Court: State can’t tax cruises-to-nowhere

Jackie Hallifax

Friday, Feb. 18, 2005 | 9:34 a.m.

TALLAHASSEE, Fla. -- Gambling jaunts known as cruises-to-nowhere don't owe taxes on commercial activity that happens beyond the state's territorial waters, the Florida Supreme Court ruled Thursday.

Unanimously backing a lower court, the justices rejected the state's argument that New Sea Escape's gambling trips fall under intrastate commerce rules because its ships never reach a foreign port.

Instead, the court found the Bahamian company can operate under state law on foreign or interstate commerce, meaning it must pay only the state's 6-cent sales and use tax for commerce conducted within the state's territorial boundaries.

The Department of Revenue had argued New Sea Escape owed $1.3 million in back taxes and penalties for cruises from September 1996 through April 1998.

The ships, which leave from Fort Lauderdale, allow gambling after they travel 3 miles off Florida's coast, beyond the state's territorial waters.

Florida's cruises-to-nowhere industry has grown from one ship to 17 in the last 20 years, with an estimated 4.4 million passengers. The industry paid the state $5.4 million in taxes and fees in 2002.

David Bruns, a Revenue Department spokesman, said the ruling would apply to other cruise operators but that it was not immediately clear how many, or how much money might be involved. Some companies have settled cases confidentially and would not be bound by Thursday's ruling, he said.

Agency lawyers were reviewing the opinion, Bruns added.

New Sea Escape, which has corporate offices in Fort Lauderdale, also argued it should escape state taxation completely under the Commerce Clause of the U.S. Constitution, but the state's high court rejected that argument Thursday.

Edna Caruso, an attorney for New Sea Escape, did not return a phone call for comment.