Taxed Twice?

[Kellyann]

We rec'd a 100% future cruise credit due to weather problems in September.  Just wondering since our credit is $900 and if we book another cruise for about the same amount, do we have to pay taxes on the new one?  I know port fees would apply.

[Flatbush Flyer]

Read the T&Cs for that future cruise certificate and you will probably find the correct answer on what exactly is/isn't covered.

 

In addition, have you filed a claim with your travel insurer for the value of the cancelled cruise and its covered associated costs? At the same time, get a definitive answer on the bottom line effect of the value of the certificate vs your claim. After all, what would happen if you don't/can't use the certificate.

 

No travel insurance policy? If you used a travel savvy CC for your original cruise purchase, it may have trip cancellation/delay insurance included.

[clo]

27 minutes ago, Flatbush Flyer said:

If you used a travel savvy CC for your original cruise purchase, it may have trip cancellation/delay insurance included.

Yep. We recently got the Chase Sapphire Reserve and were pretty pleased with the coverage.  Didn't know about it.

[Flatbush Flyer]

4 minutes ago, clo said:

Yep. We recently got the Chase Sapphire Reserve and were pretty pleased with the coverage.  Didn't know about it.

Of course, "the devil is in the detail."

One caveat on a CC's included travel insurance is that PECs are excluded from coverage (i.e., they are not waived) when causing trip delay or cancellation.

Some of the high end CCs may waive PECs. Just need to check the fine print.

The other problem with CC included travel insurance is that reimbursement limits are often woefully inadequate for "big ticket" cruise costs. One strategy (depending on the annual cost of the CCs) that effectively doubles the coverage limits is to split the cost of each travel item (cruise, flights, etc) across two separate accounts of the same CC.

 

[SRF]

If your cruise was canceled, port fees and taxes should have been refunded to your credit card.

 

Cruise fare is reimbursed via FCC.

 

So yes, I would think you would have to pay taxes, but not again, as you really did not pay them the first time (reimbursed).

[Kellyann]

The cruise was not cancelled, we just never got anywhere except the ocean for 6 days.  Our port fees were reimbursed for a lowly $40 when we were supposed to be in Bermuda for 3 days.  We are booked on a cruise in 2020 and our FCC is being applied and our trip insurance is being brought forward also.  I'm just asking if we should pay taxes again.  I don't know what CC or PEC's mean.

[Flatbush Flyer]

3 minutes ago, Kellyann said:

The cruise was not cancelled, we just never got anywhere except the ocean for 6 days.  Our port fees were reimbursed for a lowly $40 when we were supposed to be in Bermuda for 3 days.  We are booked on a cruise in 2020 and our FCC is being applied and our trip insurance is being brought forward also.  I'm just asking if we should pay taxes again.  I don't know what CC or PEC's mean.

So, your cruise was neither cancelled nor delayed? But, you got a courtesy freebie certificate. That's reasonable.

 

The "certificate" is for a future "additional" cruise. So, you should expect that bottom line fare to include the new cruise's taxes and fees. Whether your certificate will pay them is spelled out in your T&Cs (specifically the fine print in your contract).

 

Note that some third party travel insurance (e.g., Nationwide's cruise specific policies) would pay you a flat rate consideration of $XXX for each "missed port." I doubt that the insurance you purchased from the cruise line would provide that perk. 

 

As for port taxes et al. fees, most cruise lines will reimburse you for the missed ports' port taxes either automatically or via  your written request, which can be a pain if you also have to request a disaggregation of any bottom line tax inclusive fare.

 

FYI: In the context of my previous post, CC means "credit card" and PEC means "pre-existing condition" (with the insurance definition being quite different than the medical one).

 

FWIW: We would never buy cruise insurance from a cruise line. We use third party insurers whose coverages (international trip and medical) dove tail with our regular insurance coverage. And we crosscheck our own research with the recommendations of trusted brokers like insuremytrip.com.

[pacruise804]

 

4 hours ago, Kellyann said:

The cruise was not cancelled, we just never got anywhere except the ocean for 6 days.  Our port fees were reimbursed for a lowly $40 when we were supposed to be in Bermuda for 3 days.  We are booked on a cruise in 2020 and our FCC is being applied and our trip insurance is being brought forward also.  I'm just asking if we should pay taxes again.  I don't know what CC or PEC's mean.

 

Kellyann, I think I was on this cruise with you (Carnival Sunrise, Sept 16th) and our insurance told us we couldn't get anything for the missed port since there was no financial loss.  If we had an unreimbursed excursion that would have been covered by insurance.

