The South Carolina surplus lines tax is a blended 6% premium tax on coverage placed with non-admitted insurers, combining a 4% state broker’s premium tax with a 2% municipal broker’s premium tax into a single payment collected by the Department of Insurance.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance The licensed surplus lines broker who handles the placement is responsible for collecting the tax and remitting it. When an insured procures coverage directly from a non-admitted carrier without a broker, that duty shifts to the insured.
The 6% Rate and How It’s Built
The rate lives in the definitions section of the statute. S.C. Code § 38-45-10(13) sets a “broker’s premium tax rate” of 6%, which is a 4% state component plus a 2% municipal component.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance The Department collects the full 6% as one payment. There is no separate municipal filing to worry about, and the municipal portion is not optional. Older references that quote only the 4% state figure are incomplete.
What the 6% Applies To
South Carolina defines the taxable base broadly. Under § 38-45-10(12), “premium tax” reaches any tax, fee, assessment, or charge imposed on any payment made as consideration for an insurance contract. That includes premium deposits, assessments, registration fees, and other compensation given in exchange for coverage.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance In practice, the 6% attaches not just to the base premium but to ancillary charges built into the policy cost.
Return premiums are not taxed. Section 38-45-20(5) excludes return premiums and dividends paid or credited to policyholders when computing total premiums subject to tax, and any resulting credit must be refunded to the policyholder.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance A mid-term cancellation that generates a return premium reduces the tax obligation for that period.
Who Pays: Broker or Insured
In a typical placement, the licensed surplus lines broker collects the tax from the insured, files the report, and pays the Department. The Code requires brokers to report their business records for statistical, tax collection, and distribution purposes.2South Carolina Department of Insurance. Surplus Lines Broker Section 38-45-20(5) ties the payment duty to the conditions of licensure, so failing to remit can jeopardize the license itself.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance
When coverage is arranged without a broker, § 38-45-10(7) classifies it as “independently procured insurance” — insurance procured directly by an insured from a surplus lines insurer.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance In that case, the reporting and payment responsibilities move to the policyholder. This is uncommon for personal lines but shows up regularly with large commercial buyers who negotiate directly with non-admitted carriers.
When the Tax Is Due
Surplus lines taxes are due quarterly, within 30 days after the close of each calendar quarter. The four deadlines are April 30, July 30, October 30, and January 30.3South Carolina Department of Insurance. Frequently Asked Questions – Surplus Line Taxes Brokers also file an annual report of all surplus lines business transacted during the calendar year, due within 30 days after December 31.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance
Filings go through the Department of Insurance’s online tax application. South Carolina does not participate in the NAIC’s OPTins system, so filings cannot be routed through that centralized national portal.4National Association of Insurance Commissioners. OPTins State Participation Keep the electronic confirmation receipt after payment as proof of timely compliance.
Penalties for Missing a Deadline
p>The penalty structure focuses on payment, not paperwork. The Department does not currently impose a penalty for a late-filed report; the online system will prompt for a late-filing reason, but no fine attaches to the report itself. The consequence lands on late payment. If the tax is not received by the due date, the Department automatically assesses a $200 administrative penalty.3South Carolina Department of Insurance. Frequently Asked Questions – Surplus Line Taxes
A separate enforcement statute applies when a deficiency is uncovered later. Under § 38-7-120, if fees and taxes owed exceed what was paid, the balance must be remitted within 15 days of notice. Missing that window triggers a 5% penalty on the amount due, plus interest at 5% per month, capped at 25% total, running from the original due date.5South Carolina Legislature. South Carolina Code 38-7-120 – Late Payment of Insurance Fees and Taxes; Penalties; Return of Excess Payment Interest accumulates quickly at that rate, so catching an underpayment before an examination does matters.
Multi-State Risks: Only the Home State Taxes
Federal law prevents multiple states from taxing the same surplus lines placement. Under 15 U.S.C. § 8201(a), only the insured’s “home state” may require premium tax on nonadmitted insurance; no other state can collect a share.6Office of the Law Revision Counsel. United States Code Title 15 Section 8201 – Reporting, Payment, and Allocation of Premium Taxes If South Carolina is the home state, the full 6% applies to the entire premium even when some covered property or operations sit in other states.
The home state is generally where the insured maintains its principal place of business, or for individuals, their principal residence. For affiliated groups, it is determined by whichever member has the largest share of premium attributed to it. If none of the risk is located in the insured’s principal-place-of-business state, the home state becomes the state to which the largest share of taxable premium is allocated. Brokers and self-procuring insureds file a tax allocation report with the home state showing the portion of premium attributable to each state’s risks.
Records You Have to Keep
South Carolina requires surplus lines brokers to maintain full and correct records of every policy placed, including policy number, date, term, amount insured, premium, and the name of the insured. These records must be kept for at least five years.1South Carolina Legislature. South Carolina Code Title 38 Chapter 45 – Insurance Brokers and Surplus Lines Insurance The Director of Insurance can demand access to these records at any time, and the books must be open to inspection on demand. The Department can also conduct formal examinations under Chapter 13 of Title 38, and the broker bears the cost of the examination. Clean, accessible records over the full five-year window are the practical defense against the $200 automatic penalty and the compounding interest that can follow a discovered deficiency.