The IRS holds that the tax is imposed on the amount paid, not on the actual transportation.  That means the government keeps the tax, since the tax is based on a percentage of the amount the customer paid.

Cruises, tour operators, trains and buses
Officially, you are entitled to your taxes and fees back. But how many people know this? Not many.

We contacted a number of cruise lines for their policies and response:

Disney Cruise Lines: If customers cancel the cruise, the amount they paid, minus cancellation fees and other amounts owed, will be refunded. If customers cancel 75 days or earlier before the cruise, they will not incur cancellation fees and will receive a refund; if customers cancel 74-45 days before the cruise, they will lose their deposit. If they cancel within seven days or less, they will receive no refund.

According to Disney, if you cancel the cruise and receive no refund, the taxes and fees are still refunded to customer. When asked to comment on how many taxes and fees were refunded to passengers last year, Disney refused to comment.

Royal Caribbean International: Guests will receive a full refund if they notify Royal Caribbean in writing 70 days (60 days for 3- and 4-night cruise vacations) prior to the departure date. A cancellation charge may apply, depending on when the customer cancels the cruise.

If the customer cancels the cruise, the taxes and fees are refunded. It happens automatically, even if they miss a port of call, whatever that tax was for the port.

Again, when asked how much money was refunded or how many passengers received back those taxes and fees last year, RCCL declined to comment.

Carnival Cruise Lines: Carnival Cruise Lines will not refund “no shows,” unused tickets, lost tickets, interruptions, partially used tickets, or cancellations received late or after the beginning of the cruise. A cancellation occurs when a stateroom is released and not simultaneously rebooked on the same sailing. If customers cancel their cruise 61 days or earlier, they will receive a 100 percent refund. If customers cancel 60 to 30 days before the cruise, they will lose only their deposit. If they cancel within seven days or less, they lose 100 percent of their fare.

Carnival Cruise Lines says they charge fees/taxes levied upon them by the home port and ports of call and a fuel supplement. When a cancellation is made, Carnival will refund taxes, government fees and the fuel supplement.

Again, the cruise line would not comment on how many of their passengers who canceled actually received back those taxes and fees.

Princess Cruise Lines: For most cruises, if customers cancel 75 days or earlier before the cruise, they will not incur cancellation fees and will receive a refund. If customers cancel 74-45 days before the cruise, they will lose their deposit. If they cancel within 14 days or less, they will receive no refund.

According to Princess, "No matter when customers cancel their cruise, they receive the government fees and taxes back."

Really? While the line again would not comment on how many passengers who canceled did, in fact, receive back those fees and taxes, we know for a fact that our 78-year-old woman did not receive them back.

As for tour companies, it actually varies by company. Some, like Abercrombie and Kent, will refund taxes and fees. Others, like Apple Vacations, keep those taxes and fees.

But do the companies tell you ahead of time? And are they ethically or legally required to refund those taxes and fees?

Apple Vacations: It's a nonrefundable policy. If customers cancel the trip, they will not receive any taxes or fees back.

FunJet: No refunds, no taxes or fees returned.
    
Bottom line: If you have a sizable investment in your travels, you should purchase trip cancellation and interruption insurance. If not, getting any kind of refund, including taxes and fees, can be difficult. But almost everyone we talked with stated that at the very least you deserved your taxes and fees back.

But going back to the cruise example, the words "port fees" have now been altered by many cruise lines in their contracts to make it almost impossible to get those back, even if you never set foot on the ship.

My advice? Buy trip cancellation and interruption insurance.

If you purchase travel services with a credit card (and we strongly suggest you do this) and you don't receive the service for which you contracted, under federal credit laws you can dispute the charge on your bill and the credit card company will investigate and issue a temporary credit while they check into it. If that fails and you are still charged for something you didn't get, you also have recourse in small-claims court.

In addition, as in the case of the woman who missed her cruise and had bought her airline tickets through the cruise line, there's the legal concept of detrimental reliance. She relied on the cruise line to provide all her travel services, to her detriment. The minute she bought everything through the cruise line, the cruise line became, in effect, the agent of the airline as well, and should be responsible. In the case of Princess, it seems they were so obsessed with generating revenue that they forgot some basic responsiblities. And the tag to the piece — the woman will finally be cruising to Alaska this summer, courtesy of the generosity of Washington Post readers. Yes, she'll  be buying the trip cancellation and interruption insurance, and, not surprisingly, she won't be cruising on Princess!

In almost every case involving a cruise line, tour or bus operator, demand your taxes and fees back if you cancel, even if the company has a "no refund" policy. You shouldn't be assessed taxes or fees if you never used the service, especially if the fees are paid to a third party  based on the policy that you were charged a "head fee' for being somewhere you weren't.