 

I was also told the cruise line always has the port fees/taxes correct and we were not due anything beyond what Carnival reimbursed.  I agree the refund seemed light, but I suspect the charges might have been $X for stopping at Bermuda and $Y for the additional days.  We also probably had a charge for Brooklyn (which might have been different than Manhattan) and certainly a charge for Charleston (unless yours was a different cruise that had no stops).  We had a refund the first day which I'm guessing was the difference between Charleston and the extra days at Bermuda, then we were refunded the portion for missing Bermuda entirely.

 

It's nice you were able to carry forward your insurance 🙂 

[leaveitallbehind]

First of all the cruise line has no obligation to compensate you anything more than for port fees for the ports of call missed due to weather and other conditions out of their control.

 

Second the amount of port fees reimbursed is the actual charged by the cruise line as this is a direct pass through from them to the ports.  If you don't make the port of call, it isn't paid, and therefore would be returned to you in its entirety. Regardless of how lowly the amount seemed, that is the amount that you paid with your original cruise booking as the port fees portion of the taxes and fees amount.

 

Third, the fact that they provided a 100% FCC in the amount of  $900 resulting from the ports missed was very generous on their part as, was indicated previously, they have no obligation to provide any compensation to you. That being said, the cruise credit is for base cruise fare only, not taxes included.  Therefore taxes (and port fess, as you acknowledge) would be charged when you book your subsequent cruise just as they were with your original cruise. 

Edited November 5, 2019 by leaveitallbehind

[pacruise804]

I agree that Carnival was very generous in offering a FCC for our trip.  I chose to book a cruise during hurricane season knowing it could be canceled or diverted and overall had a good time.  I had food, entertainment, and cabin facilities for 6 days so I don't argue that I received the cruise I knew I might get.  I never imagined Charlotte as the port (not international), but it was still a pleasant day.

 

I think some of the confusion was the high amount of the taxes and fees paid compared to what was refunded.  Per person it was $217.52, but we were only refunded $53.71 (13.13 initially, then 40.58 when we weren't going to make Bermuda at all).  I think many on our cruise wondered where the other $163.81 went.

 

 

[sanger727]

Yes, I would expect that you would have to pay port fees and taxes on the cruise you book. You booked and took a cruise. It was well under what was promised to you so you were offered a generous future cruise credit (even though by the terms of their contract, they could have offered you nothing). Taxes and port fees are always owed when you book a cruise. When you use your $900 to essentially get a second vacation for free, you will owe it on the new cruise. That's not being taxed twice.

 

 

[leaveitallbehind]

1 hour ago, pacruise804 said:

I agree that Carnival was very generous in offering a FCC for our trip.  I chose to book a cruise during hurricane season knowing it could be canceled or diverted and overall had a good time.  I had food, entertainment, and cabin facilities for 6 days so I don't argue that I received the cruise I knew I might get.  I never imagined Charlotte as the port (not international), but it was still a pleasant day.

 

I think some of the confusion was the high amount of the taxes and fees paid compared to what was refunded.  Per person it was $217.52, but we were only refunded $53.71 (13.13 initially, then 40.58 when we weren't going to make Bermuda at all).  I think many on our cruise wondered where the other $163.81 went.

 

 

 

The $217.52 is the combined total of port fees and taxes.  The 53.71 was the port fees portion of that amount.  The $163.81 in taxes would not be refunded as you completed the full cruise even though Bermuda was missed as the cruise line is obligated to file that tax amount. Taxes are not charged on the port of call or part of the port fees.  They are the taxes based on the purchase of the cruise fare.

 

And as mentioned, the $900 FCC is always intended as a credit against a future cruise booking fare, and is exclusive of taxes.  In that manner it can be applied against any actual fare based on any stateroom category as a straight credit, with taxes then charged on the full value of that fare (which would include that FCC credit value).

Edited November 5, 2019 by leaveitallbehind

[SRF]

22 hours ago, Flatbush Flyer said:

FWIW: We would never buy cruise insurance from a cruise line. We use third party insurers whose coverages (international trip and medical) dove tail with our regular insurance coverage. And we crosscheck our own research with the recommendations of trusted brokers like insuremytrip.com.

 

Do you realize that the insurance through the cruise line IS underwritten and serviced by a 3rd party insurance company?

 

It is not done by the cruise line.  They just sell you the policy.  

 

And while the limits tend to be lower, they do include Cancel for Any Reason and also cover older people at much lower rates.

[leaveitallbehind]

6 minutes ago, SRF said:

 

Do you realize that the insurance through the cruise line IS underwritten and serviced by a 3rd party insurance company?

