A lease occurs when "there is a transfer of possession of tangible personal property, without regard to limitations upon the use, for a consideration, without a transfer of title to the property." There are two main types of tangible personal property leases; operating, and conditional-sale. The essence of the terms of the lease determines the type of lease. The essence of the lease involves a company's written contract and standard leasing practices. Tax must be paid on both types of leases based on the gross proceeds derived.

A conditional-sale type lease occurs when substantially all the risks and benefits are transferred and when ownership is possible at the end of the lease. For a conditional-sale type lease, all the tax is due at the inception of the lease agreement unless the property does not come to rest in this state until a later date. For a conditional-sale type lease that is originally initiated outside of Florida, tax is due on the date when the property is brought into Florida.

An operating lease occurs when there is little likelihood that ownership will transfer to the lessee. For this type of lease, tax payments are due over the course of the lease when payments are received/due.

A registered dealer with an Annual Resale Certificate can purchase tangible personal property tax-exempt if the property will be exclusively used for leasing purposes. However, if the property is ever converted to ones's own use, then tax must be paid at the time of conversion. If the property is going to be leased and used by the purchaser, then tax must be paid at the time of the purchase as well as when the property is leased.

A lease of tax exempt services is possible. For example, when a boat is chartered with the crew included and the charterer has no control over the boat, it is considered a service transaction and exempt from tax on the rental of tangible personal property. However, tax applies to a rented or leased "bare boat". A "bare boat" has no crew provided in the lease agreement.

Commercial Real Property:

Real property is defined as "the surface land, improvements thereto, and fixtures." Real property is also referred to as "realty" and "real estate." Payments made as rent for the right to use or occupy commercial real property are subject to tax. As always, there are exceptions to the basic rule. Examples of exempt rental payments include: property assessed as agriculture and property used exclusively as dwelling units. For a list of exempt properties see Rule 12A-1.070(1). If a lessee subleases commercial real property, the lessee must collect tax on the sublease. The lessee is only required to remit the amount of tax collected in excess of the amount the lessee already paid on the sublease on a pro-rated basis, which is usually based on square footage.

Careful consideration should be given to whether the lease qualifies as a purchase. If the lease qualifies as a purchase, there is no sales tax due as real property sales are exempt from tax. This is an issue that should be determined on a case by case basis, preferably by a tax professional, as there are multiple tax implications for a real property lease that qualifies as a sale.

Residential Real Property:

The general rule is the lease or rental payments of residential real property are taxable unless specifically exempted. If a residential real property lease is for a continuous period of longer than six months, the lease payments will not be taxed. Another example of an exempt lease of real property involves amounts paid to "institutions designed and operated primarily for the care of persons who are ill or aged" or "for any reason dependent upon special care or attention." Day nurseries and kindergartens are also not required to collect tax. Rental payments paid by "military personnel currently on active duty and present in the community under official orders" are exempt.