As of 2026, only a few U.S. jurisdictions impose a tax on commercial rent, and the list of states that charge sales tax on commercial rent is shorter than most tenants expect. Hawaii applies its 4% General Excise Tax to commercial lease income statewide. New York City levies a Commercial Rent Tax with an effective rate of 3.9% on tenants in lower Manhattan. Several Arizona cities collect a Transaction Privilege Tax on commercial leases. Florida, which for decades was the only state with a dedicated sales tax on commercial rent, fully repealed that tax effective October 1, 2025.
Hawaii
Hawaii has no traditional sales tax, but its General Excise Tax reaches commercial rent in a way no other state’s system does. The GET is technically imposed on the business collecting the rent rather than on the tenant, but landlords routinely pass it through to tenants as a separate line item on lease invoices. The statewide rate is 4%, and some counties add a surcharge on top.1Hawaii Department of Taxation. General Excise Tax (GET) Information Maui County, for example, imposes a surcharge that brings the combined rate above 4.7%.
The practical effect: expect roughly 4% to 4.7% added to your rent depending on which island your space is on. Because the GET is calculated on the landlord’s gross income, it can apply to the pass-through amount itself if the lease allows it, creating a slight compounding effect that surprises some tenants on their first invoice. Commercial landlords in Hawaii cannot avoid the tax by restructuring the lease, because the GET reaches nearly all business activity in the state.
New York City
New York City imposes a Commercial Rent Tax on tenants who occupy space for business purposes in Manhattan south of the center line of 96th Street. The tax applies when annualized gross rent reaches at least $250,000. The statutory rate is 6%, but every taxpayer gets an automatic 35% base rent reduction, which brings the effective rate to 3.9% of base rent.2NYC Department of Finance. Business Commercial Rent Tax – CRT
Small Business Credit
A meaningful carve-out exists for smaller tenants. The small business tax credit effectively exempts tenants whose total income is $5 million or less and whose annual base rent (before the 35% reduction) is under $500,000. Tenants with total income between $5 million and $10 million and base rent below $550,000 receive a sliding-scale credit that phases out as income rises. Once income hits $10 million or rent reaches $550,000, the credit disappears entirely.3NYC311. Commercial Rent Tax “Total income” for this purpose is the figure reported to the IRS on the prior year’s federal return.
Filing
Tenants subject to the CRT file quarterly returns on Form CR-Q, due within 20 days after the end of each quarter, plus an annual return on Form CR-A covering the tax year from June 1 through May 31 and due by June 21. If your annual gross rent is below $200,000 and you don’t receive at least $200,000 from a subtenant, no filing is required.3NYC311. Commercial Rent Tax
Arizona Cities
Arizona handles commercial rent taxation at the local level rather than statewide. Its Transaction Privilege Tax system lets individual cities and certain counties tax commercial property rentals. Five counties require landlords to collect and remit county-level taxes on commercial leases: Coconino, Gila, Maricopa, Pima, and Pinal.4Arizona Department of Revenue. Commercial Lease Some cities layer on their own commercial lease tax; others don’t tax commercial leases at all.
Rates vary significantly by city. Phoenix imposes a base commercial lease rate plus an additional 0.10% on nonresidential rental income.5Arizona Department of Revenue. Phoenix Transaction Privilege Tax and Use Tax Rates The Arizona Department of Revenue publishes a full rate table covering all 91 program cities, and landlords should confirm the current figure for their specific location.6Arizona Department of Revenue. Arizona State, County and City Transaction Privilege and Other Tax Rate Tables Any business engaged in commercial leasing must hold a TPT license from the state, and may need a separate city or town business license as well.7Arizona Department of Revenue. TPT License
Taxable commercial property in Arizona includes office buildings, stores, factories, farmland, parking and storage facilities, and banquet or meeting rooms. Agricultural property and anything used for residential purposes is excluded. Landlords file and remit through AZTaxes.gov, adding the appropriate county and city line items.4Arizona Department of Revenue. Commercial Lease
Florida (Repealed October 1, 2025)
Florida spent years as the only state with a dedicated sales tax on commercial real property rentals. The rate dropped from 4.5% to 2.0% in June 2024, and the legislature then eliminated the tax entirely. Effective October 1, 2025, no state sales tax or discretionary sales surtax applies to rent for commercial rental periods beginning on or after that date.8Florida Department of Revenue. Sales Tax on Commercial Rentals Repealed
Timing controls the transition. A tenant who paid August 2025 rent late in October 2025 still owed the 2% state tax plus any county surtax, because the rental period began before the repeal date.8Florida Department of Revenue. Sales Tax on Commercial Rentals Repealed Any outstanding disputes, audits, or refund claims for pre-repeal periods are still governed by the old rules.
What Counts as Taxable Rent
Where commercial rent is taxed, “rent” means more than the base monthly payment listed in the lease. Under a triple net lease, the tenant pays property taxes, building insurance, and maintenance costs on top of base rent. Taxing authorities treat those pass-through charges as part of the total consideration for occupying the space, so they’re taxable too.
Utility payments routed through the landlord rather than paid directly to the utility can also fall into the taxable amount depending on lease structure. Common area maintenance charges in shopping centers and office parks generally get the same treatment. The safest working assumption is that any payment flowing from tenant to landlord in connection with occupying the space could be taxable, then work backward to identify specific exclusions.
The tax covers only the right to use real property, meaning the land and permanent structures. Movable equipment, furniture, and inventory are personal property and fall outside the commercial rent tax. If your lease bundles an equipment charge with your space rental, separate the amounts on the invoice so the tax only hits the real property portion.
Common Exemptions
Nonprofit and Government Tenants
Tax-exempt organizations can avoid commercial rent tax by documenting their status. In Florida’s pre-repeal framework (still relevant to audit disputes), organizations recognized under Section 501(c)(3), religious institutions with an established place of worship, schools and universities, veterans’ organizations, and government agencies all qualified for exemption. The federal government itself didn’t need an exemption certificate in Florida, though many federal agencies obtained one for convenience.9Florida Department of Revenue. Nonprofit Organizations and Sales and Use Tax Similar categories exist in Hawaii, New York City, and Arizona, though qualifying groups and required documentation vary.
Subleasing and Resale Certificates
A tenant renting space solely to sublease it can generally avoid tax on the master lease by giving the landlord a resale certificate. The tax gets collected once, from the end user. Under Florida’s pre-repeal rules, the prime tenant gave the landlord a copy of the Annual Resale Certificate for Sales Tax, then collected and remitted tax on what they charged the subtenant. If the prime tenant kept part of the space for their own use, they owed tax on that portion and could take a prorated credit for tax already paid to the landlord.10Florida Department of Revenue. Sales and Use Tax on the Rental, Lease, or License to Use Commercial Real Property Fraudulent use of a resale certificate carries both criminal and civil penalties.
Buying a Business in a Taxing Jurisdiction
Acquiring an existing business in a jurisdiction that taxes commercial rent creates a hidden risk: you may inherit the seller’s unpaid tax obligations. In many states, the buyer of a business assumes liability for outstanding sales or transaction taxes the prior owner failed to pay. The standard protection is to withhold enough of the purchase price to cover potential tax debts until the seller provides an official tax clearance letter from the relevant authority.
If you’re buying a business that operates in Hawaii, lower Manhattan, or an Arizona city that taxes commercial leases, ask the seller to obtain that clearance before closing. A buyer who skips this step and later discovers unpaid obligations has very little recourse; the liability follows the business assets, not the former owner’s promise that everything was current.