 

It is not done by the cruise line.  They just sell you the policy.  

 

And while the limits tend to be lower, they do include Cancel for Any Reason and also cover older people at much lower rates.

 

Agree.  As I'm sure you are aware, often the reason the rates are lower through the cruise line is that they are essentially getting a group rate for any given itinerary based on the volume of passengers that would purchase through them, whereas individual 3rd party insurers are selling individual coverage per passenger on a given itinerary.

 

However, that being said,  IMO pays to check on the overall coverage offered as the individual insurers coverage typically is measurably better than that offered through the cruise lines and the comparative premiums are not always significantly higher.  But they are based on age, which clearly would be a driver with older passengers rates.

[pacruise804]

2 hours ago, sanger727 said:

Yes, I would expect that you would have to pay port fees and taxes on the cruise you book. You booked and took a cruise. It was well under what was promised to you so you were offered a generous future cruise credit (even though by the terms of their contract, they could have offered you nothing). Taxes and port fees are always owed when you book a cruise. When you use your $900 to essentially get a second vacation for free, you will owe it on the new cruise. That's not being taxed twice.

 

 

You and I have different definitions of "free."  I'm grateful for the credit and am looking forward to our Journey cruise next year.  As I will once again be paying parking, gratuities, drinks, excursions, and port fees and taxes (probably some other costs I'm forgetting too), it is hardly a "free" cruise.  Deeply discounted, maybe, but not free.  I doubt others were booking cruises that cost less than their credit either and probably didn't match to the penny, so we also have the fare difference.  Again, Carnival was very generous but nobody got a "free" cruise.

 

2 hours ago, leaveitallbehind said:

 

The $217.52 is the combined total of port fees and taxes.  The 53.71 was the port fees portion of that amount.  The $163.81 in taxes would not be refunded as you completed the full cruise even though Bermuda was missed as the cruise line is obligated to file that tax amount. Taxes are not charged on the port of call or part of the port fees.  They are the taxes based on the purchase of the cruise fare.

 

And as mentioned, the $900 FCC is always intended as a credit against a future cruise booking fare, and is exclusive of taxes.  In that manner it can be applied against any actual fare based on any stateroom category as a straight credit, with taxes then charged on the full value of that fare (which would include that FCC credit value).

Thank you for the explanation.  Does a cruise line not need to file taxes for customers who don't show/cancel after full payment?  I thought people post about getting taxes and fees refunded.  Are you sure taxes aren't charged based on the port of call?  Our rebooked sailing also sails from NY and has a higher base cruise rate but lower taxes, fees, and port expenses ($212.24 pp for 9 days/4 ports).

[leaveitallbehind]

26 minutes ago, pacruise804 said:

You and I have different definitions of "free."  I'm grateful for the credit and am looking forward to our Journey cruise next year.  As I will once again be paying parking, gratuities, drinks, excursions, and port fees and taxes (probably some other costs I'm forgetting too), it is hardly a "free" cruise.  Deeply discounted, maybe, but not free.  I doubt others were booking cruises that cost less than their credit either and probably didn't match to the penny, so we also have the fare difference.  Again, Carnival was very generous but nobody got a "free" cruise.

 

Thank you for the explanation.  Does a cruise line not need to file taxes for customers who don't show/cancel after full payment?  I thought people post about getting taxes and fees refunded.  Are you sure taxes aren't charged based on the port of call?  Our rebooked sailing also sails from NY and has a higher base cruise rate but lower taxes, fees, and port expenses ($212.24 pp for 9 days/4 ports).

 

To your first comment, you are correct that it certainly is not free.  But as they had no obligation to do anything, a $900 discount in my mind is very attractive and generous.  Keep in mind you don't have to book another cruise and you will spend nothing.  But having a $900 credit towards another one is pretty good in my books.

 

As to a refund of taxes and port charges, they would refund both if you were to cancel past final payment but would keep the fare paid.  But this is not that case.  And I am sure that taxes and port charges are separate and what you were credited represented the port charges, which, since you did complete your cruise, was all that you were entitled to.

 

As to taxes and port charges for your next cruise, they can be and often are different.  Port fees, in particular, are determined from a rather complicated formula based on a negotiated contracted rate between the cruise line and the ports of call that can vary by size of ship, passenger load, etc.  It is not a straight % calculation.  Again, one of the cost components is the port fees, which will be different from port to port. As such, four individual ports of call could be less than one at three days.  So they - along with taxes - can vary from itinerary and ship and cannot necessarily be compared from one itinerary to another. 

