Skagway Enacts New Tax Policy and Cruise Lines Don’t Like It
Skagway, Alaska, has officially enacted a new sales tax policy on land tours and shore excursions – and the cruise lines don’t like it one bit.
Cruise companies have long been exempted from including commission fees in the taxes on Skagway shore excursions that are sold by the cruise lines.
For context, the commission fees are usually paid to the cruise line on top of the tour price for arranging the excursion – which is how the cruise brand profits.
But in December 2024, a new tax ordinance was passed with the purpose of collecting taxes on the full prices that tourists pay fairly and consistently – whether they are visiting via cruise ships or not. This means that the cruise lines’ commissions are now taxable as well.
The Cruise Lines International Association (CLIA) is now representing the cruise industry in a battle against the new tour tax policy – which they said in a statement risks “double taxation and placing undue financial strain on cruise guests and Alaska businesses alike.”
When asked for a comment, CLIA directed local news outlets to Steven Mahoney, an Anchorage-based tax attorney who is not involved in the lawsuit.
“Under Alaska law, we believe that the Skagway ordinance is illegal. It’s not appropriate, and it should be reversed,” Mahoney said.
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The attorney’s interpretation of the law is that Skagway cannot tax the commission fee on tours where neither the transaction nor the service of booking occurred in the small, coastal town.
By taxing the cruise line’s commission fees, Skagway is essentially penalizing tours that were booked from other locations – or even other countries.
The cruise industry leader also echoed that the US and Alaska’s Constitutions state that the port can only tax activities that have a “substantial relationship to that community.”
Mahoney also noted that the US Constitution does not allow Skagway to interfere in interstate commerce, which implies transactions that occur between two different US locations on a cruise ship shouldn’t be taxed locally either.
As the added tax will likely turn into additional fees for cruise guests, the cruise lines likely do not want to compete against local businesses that don’t need to charge a commission in order to profit as well.
CLIA filed the lawsuit on May 8, 2025, and it’s unclear when litigation may move forward.
Could the New Taxes be a Good Thing?
Emily Deach, Skagway Borough Manager, reaffirmed in an email to local news outlet KTOO that the purpose of the tax is just to promote fairness.
“The bottom line is that Skagway made this change to treat tour sales by the cruise lines the same as other sales of products and services within the municipality,” Deach confirmed.
However, the new policy could also be quite profitable. Skagway’s municipal sales tax rate is currently at 5%, and with around one million cruisers sailing to the destination annually, the profits could start rolling in.
Skagway’s local tax also puts it in line with other popular Alaskan ports that do not give the cruise lines an exemption, including Juneau and Sitka.
Juneau, for example, has been charging a 5% tax for onboard purchase and an additional 3% tax on alcoholic beverages since 2022 – and isn’t receiving the same pushback.
On April 1, 2025, Ketchikan also put a new tax policy into effect that aligns with Skagway’s new tour tax – in which formerly exempted cruise ships now have to pay the 2.5% local tax at this southeastern coastal town as well.
But with 1.5 million cruise guests calling on Ketchikan annually, this change could rake in up to $300,000 to benefit the town and the port every year.
Skagway Enacts New Tax Policy and Cruise Lines Don’t Like It