Legal Battle Erupts Over Skagway’s Updated Excursion Tax Policy

In December 2024, Skagway, Alaska, enacted Ordinance 24-12, modifying its sales tax code to include commissions earned by cruise lines on excursions sold to passengers. Previously, local sales tax only applied to the base price of tours starting and ending within the borough, excluding additional fees from cruise operators. The goal of the updated ordinance is to create uniformity in tax collection across all tour sales, regardless of where the booking occurs—be it onboard, online, or via third-party vendors.

The Cruise Lines International Association (CLIA) has since challenged this ordinance by filing a lawsuit in Alaska state court. They argue that the law violates both state and federal regulations, claiming it leads to double taxation and places an unfair financial burden on cruise passengers and local Alaskan businesses. The CLIA maintains that municipalities are constitutionally limited to taxing activities significantly tied to their jurisdiction, and that applying taxes on commissions from transactions outside Skagway exceeds this authority.

Skagway officials counter that the ordinance aims to treat all tour sales within the municipality fairly. Borough Manager Emily Deach explained that it’s designed to align the tax code with modern tourism practices, ensuring consistent rules across different points of sale.

The ordinance has received backing from local officials and residents, who see it as a vital step toward updating tax collection and ensuring cruise lines contribute equitably to the local economy. Assembly member Deb Potter highlighted the staff’s efforts in adapting the tax code to current tourism dynamics.

This legal dispute underscores ongoing friction between Alaskan municipalities and the cruise industry regarding taxation and revenue sharing. Similar actions have been taken in other Alaskan ports such as Ketchikan, which have also implemented taxes on onboard sales and services to level the playing field for local businesses.

As the lawsuit unfolds, it could have far-reaching consequences for tax policy and cruise operations in Alaska, potentially impacting similar discussions in other regions.

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