Juneau is moving toward exempting transactions aboard docked cruise ships from local sales tax. The initiative is touted as bringing the city in line with other Southeast communities.
There’s been little public discussion about the proposed sales tax exemption since it was introduced at an Assembly Finance Committee meeting.
“It behooves us to try and be good neighbors with the folks that like to come here and do business and try and continue to keep them coming here and doing business,” Juneau Deputy Mayor Jerry Nankervis said at Jan. 11 the meeting.
The exemption would still levy sales tax for tours sold by local operators aboard ships. But onboard services like food and drink, and services like spa time or hair cuts and massages would be exempt. The city hadn’t been collecting the tax until Disney Cruise Line filed with the city in 2011. The city won’t say how much the company’s paid since because it’s proprietary information.
Ketchikan already has an exemption on the books. And it seems to be standard practice for many cities and boroughs not to collect sales tax from onboard sales.
Juneau’s Finance Director Bob Bartholomew said Juneau is, “trying to be consistent among the ports. So that for the industry they’re kind of having to try to have similar rules.”
He stresses that state and local fees are levied on all passengers who pass through Juneau’s waters.
“Whether they disembark or stay onboard, we receive $12.50 and that is covering the cost of using the port, the building of the facilities and some of the direct city services,” Bartholomew said.
The city’s finance department last year analyzed the issue at the industry’s request, and concluded that cruise ships are legally liable to charge their passengers local sales tax. And if it did, the industry would be on the hook for between $50,000 to $100,000 annually.
Juneau’s business groups have stayed out of the debate. Neither the Downtown Business Association nor the Chamber of Commerce have taken a position. The city estimates it collects about $8 million in sales tax from cruise ship passengers who come ashore — an indicator of the amount of cash injected into the local economy.
Not all business owners are comfortable with the exemption.
“I think there are some business owners who are so intertwined with the cruise ship companies that it’s difficult for them to speak out on something like this. And there are a lot of businesses that have this perception of ‘don’t bite hand that feeds you,'” said Pat Race, who co-owns a comic shop and video production company in Juneau. “And I can absolutely understand that. But I think that we need to have a sense of fairness on how the city deals with businesses and the people who remit sales tax.”
He’s written to the Assembly questioning the wisdom of carving out an exemption for a large industry while aggressively enforcing sales tax on small fry.
“One of the goofy local events I host is a comic convention and when I brought people to town, I went to the sales tax office and got paperwork and I handed it out to all the people who were visiting town,” Race said. “So we’ve got these people who are guests to our community coming into town and making like $10 to $20 worth of sales who are remitting sales tax and then we’ve got these giant cruise ships that are doing the essentially the same thing on a much larger scale but they don’t have to remit a sales tax.”
Even so, if the emails written to the Assembly in recent weeks are an indicator, the sales tax exemption does have support within the community. So far just one Assembly member has gone on record to oppose the exemption.
“If I go to the barber, I’ve got to pay sales tax and the barber has to send it in. So it’s just fair and equitable tax treatment to apply the same rules to everybody,” said Assemblyman Jesse Kiehl. He notes that cruise ship companies make millions in commissions on tours sold on board – so fears that local taxes would drive them away are overblown. “I think this is not an exemption that makes economic or policy sense.”
If Juneau seems like it’s playing favorites, it is. Bartholomew said incentivizing key industries is not unknown in Juneau.
“We have in other areas tried to recognize the importance of certain industries,” the finance director said. “So we provide exemptions for manufacturing locally. We provide exemptions for housing, and so this is kind of a standard practice where we’re recognizing the significant value of the industry.”
The Juneau Assembly is scheduled to hold a public hearing and vote on the ordinance at its March 6 meeting.
