Legal Battle Erupts Over Skagway’s Revised Excursion Tax Policy

In December 2024, the Municipality of Skagway, Alaska implemented Ordinance 24-12, which modified its sales tax code to include commissions earned by cruise lines from excursions sold to passengers. Previously, only the base tour prices beginning and ending within the borough attracted local sales tax, while any additional fees from cruise operators were exempt. The intent of this revision is to create uniform tax collection procedures for all tour sales, regardless of where they are booked, whether on board, online, or via third-party vendors.

The Cruise Lines International Association (CLIA) has responded by challenging the ordinance through a lawsuit filed in Alaska state court. The association argues that the ordinance violates state and federal law, asserting that it leads to double taxation and imposes unnecessary financial strain on cruise passengers and local businesses in Alaska. CLIA claims that municipalities can only tax activities with a significant connection to their areas and that taxing commissions from transactions originating outside of Skagway’s jurisdiction goes beyond this constitutional limit.

In defense of the ordinance, Skagway officials argue that it aims to provide fair taxation for all tour sales occurring within the municipality. Borough Manager Emily Deach remarked that the ordinance seeks to align the tax code with modern tourism practices, ensuring a consistent tax application no matter the sales platform.

The ordinance has found favor among local officials and residents, many of whom see it as a means to modernize the tax collection process while ensuring that cruise lines fairly contribute to the local economy. Assembly member Deb Potter commended the staff for updating the tax code to reflect the current dynamics of the tourism sector.

This legal issue in Skagway underscores the ongoing friction between Alaskan municipalities and the cruise industry regarding tax policies and revenue sharing. Similar initiatives have been observed in other Alaskan ports, including Ketchikan, where local governments have opted to tax onboard products and services to level the competitive field for local businesses.

As the legal proceedings unfold, the verdict could significantly impact tax policies and operations within the cruise industry across Alaska, potentially setting a precedent that could resonate in other regions as well.

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