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Think you understand duty-free?
Posted by: Sean O'Neill, Wednesday, Jan 28, 2009, 3:14 PM

Is duty-free shopping a true tax loophole or just a gimmick? BudgetTravel.com attempts to answer that question in this week's article "What's the Deal With Duty-free?"

Our reporter, David Farley, scoped out the duty-free items offering the deepest discounts. He found that booze and cigarettes are usually discounted from what you would pay at an overseas or U.S. retail store, and some of the best bargains now are at British airports. Yet discounts are typically rare for other products, such as watches and perfume, in England and elsewhere in the world.

Here are some other fun facts he and our staff learned during our research.

Why are electronic gizmos almost never sold duty-free? The most dedicated duty-free customers are Japanese, and electronics are relatively cheap and plentiful in Japan—so there's little demand for duty-free shops to stock high-tech products.

Must you pay U.S. duty on products you bought duty-free? Sometimes, yes! If you bought more than $800 worth of duty-free and standard retail products during your international trip, then you'll usually be slapped with a duty of at least 3 percent. (Full rules, here.)

Are perfume prices marked up at duty-free? We couldn't prove it, but we suspect so. When we comparison shopped, we found that fragrances were often cheaper in U.S. retail stores. And while the duty-free and travel trade research firm Generation Research told us that the products are not usually marked up, the firm also reported that the profitability of "duty free and travel retail accounts" for major beauty manufacturers is usually in the 10 to 50 percent range. Says the firm, "The big fragrance and cosmetics houses make more from duty free and travel retail than from many domestic markets." So it doesn't seem to us that you are bound to find many deals on perfume in a duty-free shop, given that the companies make more profit selling items in duty-free shops than elsewhere.

Is there a limit on how much alcohol you can bring back into the U.S. without paying U.S. duty? Yes, usually. If you're returning from Europe, for instance, there's a one-liter per adult limit. From the Caribbean? Two liters per person, max. Above that, you'll pay duty and taxes.

Will duty-free shops spare you from paying sales or value added tax? Often, yes. In Europe, for instance, most duty-free shops double as "tax-free" shops. (The signs screaming "tax-free" are your clue.) You'll save between 5 and 25 percent, depending on the country you're shopping in. (Here's a PDF file of V.A.T. (value-added tax) rates by country.)

MORE
"What's the Deal With Duty-free?"

Filed Under: airport news, shopping
Reader Comments

I already get Budget Travel under the name Ronnie Martin. My favorite magazine!

I travel to Europe once a year, so I love all the info you provide. This website is just great!

Posted By Veronica(Ronnie)Martin on January 29, 2009, 2:15 AM

I think it would be helpful to the reader to supply an estimate what the duty is if you bring in more than one liter of alcohol.

My friend bought back 30-40 bottles of vodka (for personal use!) for the Caribbean and said it was about $3 each bottle.

I tried to look it up and the best quote I could find is $2.35/pf. liter via http://dataweb.usitc.gov/scripts/tariff_current.asp for "22089071.--Imitations of brandy and other spirituous beverages containing alcohol--01/01/2000". A random sampling of one type of wine was $0.17 or $0.33 for "Grape wine, other than "Marsala", not sparkling or effervescent, over 14% vol. alcohol, in containers holding 2 liters or less."

Posted By Iolaire McFadden on January 29, 2009, 9:48 AM

Do not forget about in flight international sales. I have bought rum cheaper from Qantas then the duty free shops.

Posted By johnharry on February 1, 2009, 4:13 PM

I am an experienced business traveler and I know and understand the "Duty Free" concept for countries and International airports world-wide.

1. "DUTY FREE" is a huge WORLD WIDE RACKET! Experienced business and personal travelers rarely if ever buy from "Duty Free" stores unless they simply like what they see and want it for themselves or, need a gift to offer on arrival at the destination.

2. Experienced buesiness travelers know very well that "Duty Free" ONLY means free from the duty (if there ever was any duty on that particular product) and, "almost" free added value tax (TVA /VAT). The "Duty Free store NEVER retruns 100% of either the Duty or of the TVA / VAT! That is it!! This is the way the system works!

3. The cost of International airport rental space within the "Duty Fee" area of an International airport is often as high as $12.00 - $25.00 or MORE per square foot PLUS a LARGE percentage of the gross sales. As a reference, a normal in town / city store rental space is about $2.50 per square foot. With the astronomical International airport rental costs within the "Duty Fee" area, the ONLY way the "Duty Free" store can make out is by having prices that are in FACT much much higher than that of the in-town "Duty Free" stores.

3. You can do much better (much lower prices and much nicer people) in most European and Asian in-town stores by purchasing your goods from a store that can offer you "Duty Free" prices and will give you the necessary paperwork to turn in to Customs at your departure International airport. This is a completly common way of purchasing your goods from in-town storees so they can compete with the "Duty Free" stores in the International airports.

