Hawaii’s New Cruise Tax Could Cost Families Hundreds, Faces Legal Battle

Proposed legislation that would extend Hawaii’s Transient Accommodations Tax (TAT) to cruise ships starting on Jan. 1, 2026, faces an uphill battle, after the cruise industry indicated it believes the tax to be unconstitutional. The tax would impose an 11% fee on the per person cruise fare, prorated by the percentage of itinerary days that a cruise ship is docked at any Hawaiian port. (It also increases the existing TAT tax applied to short-term rentals and hotels from 10.25% to 11%.)

However, the cruise industry believes that the application of the TAT to cruise vessels violates the Commerce Clause of the Constitution of the United States in that it: unlawfully burdens the interstate and international commerce of the U.S., is discriminatory for singling out only cruise operations (as opposed to other vessel operations), and cannot be justified by the needs of the taxing authority.

Additionally, extending the TAX to cruise ships also violates the Supremacy Clause of the Constitution of the United States and Federal law,whichexpressly prohibits “taxes, tolls, operating charges, fees,” and other impositions from being assessed against vessels operating on the navigable waters of the U.S.

Finally, the cruise industry asserts that it also violates the Tonnage Clause of the Constitution of the United States. This provision forbids state or local governments from imposing taxes and duties based on the size or capacity of vessels without permission from Congress. Federal courts have interpreted this provision to include any assessment that charges “for the privilege of entering, trading in, or lying in a port.”

The tax would be particularly harmful to a line like Norwegian Cruise Line, which operates Pride of America entirely within the state of Hawaii. Current taxes (port fees and taxes) already come to approximately $200 per person for a seven-day sailing. The proposed TAT would increase substantially.

“Our Hawaii sailings aboard our homeported Pride of America already contribute approximately $200 per person in port fees and taxes,” a spokesperson for Norwegian Cruise Line told TMR. “The proposed additional tax increases this to an estimated $350 per person, reaching ~$1400 for a family of four. The added financial burden not only affects our guests but also presents challenges for us as cruise operators—impacting local businesses and communities that depend on a thriving cruise industry.”

“We oppose extending Hawaii’s Transient Accommodations Tax (“TAT”) to cruise ships as it violates the U.S. Constitution and Federal law and represents a significant increase to the fees and taxes already paid by passengers which could reduce future cruise tourism,” said a spokesperson for the Cruise Lines International Association (CLIA).

“We value our partnership with Hawaii and are working to resolve this in a way that upholds fairness, legality, and the shared goals of protecting Hawaii’s resources along with the vital economic benefit from cruise tourism that local communities depend on.”

According to CLIA, the cruise industry is a major financial contributor to Hawaii, contributing $965 million in total economic impact and $73 million in state tax revenue in 2024. The cruise industry also supports 6,409 jobs and $216 million in wages.

The bill, which passed the state legislature earlier this month and is intended to provide funding to help manage the state’s natural resources and create a revenue stream for environmental stewardship, has not yet been signed into law by the governor.

Not the Only Cruise Tax Forcing Up Prices

The cruise industry is increasingly facing more and bigger taxes around the world, including the recently reduced – and much talked about – Mexico tax, which went from a proposed $42 per person to $5 the first year and up to $21 per person at the end of three years.

Elsewhere in the world, Scotland has announced it is giving individual regions the ability to levy cruise ship taxes as needed, and the Balearic Islands in Spain, have also proposed a new cruise ship passenger tax of 6 euros per night a ship is docked in port. Other cities that have already levied higher fees or are looking to levy new taxes are Barcelona, New York City, and Amsterdam.