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Premium Tax - Surplus Lines
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For information about the filing policies or the stamping fee, please contact the Surplus Lines Stamping Office of Texas.
Section I — Total Business Reported to the Surplus Lines Stamping Office of Texas (SLSOT) as the agent of record.
The Nonadmitted and Reinsurance Reform Act of 2010 went into effect July 21, 2011. This Act created a split year for tax-reporting purposes, applying prior law to policies placed before July 21 and compliance with the NRRA for policies placed on or after that date. These instructions address only post-NRRA tax return completion.
Item A — Texas premiums — Enter the total Texas premiums, net of returned premiums, for policies reported to the SLSOT during the tax year, where Texas is the home state of the insured.
Item B — Texas premiums — Enter the total Texas premiums, net of returned premiums, for policies NOT YET reported to the SLSOT during the tax year, where Texas is the home state of the insured.
Item C — Non-taxable premiums — Enter the non-taxable premiums, net of returned premiums, and whether or not reported to the SLSOT, for policies where Texas is the home state of the insured and where the premiums are exempt or preempted from taxation.
Item D — Other states' premiums — For multi-state policies where Texas is the home state of the insured, enter the total premiums, net of returned premiums, included in Item A that cover risks located outside of Texas. Texas is entitled to tax on 100% of the policy premium when Texas is the home state of the insured; however the reporting of premium by state for risks covered under a multi-state policy is requested for data collection purposes.
Note: Premium reported to the SLSOT in the "Breakdown of States Summary" also includes premium reported to other states.
Item E — Non-taxable premiums — This category does not apply to policies that are effective on or after July 21, 2011.
Item F — Other states' premiums — This category does not apply to policies that are effective on or after July 21, 2011.
Section II — Tax Base Election
Surplus lines agents who received a license during the reporting year must elect one of the tax base options shown.
Title 34 TAC, Rule §3.822, provides specific information on the requirements for reporting surplus lines tax. Agents have the option of reporting tax using a premium-written or premium-received basis and may change their election every four years. An agent who changes from a premium-received to a premium-written basis will owe taxes on all outstanding receivables as of January 1 of the year of the change.
If a tax base election is not made, the premium-written basis is the default.
Section III — Calculation of Premium Tax Due
These premiums will not necessarily match the premiums shown in Section I, because they are based on the premium and tax reporting method chosen in Section II.
The term "premium" includes all premiums, premium deposits, membership fees, registration fees, assessments, dues and any other consideration received for surplus lines insurance.
Texas premiums include premiums written or received for new or renewal Texas or multi-state policies when Texas is the home state of the insured.
Endorsements and audits on surplus lines insurance policies, whether generating additional premium or resulting in a return of premium, must be reported for the tax year in which the endorsement or audit occurs. Do not report these transactions for the tax year in which the original policy was reported. The tax for endorsements and audits that generate return premiums due a policyholder must be calculated using the tax rate that was originally charged.
Exempt premiums are premiums for a surplus lines policy that covers risks or exposures that are properly allocated to federal waters, international waters, or risks or exposures that are under the jurisdiction of a foreign government. Effective Jan. 1, 2014, premiums on risks or exposures under ocean marine insurance coverage of stored or in-transit baled cotton for export are exempt from surplus lines premium tax.
Federal preemptions to state taxation for surplus lines insurance include premiums for policies issued to the following entities: the Federal Deposit Insurance Corporation (FDIC), when it acts as the receiver of a failed financial institution that holds the property being insured; the National Credit Union Administration; a federally chartered credit union; and Indian Tribal Nations. Refer to Publication 94-142 (PDF).
Texas returned premiums - Report the unearned portion of the premium credited or refunded to a policyholder as a result of cancellation or premium adjustment prior to the policy expiration. An agent reporting on the premium received basis will not have returned premiums.
Section IV — Calculation of Premium Tax Due for Purchasing Groups
Purchasing groups obtaining coverage from insurers licensed in Texas or surplus lines agents licensed in Texas do NOT owe tax on this report, but must file a zero report.
Purchasing groups obtaining coverage independently through negotiations and procurement occurring outside Texas are subject to tax on the premiums paid for coverage of their members located in Texas.
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