do we have to add sales tax to lease in commercial property

In Leasing Property - Asked by simon e. - Apr 4, 2012
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Michael F.
Owner/Investor
Annapolis, MD

in Florida you do

Apr 5, 2012
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William Z.
Property/Asset Manager
Arlington, TX

Your question is excellent as many brokers often fail to take into account excise/sales tax. In order to answer your question thou it is important to understand where your property is located. Excise/sales tax can be governed by mutiple govermental agencies to include state, county and city taxing authorities.
In one of the regions I operate - Phoenix Arizona - there is a excise tax on rent imposed by both the City and the County. The total impact is 2.2%. If you fail to includ this in the tenants lease the impact could be sustainal ovee the term of the lease.
You can research your local city, county and state taxing authorities to determine if your are required to charge excise tax for a commercial lease. Be sure to verify what sources of income are taxed often it can include all income late fees, hold-over, maintenance charges, damages on move-out.
One other point to consider is that if you find you are required to charge excise tax you should include verbiage that states you can change the rate without notice to meet any change imposed by the taxing authorites. This will protect youif new taxes are added or increased.
Hope this helps!

Apr 5, 2012
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