Edited November 5, 2019 by leaveitallbehind

[pacruise804]

Thanks again for the explanation about taxes and port charges.  Do I understand correctly (generalized, simple version) that taxes are paid for each person that sails, and port charges are paid for each person that visits the port?  And the tax rate and taxing authority is unknown/unknowable to the basic cruiser, along with port rate calculation?  I'm fine with what we paid and were credited and am fine with trusting the cruise company to do right by it's passengers, just curious about how it works (and fine with knowing that I won't know 😉 )

 

I agree that we didn't have to take another cruise, and I'm sure there are some who won't use the FCC.  I also agree Carnival was very generous and didn't have to give us anything beyond the port charge difference.  I'm thrilled to be able to take a Journey cruise since they are usually out of our price range - especially since we already have another big cruise planned for next year on Viking for our 25th anniversary ❤️ 

 

I'm probably a little twitchy when I see people talking about a "free" cruise with how much I saw it discussed on a different site.  I apologize if it came across as an attack on you 😞 

[leaveitallbehind]

15 minutes ago, pacruise804 said:

Thanks again for the explanation about taxes and port charges.  Do I understand correctly (generalized, simple version) that taxes are paid for each person that sails, and port charges are paid for each person that visits the port?  And the tax rate and taxing authority is unknown/unknowable to the basic cruiser, along with port rate calculation?  I'm fine with what we paid and were credited and am fine with trusting the cruise company to do right by it's passengers, just curious about how it works (and fine with knowing that I won't know 😉 )

 

I agree that we didn't have to take another cruise, and I'm sure there are some who won't use the FCC.  I also agree Carnival was very generous and didn't have to give us anything beyond the port charge difference.  I'm thrilled to be able to take a Journey cruise since they are usually out of our price range - especially since we already have another big cruise planned for next year on Viking for our 25th anniversary ❤️ 

 

I'm probably a little twitchy when I see people talking about a "free" cruise with how much I saw it discussed on a different site.  I apologize if it came across as an attack on you 😞 

 

Yes to your first paragraph. It typically just isn't a calculation that is broken out as it varies itinerary to itinerary and ship to ship.  But it is a regulated amount and is not arbitrarily assessed.

 

And you did not at all come across to me in a negative way - for you to think that makes me feel that in fact it is I who may have, for which I apologize.  I was simply trying to add my perspective not just to you but to others as well.  It's all good discussion. 🙂

 

Enjoy your cruises!

Edited November 5, 2019 by leaveitallbehind

[Flatbush Flyer]

2 hours ago, SRF said:

 

Do you realize that the insurance through the cruise line IS underwritten and serviced by a 3rd party insurance company?

 

It is not done by the cruise line.  They just sell you the policy.  

 

And while the limits tend to be lower, they do include Cancel for Any Reason and also cover older people at much lower rates.

Of course, it's not the cruise line itself  insuring you.

But, should the cruise line go "belly up" (e.g., Renaissance), they certainly wouldn't be in a position to advocate for you in a claim as would a third party broker. 

 

[pacruise804]

2 hours ago, leaveitallbehind said:

 

Yes to your first paragraph. It typically just isn't a calculation that is broken out as it varies itinerary to itinerary and ship to ship.  But it is a regulated amount and is not arbitrarily assessed.

 

And you did not at all come across to me in a negative way - for you to think that makes me feel that in fact it is I who may have, for which I apologize.  I was simply trying to add my perspective not just to you but to others as well.  It's all good discussion. 🙂

 

Enjoy your cruises!

 

No apology necessary 🙂 It is often hard to read tone on forums so I don't always know how I come across.  I also try to offer my perspective - often for other's benefit too - and enjoy good discussion 🙂 

 

Happy sailing!

[FredT]

4 hours ago, leaveitallbehind said:

Does a cruise line not need to file taxes for customers who don't show/cancel after full payment?  I thought people post about getting taxes and fees refunded.

In both Connecticut and NY (Where I file sales tax returns) The tax the cruise line owed would be based on how much it took in, NOT on weather you actually took the trip or not.  

 

In other words, if the cruise line KEPT your fare (You canceled after the final payment window) the cruise line would be liable to pay the sales tax on the fare.  If for some extraordinary reason they refunded you your money, they would NOT be liable to pay the taxing authority the applicable sales tax.  

 

Now fees, I know nothing  about.......

[leaveitallbehind]

50 minutes ago, FredT said:

In both Connecticut and NY (Where I file sales tax returns) The tax the cruise line owed would be based on how much it took in, NOT on weather you actually took the trip or not.  

