I am an Illinois surplus line
producer and my client, the insured, is tax exempt. Do they have to pay
surplus line taxes and fees?
The insured, probably a nonprofit or charitable organization, has one
or both of the following: (1) an exemption from the Illinois Retailers'
Occupation Tax -- commonly referred to as sales tax; (2) a Federal Income
Tax exemption. The surplus line tax is a completely different tax from
which there are no exemptions issued by the state, based on the insured's
IRS status*. Furthermore, the
surplus line tax is not, technically, levied upon the insured, it is
levied upon you, the surplus line producer. You have no exemption from this tax. You
are permitted, but not required, to pass the tax along to the insured.
* There are, however, certain statutorily
exempt classes including interstate railroads, interstate
aircraft and wet marine policies. See our
The materials and information contained herein are only synopses of laws,
regulations and other information and do not constitute legal advice. It is
recommended that you consult your legal advisers regarding application of
state and federal laws and regulations to any particular situation. The
Surplus Line Association does not undertake and hereby disclaims any
obligation to advise you of any change to laws and
regulations or the procedures of the Surplus Line Association.