Legal Controversy Erupts Over Skagway’s Revised Excursion Tax Policy

In December 2024, Skagway, Alaska, enacted Ordinance 24-12, modifying its sales tax regulations to include commissions earned by cruise lines from excursions sold to passengers. Previously, only the base prices of tours that started and ended within the borough were taxed, leaving out additional fees charged by cruise operators. The purpose of the revised ordinance is to create a standardized method of tax collection across all tour sales, regardless of where the bookings occur—be it onboard, online, or via third-party vendors.

The Cruise Lines International Association (CLIA) has filed a lawsuit against the ordinance in Alaska state court, asserting that the new policy violates both state and federal regulations. They argue it leads to double taxation and imposes excessive financial strains on cruise passengers and Alaska-based businesses. According to CLIA, local governments are constitutionally limited to taxing activities with a significant connection to their jurisdiction, and taxing commissions from sales made outside Skagway breaches this limitation.

Skagway officials contend that the ordinance seeks to ensure fair tax treatment for all tour sales within the area. Borough Manager Emily Deach stated that the intent behind the change is to modernize the tax code to fit present tourism practices, ensuring that taxes are applied consistently across the board.

Local officials and residents support the measure, seeing it as a step toward updating tax collection processes and ensuring that cruise lines contribute their fair share to the local economy. Assembly member Deb Potter commended the efforts made to revise the tax code to align with contemporary tourism dynamics.

This legal conflict in Skagway highlights ongoing tensions between Alaskan municipalities and the cruise industry regarding taxation and revenue-sharing. Similar initiatives have emerged in other Alaskan ports, such as Ketchikan, where local governments have begun taxing onboard sales and services to provide local businesses with a competitive advantage.

As the lawsuit unfolds, the result may significantly impact tax policies and cruise operations in Alaska, potentially shaping similar discussions in other jurisdictions.

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