North Dakota Surplus Lines Tax: Rate, Filing, and Penalties

North Dakota’s surplus lines tax is 1.75 percent of gross premiums on policies where the insured’s home state is North Dakota. Surplus lines producers remit the tax to the Insurance Commissioner with an annual tax statement due March 1, and they also file placement reports on a quarterly schedule throughout the year. The tax reaches premiums, policy fees, and service fees charged for coverage placed through the non-admitted market, less any return premiums.¹

What the 1.75 Percent Applies To

The rate is 1.75 percent, not 3 percent as sometimes reported. The statute sweeps in premiums, assessments, membership fees, subscriber fees, policy fees, and service fees. Return premiums (refunds for coverage terminated before the policy period ends) come off the top before the tax is calculated.¹

When a policy is cancelled early and the state has already credited or refunded tax to the producer, the producer owes that unearned tax back to the policyholder. The producer cannot rebate any portion of the tax for any other reason.¹

Why North Dakota Gets the Tax: the Home State Rule

Federal law decides which state can tax a surplus lines policy. Under the Nonadmitted and Reinsurance Reform Act, only the insured’s home state may collect premium tax on non-admitted insurance. For a business, home state means the principal place of business. For an individual, it means the state of principal residence.²

Two exceptions shift that rule. If 100 percent of the insured risk sits outside the state where the business or individual is based, home state moves to whichever state receives the largest share of the taxable premium. When several affiliated group members are named insureds on one policy, the home state belongs to the member with the largest premium share.²

The practical consequence: a North Dakota business insuring property scattered across multiple states still pays the full 1.75 percent to North Dakota on the entire premium, as long as its principal place of business stays in-state.

When the Insured Owes the Tax Directly

If a North Dakota insured obtains coverage straight from a non-admitted insurer without a licensed surplus lines producer, the statute treats the insured as the producer. The same 1.75 percent applies, and the insured takes on every filing, reporting, and payment obligation that would otherwise sit with a broker.¹

There is no lighter standard for self-procured coverage. The deadlines and penalties below apply the same way.

Filing Calendar

Two separate filings run on different schedules, and they are easy to confuse.

The report of placement, filed after each policy placement, endorsement, audit, or cancellation, is submitted on a quarterly schedule:¹

March 1, covering the quarter ending December 31
June 1, covering the quarter ending March 31
September 1, covering the quarter ending June 30
December 1, covering the quarter ending September 30

The annual tax statement is a separate filing due by March 1 each year, covering all surplus lines business transacted during the prior calendar year. It reports aggregate gross premiums written, aggregate return premiums, and total tax remitted. The tax payment itself is due with the annual statement. A producer who wrote no surplus lines business during the year does not need to file the annual statement.¹

The North Dakota Insurance Department runs an electronic surplus lines filing system that has replaced the older paper Report of Placement form. The annual tax statement and annual placement report can be filed through OPTins or mailed with a check to the Department in Bismarck.³

What Each Placement Report Must Contain

Every report of placement must include the insured’s name and address, the identity of the insurer or insurers, the premium amount charged, the premium tax amount, and any other information the Commissioner reasonably requires.¹

The electronic system walks producers through the required fields, including whether the insured qualifies as an exempt commercial purchaser. If the insured is not exempt, the system requires a completed Surplus Lines Affidavit before the filing can be submitted.³

Penalties for Late Filing or Nonpayment

A producer who fails to file a report of placement, an endorsement or cancellation update, or the annual tax statement faces a fine of up to $25 per day of delinquency, capped at $500 per violation. The Commissioner can pursue the unpaid tax and fine through a court action brought in the name of the state, with the attorney general representing the Commissioner.¹

The Commissioner may also revoke or suspend a producer’s surplus lines license for failure to file the annual tax statement, failure to pay the tax, or refusal to allow inspection of business records. A revoked license cannot be reissued for at least two years, and only after all outstanding taxes and fines are fully paid and the Commissioner is satisfied the producer will comply going forward. The Commissioner has discretion to waive all or part of a fine if the delay was excusable.¹

What the Tax Rules Do Not Cover

The 1.75 percent tax applies regardless of whether the insured qualifies as an exempt commercial purchaser; the exempt-purchaser rules change the diligent-search and disclosure process for placement, not the tax rate. Insurer eligibility standards (capital and surplus requirements for domestic non-admitted insurers, and the NAIC quarterly listing for alien insurers) are a separate gatekeeping step the producer confirms at placement; meeting them is a condition of writing the business, not a change to the tax owed.¹

1
North Dakota Legislative Branch. North Dakota Century Code 26.1-44 – Surplus Lines Insurance
2
Office of the Law Revision Counsel. 15 USC 8206 – Definitions
3
North Dakota Insurance Department. North Dakota Surplus Lines System User Guide