How is surplus lines tax calculated in Texas?

In Texas, the surplus lines tax is calculated based on the gross premium charged on the policy. This means that the tax is determined by the total amount of money the insured pays for coverage, which includes the premiums for the insurance policy. This approach aligns with how taxes are typically assessed in the insurance industry, where the tax amount is directly proportional to the revenue generated by the insurance provider from the specific transaction.

Calculating the surplus lines tax in this manner ensures a straightforward and consistent method for determining tax obligations related to insurance transactions. It reflects the financial aspects of the insurance contract between the insurer and the insured, making it a fair representation of the taxable events occurring in surplus lines insurance.