Premium Tax and Recordkeeping
The tax mechanic
Colorado imposes a surplus lines premium tax measured by gross premiums charged on Colorado-home-state surplus lines policies, less premiums returned to the insured. The broker collects the tax from the insured at placement and remits it; the nonadmitted insurer does not file or pay Colorado premium tax, and the tax is not carved out of the broker's commission. Because only the home state may tax under NRRA, multi-state risks are not taxed piecemeal by each state.
Confirm the current rate and due dates in the statute and the Division's guidance rather than relying on memory - rates and filing calendars change. The annual filing is a sworn report of premiums written and tax due, and the tax must be paid on the prescribed schedule.
Recordkeeping
Build the file so a stranger can reconstruct the placement: the insured's name and address, the amount and terms sought, the authorized insurers contacted and their responses, the signed disclosure, the nonadmitted insurer's identity and domicile, the policy or certificate, the premium and tax calculation, and the remittance evidence. Retain the file for the period the statute and rules require, and produce it on request during a Division examination.
Traps
Computing tax on net-of-commission instead of gross premium; forgetting to credit returned premiums; treating collected tax as operating cash; assuming the insurer remits the tax; ignoring penalty and interest exposure for late filings.
Worked example
Gross surplus lines premium $48,000, returned premium $8,000. Taxable base is $40,000; at a 3% rate the tax is $1,200, collected from the insured and remitted with the annual report.