Hawaii Cruise Tax Ruling Includes Cruise Passengers in New Environmental Levy: All You Need To Know

Published on December 27, 2025

Hawaii Cruise Tax Ruling has major implications for travel planners and cruise lines as a federal court’s decision now permits the state’s new environmental tourism tax to include cruise passengers when the law takes effect on January 1, 2026. The decision by U.S. District Judge Jill A. Otake means that for the first time a climate‑oriented levy will apply to cruise travellers visiting the Hawaiian Islands, potentially reshaping how cruise itineraries and visitor expenses are structured.

Travel professionals tracking policy impacts on tourism will see this legal development redefine visitor costs for Hawaii’s cruise sector at a time when climate adaptation funding is a central state priority.

Expansion of Transient Accommodation Tax for Cruise Visitors

Hawaii’s Legislature enacted what is often termed the “Green Fee”, which expands the Transient Accommodation Tax (TAT) to cover not just hotel rooms and short‑term rentals but also cruise ship passengers arriving in Hawaii ports. As of January 1, 2026, this expanded levy increases the base tax to 11 percent on gross charges paid by cruise passengers while vessels are in state waters, prorated according to days docked.

For visitors staying in transient lodging like hotels or rentals, the tax also rises by 0.75 percent, and counties can impose an additional surcharge of up to 3 percent, meaning combined lodging taxes can reach 14 percent or more depending on location.

The state estimates this revenue increase could generate up to USD 100 million annually for climate resilience and environmental protection efforts, including shoreline preservation and wildfire mitigation.

Legal Challenge from Cruise Industry

The Cruise Lines International Association (CLIA) and allied industry groups filed a federal lawsuit in August 2025 challenging the extension of the TAT to cruise passengers. These plaintiffs argued that applying the tax to cruise bills is unconstitutional under federal law and could undermine long‑standing legal principles governing maritime commerce.

The plaintiffs contended the tax would increase costs for passengers and possibly deter future bookings, and they sought an injunction to delay or block implementation before the effective date.

Federal Court Decision and Its Implications

U.S. District Judge Otake denied the motion to halt the new tax while litigation continues. This ruling allows Hawaii to proceed with enforcement of the expanded TAT, including the cruise component. The judge’s decision did not address the deeper constitutional arguments but instead permitted the law to take effect while the industry pursues further appeals.

The court’s action means that travellers arriving on cruises will, starting in 2026, face this tax alongside other visitor groups. Counties can still levy their own surcharges based on local tax codes, which affects the total levy travellers pay once docked in Honolulu, Maui, Kauai or other ports.

Travel Industry and Itinerary Revisions

For cruise operators and travel advisers, this ruling signals a shift in how Hawaii is positioned as a destination. The inclusion of cruise visitors in the Transient Accommodation Tax requires adjustments to cruise pricing structures and itinerary budgets, particularly for sailings that include multiple island stops.

Travel planners will need to account for incremental costs when preparing package pricing or advising clients about total travel expenses. Some cruise lines have already started communicating these changes to prospective passengers to ensure transparency in pricing for sailings that incorporate multiple Hawaii port calls.

Climate Funding and Tourism Strategy

State officials have framed the expanded tax as a strategic investment in Hawaii’s environment, positioning visitors, including those arriving by sea, as contributing to long‑term climate adaptation and resilience projects. The levy aligns with broader state plans to fortify infrastructure against erosion, wildfires and other climate‑related threats.

By including cruise passengers within the funding strategy, Hawaii seeks to balance visitor contributions with the growing needs of local communities and ecosystems that sustain tourism.

Ongoing Legal Process and Travel Impact

Hawaii Cruise Tax Ruling allows the first‑of‑its‑kind climate tourism tax to move forward as scheduled at the start of 2026, affecting all transient visitors including those arriving by cruise ship. For travel B2B stakeholders, this ruling highlights the need to adapt pricing, product information and client communication in response to regulatory shifts that influence total travel costs. With appeals still possible in the federal courts, the broader legal process remains in motion even as enforcement begins, reinforcing the dynamic nature of tourism regulation and its influence on how travellers plan Hawaiian experiences.