And sometimes, when travel providers fail to disclose additional charges, you also have rights. For example, if you used a credit card overseas between Feb. 1, 1996 and Nov. 8, 2006, you are probably eligible for at least a $25 rebate check from your credit card issuer. Why? A class action suit against Mastercard, Visa, Diners Club and Bank of America (and many other credit cards) charged the companies for not disclosing to their customers a foreign curency transaction fee they charged you for using the cards overseas. The credit card companies settled and established a $336 million settlement fund. Just log on to www.ccfsettlement.com before May 30, and you can file for your settlement online (some settlements may be huge, depending on how many trips you went on and how much money you spent).

Travel basics
Keep in mind that virtually all cruise lines have what amounts to a draconian refund policy and you need to read the fine print carefully. For most cruise lines, if you cancel your trip for any reason within 30 days of the cruise, you are entitled to no refund at all. So if you have any sizable investment in travel, (and a cruise certainly qualifies in this case), you should seriously consider purchasing trip cancellation and interruption insurance. The premiums range from 8 to 13 percent of the cost of the trip, and the difference in premiums is really a reflection of how comprehensive the insurance policy is. Some policies will protect you if you get sick or there are weather issues. Other policies (more expensive, of course) allow you to cancel for any reason.

But if you don't have a substantial investment and don't purchase the insurance, here are some real-world scenarios under which you can —and should — get a refund:

Your flight is canceled by the airline: If your flight is canceled by the airline (and not by you), you are entitled to a full refund, even if the ticket was listed as "nonrefundable." The airline might want to give you the opportunity to rebook your flight later for no additional fee, or they might offer you vouchers to "compensate" you for your inconvenience. But that's not cash back to you, and you are entitled to that refund.

You're offered a voucher: Airlines and cruise lines are notorious for trying to offer vouchers in lieu of refunds. This is problematic on a number of levels. Firstly, a voucher only really works if you're planning on taking a flight, or another cruise, within a year. But the real problem is that it obligates you to take another flight or another cruise and spend even more money. It is not a real refund. If you do accept an offer for a voucher, make sure it has at least a two-year expiration and there are no blackout dates — which could render it valueless in real-world terms.

You didn't get taxes and other fees refunded: Every cruise line insists that even when you cancel your cruise, you are entitled to taxes and fees back. Entitled? Perhaps, but did folks get their taxes and fees back? The woman in Washington, D.C., didn't. If you don't ask — and in many cases, demand — you won't get the taxes back (after all, how can you be taxed on something you never did?). And here's the real confusing part: The fees. After a number of lawsuits against cruise lines for charging port fees but then keeping those fees — even when the ships didn't even stop at those ports — many cruise lines changed the language in their contracts and no longer call them port fees.

One reason they did this: The amount of money represented by just port fees is in the hundreds of millions of dollars. Keep in mind that cruise ships pay port fees on a per-passenger basis, based on the number of heads in beds on each cruise. If you werent on the cruise, the cruise company didn't pay the port fee — but they sure collected it, didn't they? By "bundling" those port fees as part of your overall cruise ship fare, it's now become difficult, if not impossible, to get the cruise lines to break them out and refund them. It's another strong case to buy travel insurance.

You need a refund from your tour operator: They don't bundle the taxes and fees, and as a result, it's easier to go after them for the taxes and fees if you canceled your trip.

The cruise line or tour operator refused a refund: Do you have any legal standing at all? In the case of the Washington woman, the answer is a qualified yes. Since she bought all aspects of her trip — not just the cruise — through the cruise line, a legal argument could easily be made that the cruise line in fact became the agent of the airline (since it also sold her the airline tickets), and the legal argument of "detrimental reliance" can kick in — she relied for her entire trip, including the air portion — on the cruise line, to her detriment. However, most travel providers are counting on the fact that they have deeper pockets than you do, and that most travelers will not litigate.

However, there's a remedy for travelers anyway — small-claims court. In recent years, many states have upped the dollar limits for what can be filed in small-claims courts. In California, it's now $7,500; in Illinois, it's $10,000, and in some states, like Tennessee, it's as high as $15,000. And the good news about small-claims court is that you don't need a lawyer. You can represent yourself — of course, all the basic good judgment and homework principles apply — you need to have all your records, receipts, witnesses and other documentation ready to present to the judge. But the other good news here is that in many cases, the defendants (cruise lines, tour operators) don't appear on their case date, and as a result, the court issues a judgment against them for the amount of your claim. Basically, you get your money back.

   

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Peter Greenberg is TODAY’s Travel editor. His column appears weekly on TODAYshow.com. Visit his Web site at PeterGreenberg.com. 

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