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State Tax

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The current state surplus line tax rate is 3%.
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The link to the CDI tax forms is located on the Broker page of this website or you can visit the CDI's website: http://www.insurance.ca.gov/0250-insurers/0300-insurers/0100-applications/tax-forms-instruct-and-info/index.cfm.

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The due date for surplus line taxes is to be calculated from the surplus line broker's "invoice date" rather than policy effective date. The invoice date may not be more than 60 days after the policy effective date. Note: The effective date of the policy is used to determine the basis for the tax (such as whether to apply the prior law that taxed only the California portion of the premium, or the law effective 7/21/11 which taxes the entire premium for California home state placements). Refer to CIC Section 1774(d)(3).
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Every surplus line broker must make an annual state tax filing. The amount of state tax is 3% of the California taxable surplus line premium transacted by the broker, for California home state insureds, from January 1st to December 31st of the previous year. This form must be completed by all brokers, regardless of whether business was transacted. For additional information regarding the filing of state tax returns, contact the California Department of Insurance Premium Tax Audit Bureau at premiumtaxaudit@insurance.ca.gov.
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California does not send invoices for payment of the state tax.  The broker is responsible for paying taxes on time.
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The state tax is payable to the California Department of Insurance and the address is included in their tax return instructions. The stamping fee is paid to the Association after the broker receives an invoice from the Association.
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The Annual Statement and Tax Return, with payment, must be sent to the California Department of Insurance, postmarked on or before March 1st following the end of the calendar year. When the due date falls on a Saturday, Sunday, or State or Federal legal holiday, the statement, tax return, and payment are considered timely if postmarked on the next business day. Please refer to the CIC Section 1775-1775.9.
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Effective January 1, 2015, every surplus line broker whose annual tax for the preceding calendar year was $20,000 or more shall make monthly installment payments. Refer to CIC Section 1775.5 through 1776.

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Brokers whose annual tax is over $20,000 are required to participate in the electronic funds transfer program. To register as an EFT taxpayer, contact the CDI's EFT Unit at: (916) 492-3288.
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Beginning tax year 2013, individually licensed and endorsed surplus line brokers who transact or write business solely on behalf of a surplus line organization were no longer required to file a Zero Premium Tax Return. Instead, all surplus line organizations were required to include a list of endorsed surplus line brokers who transacted business on their behalf, including each broker’s name and license number, with the organization’s Annual Statement and Tax Return.

Beginning tax year 2013, surplus line brokers who delegated the responsibility for filing the Confidential Report of Placement (SL-1 form) to another surplus line broker(s) pursuant to Section 1774(b) of the California Insurance Code were no longer required to file a Zero Premium Tax Return. All delegated surplus line brokers were required to list those surplus line brokers who delegated this reporting function on their behalf, including each broker’s name and license number, on their Annual Statement and Tax Return.

All surplus line brokers with active licenses not named on another surplus line broker's Annual Statement and Tax Return, and all special line brokers with active licenses who did not transact surplus line or special lines surplus line business beginning with tax year 2013, are required to file a Zero Premium Tax Return.
 
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If a broker fails to pay state tax by the due date, it will result in a penalty of 10% of the amount of payment due, plus an interest rate of 1% per calendar month (or fraction thereof) until the payment is received by the Commissioner. More severe penalties may be imposed for "willful" violations.
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Line 15 is for the calendar year  - even if the premium reported is non-taxable - and is for informational purposes only. The amounts reported may not necessarily reconcile with the other lines. However, the reasons for the differences should be noted on the return.

  • Line A: Total amount of taxable and non-taxable Gross Premium (i.e., not including returned premiums) for California Home State Insureds
  • Line B: Single State risks in California. For the most part, reconciles with Line 10 (single state gross premiums). Note any differences.
  • Line C: Multi-State risks. The percentages should equal 100% of the total premium risk allocated to California and to each other state for the entire year. If percentages do not equal 100% due to non-U.S. risks or other reasons, please note in your tax return filing.
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California does require a direct placement tax from the consumer for coverage placed on their own, for their own property, with a surplus line insurer. Refer to Bulletin #621