SENATE BILL REPORT

SB 5078

BYSenators Newhouse, Gaspard, Johnson, Bauer, Sellar, DeJarnatt, Hansen, Madsen, Benitz, McCaslin, Vognild, Warnke, Craswell, Nelson, Lee, Saling, Conner, West, Smith, McMullen, Kreidler, Cantu, Stratton, Bailey, Moore and Smitherman

Modifying the measure of tax on insurance agents, brokers, or solicitors.

Senate Committee on Ways & Means

Senate Hearing Date(s):February 5, 1990

Senate Staff:Terry Wilson (786-7715)

AS OF FEBRUARY 1, 1990

BACKGROUND:

A business and occupation tax is imposed on insurance agents, brokers, and solicitors equal to 1.1 percent of their gross commissions.  No deduction is allowed for commissions paid to other agents, brokers, or solicitors on the same transaction.

In the insurance industry, commissions are sometimes paid to a general agent who retains a portion of the commission and passes the remainder through to the selling agent, although sometimes the policy of the insurance company is to pay each agent directly.  Since no deduction is allowed in determining gross commissions, an agent would pay a tax on the gross commission received even though that agent may have retained only a small percentage of the total commission.  The agent receiving a share of a commission from another agent also pays business and occupation tax on the amounts received.

SUMMARY:

The measure of tax is the gross commission retained by the insurance agent, broker, or solicitor after payment of any commission to another agent, broker, or solicitor pursuant to a contract or agreement in existence before the commission was earned.

Appropriation:    none

Revenue:    none

Fiscal Note:      available