Fees, commissions, claim-related services – what’s taxable, what’s not? Before you insure, be sure you ensure you’re covered.
Taxable services have long been confusing to Texas taxpayers. It’s no different for insurance services. The Comptroller’s Office offers the following guidelines for sales and use tax.
Fees charged by insurance agents in lieu of traditional commissions for procuring insurance coverage for their clients are exempt from Texas sales and use tax if the fees are subject to gross premiums taxes under the Texas Insurance Code. They are taxable for sales and use tax purposes, however, if they are not subject to the premiums tax.
Ancillary services that include some taxable insurance services (claims-related and risk control services), which are provided by an agent together with procurement services, but not billed separately from the procurement services, are taxed or exempt from tax in the same way the procurement services are taxed. Fees for providing taxable insurance services that are billed separately from and over and above the amount paid for procurement services are subject to tax.
In addition, insurance agents and brokers are liable for sales and use tax on purchases of taxable insurance services secured from third-party providers, for use in conjunction with obtaining insurance coverage for clients. The agent or broker is still liable for the taxes even if the charges will be passed to the client as part of the fee for the procurement services.
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