Cruise lines are taking legal action against Alaska cruise destination Skagway over a change in the way it will tax revenues on local shore excursions.
It applies a local sales tax on tours that start and finish in Skagway.
New Ordinance Taxes Cruise Lines’ Commissions
It recently made a change to how it calculates the tax.
It charged tax based on the value of the tour billed by the operator but not including the commission cruise lines added to the cost and charged to their guests.
Last year, Skagway passed an updated ordinance which now taxes excursions at the full retail price including the commission cruise lines add-on.
The borough said this is a fairer tax policy, but the cruise industry strongly disagrees.
They say this violates both state and federal laws.
CLIA Filed a Lawsuit on Behalf of Cruise Lines
Industry group Cruise Line International Association this month filed a lawsuit against Skagway lawmakers in Alaska state court. It named Skagway’s borough manager and treasurer as defendants.
CLIA claims the ordinance is “double taxation” and puts “undue financial strain on cruise guests and Alaska businesses alike.”
It said Skagway wants to tax all cruise line tour commissions, including those booked online and from any global location.
Steven Mahoney, an Anchorage-based tax attorney said the cruise industry’s double taxation claim is valid.
The U.S. and Alaska Constitutions say municipalities may “only tax activities that have a substantial relationship to that community.”
The taxable amount should not include cruise lines’ commission for this reason, Mahoney said.
Skagway Borough Manager Emily Deach, said: “The bottom line is that Skagway made this change to treat tour sales by the cruise lines the same as other sales of products and services within the municipality.”
The CLIA lawsuit is seeking the removal of tax for the commission element of the tour cost and wants compensation for its legal costs.
