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 similar exemptions under the law*.
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.