A federal appeals court has temporarily blocked Hawaii’s new cruise tax, delivering a last-minute victory for cruise lines just hours before the levy was set to take effect. The decision, issued on December 31 by the U.S. Court of Appeals for the Ninth Circuit, prevents the tax from being implemented while the court considers a broader legal challenge brought by the cruise industry.
The tax, an 11 percent charge applied to cruise ship accommodations, was scheduled to begin on January 1 as an expansion of Hawaii’s existing Transient Accommodation Tax. State lawmakers approved the measure as part of a broader effort to ensure that visitors contribute more directly to environmental protection and climate resilience initiatives across the islands. Revenue from cruise passengers was intended to support sustainability programs aimed at addressing the pressures of overtourism and climate-related risks.
The appeals court’s order came less than two weeks after a federal district court ruling cleared the way for the tax to move forward. On December 23, a U.S. district judge had denied a request from the cruise industry to stop the measure, prompting cruise lines to immediately seek emergency relief at the appellate level. The Ninth Circuit’s decision effectively pauses the tax until it reaches a final ruling on the case, with the court signaling that the review process will be expedited.
The lawsuit challenging the tax was filed in August by the cruise industry’s main trade group, which argues that Hawaii’s measure violates the U.S. Constitution and longstanding federal laws governing taxation of maritime commerce. According to the plaintiffs, individual states are limited in their ability to impose taxes on vessels engaged in interstate and international travel, particularly when those taxes are based on time spent in port rather than services consumed on land.
The legal fight escalated further in November when the U.S. federal government joined the case in support of the cruise industry. In its filing, the government argued that the tax unfairly targets American businesses and travelers and could set a precedent affecting maritime commerce nationwide. The intervention underscored the broader implications of the case beyond Hawaii, as other destinations watch closely for signals on how far local governments can go in regulating and taxing cruise tourism.
Hawaii officials have defended the tax as a reasonable and necessary step to protect the state’s natural resources. Governor Josh Green has said that visitors who benefit from Hawaii’s beaches, ecosystems, and infrastructure should share responsibility for preserving them. Supporters of the measure argue that cruise passengers place significant strain on local services while contributing less per visitor than overnight hotel guests.
For now, the ruling creates uncertainty for both the cruise industry and state planners. Cruise lines avoid an immediate increase in costs, while Hawaii faces delays in funding programs tied to the expected revenue. The appeals court’s final decision will determine whether the tax can be reinstated or whether Hawaii must revisit its approach to cruise tourism altogether.
