Surplus lines insurance plays a critical role in covering risks that admitted carriers won't touch. But with this specialized coverage comes a complex web of tax obligations that vary significantly from state to state.
What Are Surplus Lines Taxes?
Surplus lines taxes are levied by states on insurance premiums for policies placed with non-admitted carriers. These taxes compensate states for the regulatory oversight they provide and help fund various state insurance programs.
State-by-State Variations
Each state has its own surplus lines tax rate, and these can range from 0% in some states to over 6% in others. Additionally, many states impose additional fees:
- **Stamping fees**: Charged by state stamping offices for processing and filing
- **Fire marshal fees**: Additional charges in certain states
- **FSLSO fees**: Florida's unique assessment structure
Key Changes for 2026
Several states have updated their surplus lines requirements for 2026:
- **Montana** transitioned to SLIP+ For States starting January 1, 2026 for all new filings
- **California** maintains its 3.0% tax rate plus 0.18% SLSF assessment
- **Illinois** continues using SLAI (Surplus Lines Association of Illinois) for electronic filings
- **Texas** requires all filings through SLTX with its 4.85% premium tax rate
Compliance Best Practices
To stay compliant with surplus lines tax requirements:
- Maintain accurate records of all policy transactions
- File on time—most states have strict deadlines
- Use the correct tax rates for each state
- Keep up with regulatory changes
- Transition to new electronic filing systems as required
How arqu Helps
Our platform automatically calculates the correct taxes for all 50 states, stays updated with rate changes, and generates filing-ready documents. This eliminates manual calculations and reduces the risk of errors.