The cruise sector has launched a legal challenge against Hawaii, aiming to halt a novel climate-focused tax targeting hotels, short-term rentals, and, for the first time, cruise ship passengers. This new measure, dubbed the "Green Fee," was enacted in May and is slated to begin on January 1, 2026. It raises the state's transient accommodations tax from 10.25% to 11% by adding a 0.75% increase.

Cruise passengers will face an 11% tax on their total fares, calculated based on the number of days their ships are docked at Hawaiian ports. Additionally, counties may impose an extra 3% surcharge, potentially increasing the total tax to 14%.

Hawaiian legislators claim this is the first such tax in the United States, designed to raise funds to combat climate change impacts like coastal erosion, wildfires such as the 2023 Maui blaze, and other environmental issues. The state estimates this tax could generate $100 million annually.

The lawsuit, filed on August 27 in Honolulu's federal court by the Cruise Lines International Association (CLIA) alongside Honolulu Ship Supply Co., Kaua’i Kilohana Partners, and Aloha Anuenue Tours LLC, names state tax authorities and county finance departments as defendants. The plaintiffs argue that the tax violates the U.S. Constitution’s tonnage clause and the Rivers and Harbors Appropriation Act of 1884, which restrict states from levying fees on vessels in navigable waters. They note that no other state has imposed a similar tax and assert that Hawaii is using the revenue for general funds and environmental projects rather than for services directly benefiting ships.

The lawsuit highlights that hotel and short-term rental guests receive exemptions not extended to cruise passengers, creating an uneven burden on the cruise industry. It also challenges a requirement for cruise lines to display tax-related notices onboard and in advertisements for Hawaii-bound cruises, arguing this infringes on free speech rights.

The cruise industry warns that the tax could significantly increase costs for passengers, potentially adding hundreds of dollars to popular Hawaiian itineraries. This could deter tourists from choosing Hawaii, impacting not only cruise companies but also local businesses dependent on cruise visitors. In 2023, cruises brought nearly 300,000 tourists to Hawaii, contributing over $600 million to the state’s economy and supporting thousands of jobs, according to CLIA and state data.

The plaintiffs are seeking a court ruling to declare the cruise-related tax provisions unconstitutional and request an injunction to block enforcement before the law takes effect. They emphasize the urgency, as many passengers book trips years in advance, and the tax is already influencing 2026 travel decisions. A hearing for the injunction is set for October 31.

This marks only the second time CLIA has sued a U.S. state. In 2016, the organization challenged passenger head taxes in Juneau, Alaska, citing the tonnage clause. A federal court ruled in 2018 that such fees must directly fund vessel services, leading to a settlement in 2019. Similar disputes have occurred internationally, such as in Greece, where new fees addressed overtourism on islands like Santorini and Mykonos, and in Mexico, where a proposed head tax was adjusted after cruise industry pushback.

Hawaii officials, including the state attorney general and county authorities, have not commented, pending a full review of the lawsuit.

For maritime professionals, this case underscores the complex interplay between environmental regulations and the economic realities of the shipping and cruise industries. As global ports increasingly adopt sustainability measures, seafarers and maritime businesses must stay informed about evolving tax policies and their operational impacts.

Source: Marine Insight