Assembly considering tax exemption for cruise ships

Onboard sales have historically not been taxed but could generate $100,000 a year
A visitor off the Holland America Line MS Westerdam loses his hat to the high winds in 2016.

The City and Borough of Juneau Assembly is considering whether to exempt sales onboard cruise ships from Juneau’s sales tax.

 

The Assembly’s finance committee, meeting Wednesday, voted 8-1 to advance an exemption for cruise ships. KTOO-FM first reported the vote.

Cruise ships have historically been exempted from Juneau sales taxes under the principal that foreign-flagged vessels (most cruise ships are registered in foreign countries) could not be taxed, but in 2011, one cruise line voluntarily registered with the sales tax office and began remitting tax.

Last year, the CBJ law department advised the city’s sales tax office that onboard sales — within borough boundaries — are subject to sales tax, and all cruise ships should pay the tax.

The issue was brought to the Assembly finance committee, then returned to the sales tax division for further review.

On Jan. 11, the sales tax division submitted its final report to the assembly.

“The final determination is that the sales are subject to the sales tax code,” the report states.

If the tax is applied to all ships, as much as $100,000 could be generated each year for city coffers.

Unless the Assembly acts, the tax will begin this cruise ship season.

The Assembly’s 8-1 vote last week starts the process of drafting an ordinance exempting the cruise industry from sales taxes. The ordinance would return to the Assembly for a public hearing, and another vote must be taken before the exemption becomes effective.

An exemption already exists in Ketchikan, and John Binkley — a cruise industry advocate — submitted a written statement to the Assembly claiming that the exemption encourages ships to stay longer in a particular community.

Assemblyman Jesse Kiehl, the sole vote against the exemption last week, said at the meeting that the issue was one of fairness. It isn’t fair, he said, for cruise ships to be exempted from sales tax when local businesses have to pay it.

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