I am an Illinois surplus line producer and my client, the insured, is a governmental entity. Do they have to pay surplus line taxes and fees?
There are no exemptions for any governmental entities from the surplus line taxes and fees anywhere in the surplus line laws or regulations*. Remember, surplus line taxes and fees are not, technically, levied upon the insured. They are levied upon you, the surplus line producer. You are permitted, but not required, to pass these costs on to the insured.
* There are, however, certain statutorily exempt classes including interstate railroads, interstate aircraft and wet marine policies.