Hawaii’s New Cruise Tax Is Entering Some Uncharted Legal Waters

As someone who has spent his entire legal career navigating the intricacies of maritime law, I’ve seen plenty of jurisdictional curveballs. But Hawaii’s new 11% transient accommodations tax on cruise passengers—levied for time spent in port—marks a bold new tack.

The state’s goal seems straightforward: Treat cruise passengers like hotel guests. After all, when a floating resort docks in Honolulu, passengers dine, shop, tour, and use local infrastructure. Why shouldn’t they pay their fair share, just like someone checking into a beachfront resort?

But when it comes to cruise ships, what appears simple rarely is.

Unlike land-based accommodations, cruise ships typically sail under foreign flags—Bahamas, Panama, Malta—and operate under international treaties and fall under federal maritime jurisdiction. That makes the question of whether a US state can tax passengers for being aboard a vessel in its port far more complex than taxing a room with an ocean view on Waikiki Beach.

Here’s the key legal issue: Does Hawaii’s new tax cross the line into territory reserved for federal regulation? Maritime law strongly favors federal preemption. That means states generally can’t impose taxes or regulations that burden interstate or international commerce—unless Congress has clearly said they can. In this case, it hasn’t.

The cruise industry has good reason to be concerned. There’s a credible argument that this tax runs afoul of both the US Commerce Clause and the Foreign Commerce Clause. These constitutional provisions restrict states from passing laws that discriminate or unduly burden commerce that crosses state or international boundaries. When you consider that many cruises begin and end in foreign ports, the constitutional questions only deepen.

Hawaii’s tax isn’t aimed at cruise lines, but at their passengers—people who may not even disembark. The law treats time spent onboard a vessel in port as equivalent to booking a hotel room ashore. That’s a novel legal theory, and one that hasn’t been thoroughly tested in court.

I understand the motivation behind the tax. Hawaii, like many tourist-heavy destinations, is grappling with the environmental and infrastructural impacts of mass tourism. Cruise ships can strain local resources without generating the same level of tax revenue as hotels or resorts. From a policy standpoint, the move aims to close that gap and fund sustainability efforts.

But from a legal standpoint, Hawaii may be overstepping. There’s no clear precedent supporting a state’s right to tax foreign-flagged vessels for the mere presence of passengers onboard. If this law holds, it could set a precedent that other coastal states—California, Florida, Alaska—might follow.

The result? A patchwork of state-by-state cruise taxes that could disrupt the industry’s operations and increase costs for travelers. “Patchwork” is anathema to maritime law, a legal system whose watchword is “uniformity.”

I expect the cruise industry to challenge this law in court. Lawsuits likely will argue that Hawaii’s tax is unconstitutional, interferes with federal maritime jurisdiction, and imposes undue burdens on foreign commerce. We may see the case climb all the way to the US Supreme Court before a clear answer emerges.

For now, cruise lines will be watching this closely, adjusting itineraries, and considering the implications for future port calls. Passengers, too, may start to notice price adjustments as operators seek to offset the cost of compliance—or litigation.

Hawaii’s move may turn out to be the tip of the iceberg in a broader debate about how we regulate and tax cruise tourism in the 21st century. But in trying to treat ships like hotels, the state may have invited a legal storm it didn’t fully anticipate.

In maritime law, as in sailing, one cardinal rule always applies: Don’t underestimate the power of an unexpected headwind.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Peter Walsh is a maritime attorney and founder of The Cruise Injury Law Firm in Miami.

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