Alaska’s Supreme Court to rule on fish tax, with millions at stake

The Alaska Supreme Court is currently reviewing the constitutionality of a lucrative landings tax on fish caught in federal waters and brought through Alaska ports to be exported to international markets.

Every season, millions of tons of fish are scooped up by factory trawlers in the Bering Sea’s federal waters, which start three miles off the coast of Alaska. Most of those fish are processed at sea, then taken to ports like Dutch Harbor to be transferred to other ships and containers for export. Since 1994, Alaska has been collecting a three percent tax on that catch and distributing it to state and local governments.

But Fishermen’s Finest Inc. – a Washington state-based company that runs three factory trawlers that operate mostly out of Dutch Harbor, Alaska – filed a lawsuit in 2018 claiming the landing tax is unconstitutional. The company’s lawsuit hinges on a constitutional prohibition in the U.S. of taxes on goods bound for export.

According to the Alaska Journal, attorneys for Fishermen’s Finest argue that the fish are caught and processed in the federal U.S. exclusive economic zone (EEZ) and are already bound for export by the time they reach ports within the state of Alaska.

At an initial hearing earlier this month, Alaska Assistant Attorney General Laura Fox countered the fish could be sold domestically while at Alaska ports, and the product is only bound for export when it leaves Alaskan waters.

“Catcher-processor operators take advantage of Alaska to further their business and Alaska’s landing tax merely requires them to pay their fair share for doing business in Alaska like other businesses do,” Fox told the court.

Millions of dollars in revenue for state and local governments rest on the decision in cash-strapped Alaska. According to records from the Alaska Department of Revenue, the landing tax added up to around USD 42 million (EUR 35.9 million) from to 2016 to 2019, money that is split evenly between the local ports where the fish are unloaded and the state. Perhaps the largest beneficiary of the tax is the town of Unalaska, Alaska, home to Dutch Harbor and home port to much of Bering Sea’s massive pollock fishery. Alaska Public Media reported Unalaska received USD 4.6 million (EUR 3.9 million) last year alone from the tax, known as the Fisheries Resource Landing Tax.

Last year, Fishermen’s Finest won a lower court ruling that the landing tax was in fact unconstitutional, and the current hearing is the result of a state appeal that has pushed the case to the Supreme Court.  

The challenge to the Fisheries Resource Landing Tax is not the first. Shortly after Alaska state legislators passed the landing tax in 1994, the American Factory Trawler Association (AFTA) filed a lawsuit disputing the constitutionality of the tax. A year later, according to the state, "the Supreme Court rejected AFTA’s request based on AFTA’s failure to exhaust administrative remedies with the Department of Revenue."

Photo courtesy of Mark Stephens Photography/Shutterstock