7.1 Definition of Premium & the Taxable Base

Every tax and fee calculation starts with one question: what is premium? Outline item II.C.1 tests that definition directly, and getting it wrong breaks every calculation that follows. Florida defines premium broadly to include most charges made for the insurance contract, with a short list of exclusions.

The Statutory Definition

Sections 626.932(6) and 626.9325(6) use the same core definition:

"Premium" means the consideration for insurance by whatever name called and includes any assessment, or any membership, policy, survey, inspection, service, or similar fee or charge in consideration for an insurance contract, which items are deemed to be a part of the premium.

Both sections then add:

• the per-policy fee authorized by s. 626.916(2), charged by the filing surplus lines agent, is specifically included in premium; and
• for the tax under s. 626.932(6), the service fee imposed under s. 626.9325 is excluded from premium.

The key phrase is "by whatever name called." Relabeling a charge does not take it out of premium if it is consideration for the insurance contract.

What Is In and What Is Out

Premium and the Service Fee

The service fee statute uses the same definition of premium, including the s. 626.916(2) per-policy fee, so the service fee is computed on the same base as the tax. The only difference in the tax definition is that it expressly excludes the service fee from the tax base. The service fee is never charged on itself or on the tax.

Return Premium and Rate Changes

Return premiums reduce the taxable amount. A cancellation or reduction endorsement produces a tax credit and service fee credit at the rate that applied to the original policy. The FSLSO determines the rate by the effective date of the new or renewal policy, not by the transaction date:

• a policy effective before July 1, 2020 was taxed at 5%, and its later endorsements and cancellations use 5%;
• a policy effective on or after July 1, 2020 uses 4.94%; and
• the service fee likewise follows the policy's inception date: 0.06% for policies effective April 1, 2020 to June 30, 2026, and 0.03% for policies effective on or after July 1, 2026.

Worked Example 1: Commercial Package, Effective September 1, 2026

1. Taxable premium = $36,000 + $400 + $250 = $36,650.00
2. Tax at 4.94% = $36,650 x 0.0494 = $1,810.51
3. Service fee at 0.03% = $36,650 x 0.0003 = $11.00 ($10.995, rounded)
4. EMPA surcharge on a commercial multiple-peril property policy = $4.00
5. Retail fee = $150.00, not taxed

Total invoice = $36,650.00 + $1,810.51 + $11.00 + $4.00 + $150.00 = $38,625.51

Worked Example 2: Mid-Term Return Premium

The same policy is endorsed on March 1, 2027 to delete a location, producing a $6,000 return premium.

• Tax credit = $6,000 x 0.0494 = $296.40
• Service fee credit = $6,000 x 0.0003 = $1.80, still 0.03%, because the rate follows the policy's September 1, 2026 inception date
• The agent files the endorsement with the FSLSO within 30 days of its effective date, and the credit appears on the quarterly invoice.

Exam Traps

• "The service fee is part of taxable premium." False. It is excluded.
• "An insurer's inspection fee is not premium because it is labeled a fee." False. Premium includes it "by whatever name called."
• "The EMPA surcharge is taxed at 4.94%." False. It is not premium.
• "The surplus lines agent's policy fee is excluded from premium." False. It is specifically included.