-cutover tax will have been paid, and the buyer will simply have a cleaner model. But the deals that go sideways on this are the ones where a tax that everyone assumed was “just gone” turns out to have an unpaid tail, and the buyer who skipped the backward look inherits it. The repeal is a real win for Florida tenants. On an M&A deal it is a diligence item, not a diligence shortcut.

The interaction between lease assumption and the broader risk allocation in a purchase agreement is something our M&A practice works through deal by deal, and the way these representations and escrows get negotiated tracks the larger pattern of seller-friendly versus buyer-friendly terms. The Florida Department of Revenue’s guidance on the repeal is .

If you are buying or selling a Florida business that leases its space and want to think through how the rent-tax repeal lands in your diligence, feel free to reach out to my firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.