Premium Tax, Stamping Fees, and Reporting
Premium tax
Michigan imposes a surplus lines premium tax on gross premiums. The surplus lines agent is responsible for reporting and remitting the tax; it is not a commission deduction and is not calculated on net premium after commission. The tax is separate from the insurer’s premium and from any association stamping fee. Multistate placements require attention to NRRA home-state allocation and any applicable compact or allocation rules.
Stamping fees
A stamping fee is an administrative charge associated with surplus lines filing or review, often collected through the surplus lines association. It is not a premium tax and should not be reported as tax. Whether a fee applies depends on the filing channel and association rules; the agent should show it separately in the file and on the invoice.
Reporting
Surplus lines agents must file required reports with DIFS and maintain records supporting premiums, taxes, and placements. Late or incomplete reporting, missing zero reports, and failure to reconcile policy premiums to tax remittances are common examination findings.
Worked example
A policy has a $10,000 gross premium. At the statutory tax rate of 2.5%, the premium tax is $250. If a separate $50 stamping fee applies, it is billed and recorded separately. The agent does not deduct its commission before calculating the $250 tax, and it reports the gross premium on the required return.
Traps that cost marks
Calculating tax on net premium; treating the stamping fee as tax; ignoring returned premium adjustments; missing filing deadlines; and failing to allocate a multistate premium correctly under home-state rules.