 

In other words, if the cruise line KEPT your fare (You canceled after the final payment window) the cruise line would be liable to pay the sales tax on the fare.  If for some extraordinary reason they refunded you your money, they would NOT be liable to pay the taxing authority the applicable sales tax.  

 

Now fees, I know nothing  about.......

 

That's a good point, but I'm not sure retained fares (those kept as a penalty for cancellation post final payment) would assessed for taxes and paid per individual fare, but rather any tax liability would be based on overall annual revue basis as with most corporate accounting.  In other words, taxes may be realized per passenger with individual bookings (for accrual) - and therefore returned to them if a cruise was not actually realized - but actual cruise line tax liability would be based on annual corporate total revenue.

 

To support, as example from the RCI website FAQ's regarding cancellations and penalties (my bold and underline):

 

In the event of a cancellation of a Cruise or CruiseTour, any applicable Taxes/Fees or Fuel Supplement charges shall be refunded.

Edited November 6, 2019 by leaveitallbehind

[njhorseman]

1 hour ago, FredT said:

In both Connecticut and NY (Where I file sales tax returns) The tax the cruise line owed would be based on how much it took in, NOT on weather you actually took the trip or not.  

 

In other words, if the cruise line KEPT your fare (You canceled after the final payment window) the cruise line would be liable to pay the sales tax on the fare.  If for some extraordinary reason they refunded you your money, they would NOT be liable to pay the taxing authority the applicable sales tax.  

 

Now fees, I know nothing  about.......

There is no sales tax on cruise ship fares in NY or CT. In fact the only state that has anything remotely close to a sales tax on cruise ship fares is Hawaii, which imposes a General Excise Tax (GET) .

 

Think about it. The taxes and fees you pay and that are displayed on your cruise invoice are the same regardless of whether you are in an inside cabin costing $400 a week per person or a suite with a fare of $4,000 per person . Further the taxes and fees for that cruise are the same regardless of whether you live in New York, which has a substantial sales tax, or Delaware, which has no sales tax.

[njhorseman]

1 hour ago, leaveitallbehind said:

 

That's a good point, but I'm not sure retained fares (those kept as a penalty for cancellation post final payment) would assessed for taxes and paid per individual fare, but rather any tax liability would be based on overall annual revue basis as with most corporate accounting.  In other words, taxes may be realized per passenger with individual bookings (for accrual) - and therefore returned to them if a cruise was not actually realized - but actual cruise line tax liability would be based on annual corporate total revenue.

 

To support, as example from the RCI website FAQ's regarding cancellations and penalties (my bold and underline):

 

In the event of a cancellation of a Cruise or CruiseTour, any applicable Taxes/Fees or Fuel Supplement charges shall be refunded.

Please see my previous post. . First, there are no sales taxes on cruise ship fares with the exception of Hawaii's General Excise Tax (GET), which is similar to a sales tax.

 

Further, cruise line income tax liability, or the tax liability of any corporation is based on profit, not gross revenue. What's more cruise lines pay little or nothing in federal income tax regardless of their profit because they are not incorporated in the US, and  their ships are flagged in foreign countries. Under US tax law as currently structured cruise lines are largely shielded from taxation.

 

The taxes and fees you see on your cruise invoice have nothing to do with sales taxes or federal income taxes, nor will any cruise line tell you how they are calculated... and I know you know that because you wrote this a couple of posts back: "As to taxes and port charges for your next cruise, they can be and often are different.  Port fees, in particular, are determined from a rather complicated formula based on a negotiated contracted rate between the cruise line and the ports of call that can vary by size of ship, passenger load, etc.  It is not a straight % calculation.  Again, one of the cost components is the port fees, which will be different from port to port. As such, four individual ports of call could be less than one at three days.  So they - along with taxes - can vary from itinerary and ship and cannot necessarily be compared from one itinerary to another. "

 

Edited November 6, 2019 by njhorseman

[leaveitallbehind]

55 minutes ago, njhorseman said:

Please see my previous post. . First, there are no sales taxes on cruise ship fares with the exception of Hawaii's General Excise Tax (GET), which is similar to a sales tax.

 

Further, cruise line income tax liability, or the tax liability of any corporation is based on profit, not gross revenue. What's more cruise lines pay little or nothing in federal income tax regardless of their profit because they are not incorporated in the US, and  their ships are flagged in foreign countries. Under US tax law as currently structured cruise lines are largely shielded from taxation.

 

 

Thanks for clarifying.