Cruise ships calling at Ketchikan are losing their tax-exempt status. Ketchikan city and borough councils voted to repeal laws that had exempted cruise ships from paying sales tax while docked in the city.
Sales Tax Applicable for Goods and Services Bought Onboard Ships While in Port
Until now, they have not been required to pay tax on purchases made onboard such as in retail outlets and restaurants. Local lawmakers sought to abolish the tax-exempt status as it disadvantaged local Ketchikan traders.
“It’s been a longstanding inequity for local brick-and-mortar businesses that sell similar items to what is sold aboard the vessel, where you have essentially one operating tax-free and one not,” said Borough attorney Glenn Brown.
Ketchikan Gateway Borough Mayor Rodney Dial added: “One of the reasons that the Ketchikan City and the Borough are working to repeal it now is just simply it’s an equity issue. We want fairness between what the cruise ships are charging and what the brick and mortars are charging,”
A supplemental financial impact report by Brown projects additional sales tax revenue of up to $300,000 annually. Cruise ships would pay the same rate of tax as local businesses. “This is drafted so when they are in the territorial waters of the borough, its taxable sales aboard the vessel,” Brown added.
However, Brown acknowledged that forecasting possible tax revenues correctly is challenging. He cited anecdotal evidence in Juneau that some cruise ships close retail outlets when in port rather than pay the tax. Juneau eliminated the tax exemption in 2022.
“There may be some sales that no longer occur,” he said. Other Alaska ports that are subject to shipboard sales tax include Sitka and Skagway. The new law imposing the sales tax will take effect before the start of the 2025 cruise season. The first cruise ship is scheduled to call at Ketchikan on April 17.
