Lawsuit challenges Hawaii’s tourist tax on cruise industry aimed at climate change consequences

HONOLULU (AP) — A lawsuit challenging the constitutionality of Hawaii imposing a tourist tax to deal with climate change consequences seeks to stop officials from enforcing the new law on cruise ship passengers.

In the nation’s first such levy to help cope with a warming planet, Hawaii Gov. Josh Green signed legislation in May that raises tax revenue to address eroding shorelines, wildfires and other climate problems. Officials estimate the tax will generate nearly $100 million annually.

The levy increases rates on hotel room and vacation rental stays but also imposes a new 11% tax on cruise ship bills starting next year, prorated for the number of days the vessels are in Hawaii ports. The lawsuit, filed in U.S. court in Honolulu this week, notes the law authorizes counties to collect an additional 3% surcharge, bringing the total to 14% of prorated fares.

“No other State imposes comparable fees — and for good reason: It has been a fundamental principle since the Founding that the navigable waters of the United States are a common resource, not one to be commandeered by individual States for their own parochial revenue-raising interests,” attorneys representing the Cruise Lines International Association wrote in a motion asking a judge to bar enforcement of the law’s cruise provisions while the lawsuit plays out.

Joining in the lawsuit with the association that advocates for the cruise industry are a Honolulu company that provides ship provisioning and Kauai and Big Island tour businesses that rely on cruise ship passengers.

The defendants are various state taxation and county finance officials whose representatives didn’t immediately respond to an email from The Associated Press seeking comment Friday.

According to the lawsuit, the cruise ship industry draws nearly 300,000 annual visitors to Hawaii, supporting thousands of jobs throughout the state and creating a total economic contribution of more than $600 million a year.

The tax will make Hawaii cruises too expensive, and potential visitors will choose to vacation elsewhere, the lawsuit said.

A judge must act urgently to stop the cruise surcharge, a motion for a preliminary injunction said, because potential cruise-ship passengers typically make travel plans well in advance.

The impending surcharge “will begin to skew the market even before they take effect,” causing families who would have purchased Hawaii cruise tickets in 2026 to make other vacation plans, the motion said.

The new law adds 0.75% to the existing 10.25% tax on daily hotel and vacation room stays for a 11% total. Hawaii’s counties each add their own 3% surcharge, and the state and counties impose a combined 4.712% general excise tax on goods and services including hotel rooms. Together, that will make for a hotel and vacation rental tax rate of nearly 19%.