The importance of the cruise ship industry was apparent during Monday night’s City and Borough of Juneau Assembly meeting as the group determined whether or not to pass an ordinance to establish a tax exemption for the sales of goods sold on cruise ships when they’re in Juneau’s waters.
The Assembly heard various viewpoints from around the community and debated the topic before eventually voting, by a 7-1 count, to approve the ordinance and exempt the sales tax on goods sold on the cruise ships. Dissenting viewpoints varied, but the overriding argument in favor of the exemption was to further encourage cruise liners to not only come to Juneau, but stay in port for longer.
“The longer the ships stay tied up, the more revenue flows into the town of Juneau,” Mayor Ken Koelsch said.
The exemption will apply to goods and services that occur strictly on the cruise ship, such as food, alcohol, salon services and more, according to information supplied by CBJ. The issue arose at an Assembly Finance meeting in March 2016, according to CBJ, and was brought up again at the Jan. 11 Assembly Finance meeting, when it was proposed that an ordinance be drawn up.
In April, the Cruise Line International Association (CLIA) asked for a determination from CBJ on its sales tax code. CBJ’s Sales Tax Administrator determined that the city’s sales tax code dictated whether or not sales taxes applied to docked cruise liners. The CBJ sales tax office estimates that between $50,000 and $100,000 could be gained by taxing cruise ships.
The ordinance has its share of critics, including Assembly member Jesse Kiehl. He was the sole “no” vote during the roll call, arguing that even if sales taxes were enforced on board while ships were docked, it wouldn’t discourage the ships from coming.
He also pointed out that some states, such as Florida (where many cruise corporations have their headquarters), institute a sales tax on cruise ships while in port.
“I object to carving out another exemption for an industry that I think is a great, great benefit to Juneau’s economy and Juneau’s community,” Kiehl said, “but that is not in need of a new-found exemption that would differ from the very state where they’re headquartered.”
Multiple community members on hand shared their opinions as well, including Custom Juneau Tours owner Dennis Harris, who said that it’s unfair that cruise liners are exempt from sales tax while companies on the mainland are not.
“It really irks me that they keep trying to kind of bully the city into doing favors for them,” Harris said. “Meanwhile, poor families pay sales tax on every sack of groceries they buy, and that’s really not fair.”
Chamber of Commerce Executive Director Craig Dahl and others on hand see it differently, that working with the cruise companies benefits the city. Dahl specifically spoke about the idea of fairness, saying that exempting sales tax on cruise ships isn’t unfair because of the massive amount of profit the city gains from hosting the ships.
According to CBJ, the cruise industry generates about $20.5 million in annual revenue for Juneau, including $8 million from sales tax charged on onshore purchases. That onshore sales tax will continue. Dahl pointed out that cities everywhere would want an economic opportunity akin to the one that cruise companies supply Juneau.
The Ketchikan Gateway Borough is the only Southeast Alaska community to currently have an exemption in place for cruise ships in port, though no other community currently collects sales tax from sales aboard cruise ships, according to CBJ.
Assembly member Norton Gregory, who voted in favor of the ordinance, said there are much bigger issues than this to deal with — including the existing lawsuit between CLIA and the city over the alleged misuse of head tax funds — but that voting against the ordinance would be a poor idea.
“I feel that this is an issue that was not conjured up by this Assembly,” Gregory said. “This is a hot potato that was dropped in our lap and we must deal with it.”
Alex McCarthy covers the City and Borough of Juneau for the Empire. He can be reached at 523-2271 and alex.mccarthy@juneauempire.com.
CBJ Assembly member Jesse Kiehl speaks against an ordinance exempting cruise ships from charging sales tax aboard their boats while in port in Juneau. The Assembly approved the ordinance. (Alex McCarthy | Juneau Empire)
