Hawaii’s New Tourism Tax Faces Legal Challenge

Hawaii has introduced a bill to raise tourism taxes, calling it a measure to combat climate change. However, this move has sparked a lawsuit questioning its legality.

The proposed Temporary Accommodation Tax (TAT) will elevate the tax rate to 11% for tourists staying in hotels, while also implementing a new 11% tax on cruise passengers. This has drawn criticism from Cruise Line International and cruise ship suppliers, who have filed a lawsuit against the state.

“We believe this extension violates both the US Constitution and federal law, adding more financial burdens on passengers who already face significant fees and taxes,” CLIA stated. They emphasize the economic importance of cruise tourism for Hawaii.

The lawsuit further mentions that individual state counties impose an additional 3% fee, pushing the total tax to 14%. CLIA also warned that expanding TAT in this way could deter visitors, potentially leading to job losses and destabilizing tourism-dependent businesses.

According to the bill, a portion of the new revenue will be allocated to the Special Fund for Climate Mitigation and Resilience, as well as the Special Fund for Economic Development and Revitalization. It aims to tackle issues like invasive species and wildlife conservation.

Some of the raised funds will also support initiatives related to environmental concerns, including the “Green Jobs Usescope.” The Hawaii Tourism Bureau reported that 9.6 million visitors arrived in Hawaii in 2023, and the new taxes are expected to generate around $100 million annually.

The Attorney General has acknowledged a complaint related to this recent tax measure, stating they will review it thoroughly before making any comments. The situation remains dynamic, reflecting the ongoing conflicts in balancing tourism growth with environmental needs.