The Juneau City and Borough Assembly on Monday voted to continue the existing practice that exempts cruise ship passengers from an onboard sales tax. It’s a “wet foot tax” Juneau could technically collect from visitors who are underway in the waters of the borough.
Currently, the city collects about $8 million in sales taxes from passengers and crew once their feet hit the docks and they visit stores and restaurants.
But while they are onboard the ships, the city hasn’t extended its sales tax to those purchases that occur as the ships motor to and from the city.
Ships enter and exit the borough far south of Juneau and have a few sales — such as alcohol, salon, and spa sales — that could be taxed.
Some, like Assembly member Jesse Kiehl, wanted to squeeze out that extra $100,000 of anticipated revenue for the city. The pro-tax crowd pushed to have the exemption lifted, and some pushed hard at last night’s meeting.
TAXATION CHANGES BEHAVIOR
Taxing passengers while they are floating to and from the port could have unintended consequences, however.
Rather than having to collect taxes on bottles of wine at onboard meals, ships could choose to leave an hour earlier to make sure they were out of the borough before onboard dinner starts. They’d avoid the extra hassle of bookkeeping for the $100,000 or so remittance to the city, and they’d save their passengers money.
But that extra hour would mean a huge loss of sales at local shops and restaurants, because the hour before the ships leave is prime retail time in the downtown core, as visitors return from their day trips and mill about the shops for last-minute gift items before returning to their ship. In other words, lifting the exemption could conceivably result in fewer tax collections at the end of the cruise day.
Alaskans well know the value of a tax break: For years and years, when traveling to Washington state, Alaskans have been quick to whip out their Alaska driver’s licenses to avoid paying Washington’s 6.5 percent sales tax, which when local sales taxes are added can reach 9.9 percent.
But some revenue seekers in Juneau were not ready to extend the same courtesy exemption to visitors entering Alaska’s capital by cruise ship.
More than one million people arrive on cruise ships in downtown Juneau during the five-month cruising season. Between the sales and passenger tax, the city collects more than $20 million a year.
WHALE OF A LAWSUIT
In a separate measure, the Juneau Assembly voted to spend sales tax money instead of passenger head tax money to continue defending itself against a lawsuit from the cruise industry.
The lawsuit involves a manmade island that houses a whale sculpture that is the subject of much controversy because the project construction was made possible by passenger taxes.
Using passenger taxes to pay lawyers to fight cruise lines over a passenger tax didn’t seem like a friendly gesture, so the Assembly voted to replace that litigation money with regular unrestricted sales tax.
The litigation was brought last year by the industry because it felt the city was not spending passenger taxes on legally allowed uses, but instead building discretionary projects of little or no value to the cruising public.
Rorie Watt, city manager of Juneau, included a draft ordinance in the Assembly packet that would award his office an additional $100,000 to pay lawyers to defend the city in the lawsuit the cruise industry had brought over the development of The Whale Project, which the industry believes is not an appropriate use of the passenger tax because it is too far from the docks to be a practical amenity for the tourism sector.
The city has already spent $280,000 defending the project — never mind the cost of the project itself — as it heads into a trial that is expected later this year.