Legal Conflict Emerges Regarding Skagway’s Updated Excursion Tax Regulations

In December 2024, the Municipality of Skagway (Alaska USA) enacted Ordinance 24-12, amending its sales tax code to include commissions earned by cruise lines on excursions sold to passengers. Previously, only the base price of tours commencing and concluding within the borough was subject to local sales tax, excluding additional fees imposed by cruise operators. The revised ordinance aims to standardize tax collection across all tour sales, irrespective of the booking location, whether onboard, online, or through third-party vendors. 

The Cruise Lines International Association (CLIA) has challenged the ordinance, filing a lawsuit in Alaska state court. The association contends that the policy contravenes both state and federal laws, arguing that it results in double taxation and imposes undue financial burdens on cruise passengers and Alaskan businesses. CLIA asserts that municipalities are constitutionally restricted to taxing activities with a substantial nexus to their jurisdiction, and that taxing commissions from transactions occurring outside Skagway’s borders exceed this authority.

Skagway officials maintain that the ordinance is designed to ensure equitable tax treatment for all tour sales within the municipality. Borough Manager Emily Deach has indicated that the change seeks to align the tax code with contemporary tourism practices, ensuring consistent application regardless of the point of sale.

The ordinance has garnered support from local officials and residents who view it as a means to modernize tax collection and ensure that cruise lines contribute fairly to the local economy. Assembly member Deb Potter praised the staff’s efforts in updating the tax code to reflect current tourism dynamics.

This legal dispute in Skagway reflects broader tensions between Alaskan municipalities and the cruise industry over taxation and revenue sharing. Similar measures have been adopted in other Alaskan ports, such as Ketchikan, where local governments have moved to tax onboard sales and services to create a level playing field for local businesses. 

As the lawsuit progresses, its outcome may have significant implications for tax policy and cruise industry operations in Alaska and potentially influence similar discussions in other jurisdictions.