Court Blocks Hawaii's Controversial 11% Cruise Tax—Just Hours Before It Was Set to Take Effect
Federal appeals court issues last-minute injunction halting Hawaii's controversial cruise passenger green fee tax hours before January 1 implementation, while increased taxes on hotels proceed.
In a dramatic last-minute legal victory for the cruise industry, a federal appeals court has temporarily blocked Hawaii’s new “green fee” tax on cruise passengers—just hours before it was scheduled to take effect on January 1, 2026. The controversial 11% tax, which could have added up to 14% in additional costs to cruise fares when combined with county surcharges, has been halted while the industry’s legal challenge moves forward.
The Ninth U.S. Circuit Court of Appeals issued an injunction on December 31, 2025, effectively pausing implementation of the tax on cruise passengers while the case proceeds through the appeals process. However, the increased taxes on hotels and vacation rentals went ahead as scheduled, creating a split outcome that has left both sides claiming partial victories.
What the Green Fee Tax Would Have Done
Hawaii’s expanded Transient Accommodations Tax, commonly referred to as the “green fee,” represented the state’s first attempt to apply similar taxation to cruise passengers as it does to land-based tourists. According to Travel and Tour World, the tax would have imposed an 11% levy on gross fares paid by cruise ship passengers, with each of Hawaii’s four counties authorized to collect an additional 3% surcharge, bringing the total potential tax burden to 14%.
The stated purpose of the tax is to fund environmental initiatives and climate protection projects across the islands. State officials estimated the green fee would generate nearly $100 million annually, providing much-needed revenue to address eroding shorelines, wildfire prevention and recovery, and other climate-related challenges facing the island chain.
Why the Cruise Industry Fought Back
The Cruise Lines International Association (CLIA), the industry’s primary trade group, immediately challenged the tax in federal court, arguing it violates maritime law and unfairly singles out cruise passengers. The industry’s position centers on several key concerns:
Constitutional and Maritime Law Questions: The cruise industry argues that imposing state taxes on passengers engaged in interstate and international maritime commerce may violate federal maritime law, which traditionally preempts state taxation of shipping activities.
Discriminatory Treatment: By taxing cruise passengers differently than other tourists—and applying the tax to gross fares rather than just the Hawaii portion of multi-destination itineraries—the industry contends the law unfairly discriminates against maritime commerce.
Economic Impact: With cruise tourism representing a significant economic driver for Hawaiian ports, particularly on islands like Maui and Kauai, the industry warned that a 14% tax increase could make Hawaii less competitive compared to other tropical destinations, potentially reducing calls and harming local economies that depend on cruise passenger spending.
What This Means for Cruise Passengers
For cruisers planning Hawaii itineraries in 2026, the court’s decision provides significant relief—at least temporarily. Passengers who booked cruises to Hawaii will not face the additional 11-14% tax surcharge on their cruise fares while the injunction remains in place.
However, this is far from a final resolution. The injunction is temporary, issued to maintain the status quo while the Ninth Circuit considers the merits of the cruise industry’s appeal. A final decision could take months or even years, and there’s no guarantee the industry will prevail. If the appeals court ultimately sides with Hawaii, the tax could still be implemented, potentially even retroactively.
It’s also worth noting that land-based tourists visiting Hawaii are not getting the same reprieve. The increased hotel and vacation rental taxes took effect as scheduled on January 1, 2026, meaning anyone staying in Hawaii accommodations is now paying the higher rates. This creates an unusual situation where cruise passengers visiting Hawaii have temporarily avoided a tax increase that their land-based counterparts must now pay.
The Broader Context: Tourism Taxation Goes Global
Hawaii’s green fee is part of a much larger global trend of popular tourist destinations implementing new taxes, fees, and restrictions on visitors—with cruise passengers increasingly in the crosshairs. According to recent cruise industry reports, numerous destinations around the world have announced or implemented cruise-focused taxes or passenger caps for 2026 and beyond.
Greece, Norway, Iceland, and France have all confirmed or proposed additional taxes on cruise passengers, often framed as measures to combat overtourism or fund environmental protection. Amsterdam has banned cruise ships from its historic center, while other European cities have implemented caps on daily passenger arrivals or restricted where ships can dock.
This trend reflects a growing tension between the economic benefits of cruise tourism and concerns about environmental impact, infrastructure strain, and overtourism in popular ports. As destinations grapple with these challenges, cruise passengers may increasingly find themselves paying premium prices to visit certain ports—or finding those ports closed to ships altogether.
What Happens Next
The temporary injunction means the legal battle now moves to the substantive appeals process, where judges will hear full arguments from both Hawaii and the cruise industry about the merits of the tax. Key questions the court will likely consider include:
- Does Hawaii’s cruise passenger tax violate federal maritime law or the Constitution’s Commerce Clause?
- Is the tax discriminatory in how it treats cruise passengers versus other tourists?
- Can states tax passengers engaged in interstate and international maritime voyages?
Hawaii has defended the tax as a legitimate exercise of its authority to raise revenue for critical environmental programs, arguing that cruise passengers benefit from Hawaii’s natural beauty and should contribute to its preservation, just as hotel guests do.
A final ruling could establish important precedent for how states can tax cruise tourism, potentially affecting similar efforts in Alaska, Florida, and other major cruise markets. If Hawaii prevails, expect other states to quickly follow suit with their own cruise passenger taxes. If the industry wins, it could put a chill on such efforts nationwide.
The Bottom Line for Cruisers
For now, passengers planning Hawaii cruises can breathe easier knowing they won’t face the controversial green fee—yet. But the emphasis is on “yet.” This legal battle is far from over, and the final outcome remains uncertain.
Those booking Hawaii cruises in 2026 and beyond should stay informed about developments in this case. If you’re concerned about potential tax increases, consider booking with cruise lines that offer price protection or flexible cancellation policies. And if you’re weighing a Hawaii cruise versus a land-based Hawaii vacation, remember that hotel guests are already paying the increased taxes that cruise passengers have temporarily avoided.
Hawaii remains one of the most spectacular cruise destinations in the world, with its dramatic volcanic landscapes, pristine beaches, and unique culture. But as this legal battle demonstrates, the business of cruise tourism is becoming increasingly complex, with destinations, cruise lines, and passengers all navigating new tensions around taxation, environmental impact, and the future of tourism.
We’ll continue to monitor this case and report on developments as they occur. For now, Hawaii cruisers can enjoy their sailings without the green fee—but they should also enjoy the uncertainty-free pricing while it lasts.
Sources: Travel and Tour World, Hawaii Tribune-Herald, Honolulu Civil Beat