is it cheaper to rent a car in milan or florence

While an airport or train station might have a "premium location" fee, the cost is usually the same to pick up and drop cars at any two cities in Italy that a rental company offers. Try Auto Europe for a price quote. For use in Tuscany, pick up the car at a train stop closer to your destination (Pisa, Siena, Chiusi?). If you search "car Florence" in the box above, you'll find several recent discussions on preferred pick up locations around that city.

For cheaper car rental, the best way is to use a consolidator.
Laura above mentioned Autoeurope.com.
You may also want to check the prices with their sister company Kemwel.com, also based in Portland, ME.
They are both part of the same parent company (TSI) and they work similarly, however generally Kemwel has better prices.
These two consolidators work primarily with the following 3 major global rental companies: Avis-Budget, Hertz and Europcar. In some cases they also work with Maggiore, the largest rental company in Italy.
Check the prices with both Autoeurope and kemwel and pick up the best deal available for your dates.
Picking up in Milan or Florence, should make no difference in price, however picking up at the airport will cost you more, because of airport fees. You can return at any location at no extra charge.
What should determine where to pick up your car is however your intended itinerary. If you plan for example to land in Venice, visit Venice then move on to Florence and lastly visit Tuscany's countryside, it would make sense not to rent a car until you are done visiting those two big cities because a rental car is totally useless in both Venice and Florence, since both have severe traffic restrictions enforced by cameras (and in the case of Venice, enforced by water).

Just like in the US, you have to shop around. You should look at Kayak, as well as AutoEurope, Gemut, and Kemwel, and the various company's own websites. Be sure you're comparing apples to apples - include insurance, taxes, etc to get the total real price. I know of two recent stories where Kemwel was significantly cheaper than any other rental, but of course that's no guarantee.

Thanks all, am I to understand that if I rent a car in one city in Italy and return it to another city in Italy, most car rental companies will not charge an additional fee/penalty?

how about if I pick up a car in italy and drop it in france?

NO DROP OFF charges if you return the car in a different city in the SAME COUNTRY (at least I never had to pay one and I often have a different drop off location).

However, there are HUGE DROP OFF CHARGES if you pick up in a country and RETURN IT IN ANOTHER COUNTRY. Don't do it, it's hundreds of Euros.