4. Bottom line: You will purchase your "Duty Free" goods a prices that are much much lower when you purchase from in-town stores offering "Duty Free" purchases than from those at the world wide racket International airport "Duty Free" stores. The price difference is truly astounding!

Posted By John S. Levinson on February 1, 2009, 6:22 PM

have you seen the price of angel these days at macys $107.00 at duty free shops $60.00. the prices at duty free shops on perfume is the best. it is not true what you wrote. i always pay minimum $20.00 less for perfume at duty free !!!!!!!!!!!!! also i went to Spain never got my vat tax back so i suggest do not buy anything there just in duty free shop at airport!!!!!!!!!

Posted By andea on February 1, 2009, 6:33 PM

I have had the following experiences with Duty Free. #1 is buying Scotch liquor, a product of the UK while on a flight from Minnesota to London. I bought this liquor for much less on the plan, than the same booze would cost in the UK itself. #2 is buying US cigarettes on a plane from the US to Europe. Again, much less money than price in the local market. Situation #1 is more surprising, considering the origin of the product and the number of hands it had to pass through to be sold on an airplane which originated in the states. High taxes in the UK must be the reason.

Posted By Dooty Frei on February 1, 2009, 6:53 PM

I like to shop at the duty-free shop.
I like to shop at the duty-free shop.
I like to shop at the duty-free shop.
I like to shop at the duty-free shop.

Posted By George Costanza on February 1, 2009, 7:50 PM

There are very few goods, these days, that cost less in the Duty Free than they do in the High Street. Almost anything in the perfume, electronics, gifts, and accessories sections I find can find cheaper in department stores or online - prices have gone up more since credit card companies now charge FX fees for transactions in overseas currencies.

I have to disagree with the writer on a couple of fronts: British Duty Frees have been competitive solely because of the drop in value of the Pound Sterling, but Britain in general is high on my list of "expensive countries".

Then the comment that "electronic gizmos are almost never sold Duty Free". Duty Free electronic gizmos are available in large quantities in many airports in the world. I particularly try to fly through Amsterdam, Tokyo, Hong Kong, and Singapore to buy my toys, they all have amazing assortments. Amsterdam Schiphol is particularly cool, since it has a full catalogue online (http://schiphol.nl, or look for their "SeeBuyFly" brand), while one can, through their website, pre-order almost any gizmo that is sold in The Netherlands. Arriving there last December, the place looked like an overlarge department store, rather than an airport.

Generally, I find Duty Free shops good places to buy unusual or original gifts, and those got-to-have things that show you're a globetrotter when you get home. For cheap shopping, go to one of those shopping warehouses that dot Beijing, or East Germany, or Poland, and remember that many international airports, worldwide, have a "Tax Return" office, where you can claim the VAT or GST you paid in the country back, minus a small service fee. That makes almost any purchase in such a country Duty Free.

Posted By Menno Aartsen on February 1, 2009, 8:17 PM

I have often bought duty free at Malpensa in Milan. I purchased a Feragamo wallet and paid significantly less than I had seen it in the US. Plus, I took my receipt to the customs area and received my VAT refund with no problem.
Same is true for leather is Florence. You can present your VAT right at the corner of Ponte Vecchio and receive a refund with no problem. As for UK, I am able to purchase 20 year old Lagavulin single malt scotch at the airport. Don't know how much you save, but you can't find 20 year old Lagavulin in this country. So if you like that stuff, it's worth the price.

Posted By chuckles on February 1, 2009, 8:48 PM

The problem is that many companies craft duty-free items that are not found in other markets, making it harder to comparison shop. Or, they change the packaging and size. Scotch and other liquors seem to me to be about a 20% bargain - you pay the same price in duty free for a liter that you would pay at home for 750ml. In Mexico they will sell all sorts of premium tequilas in duty free that you have never seen before. Cigarettes can be a good deal at duty free, but I heard recently that they are bad for you - someone should check on that.

Posted By Vincentius on February 1, 2009, 8:56 PM

Just returned from the caribbean on a 9 day cruise, NCL Jewel. I can say that the pricing on the men's skin care products were less than half. The cologne was priced fair market value and they always have cologne that is hard to find in the states. Living in FL there is a 7% tax, buying $300 in men's skin care saved me over $21.00 in taxes. Now.. if you make it down to St. Lucia - do some shopping the exchange rate is insane. What is $30 bucks in St. Lucia will cost you $11 bucks U.S. - Enjoy!

Posted By RLF the artist on February 1, 2009, 9:59 PM

My personal experience is that duty free shops are overpriced. I am lucky that I live in Southern California and prices are very good, also the internet. My experience show that people from Europe, where taxes are very high, seem to think duty free prices are good compared to home. Even going to Tokyo and the electronic district, the prices were not so good compared to what I can get already at home. Buyer beware.

Posted By Jay on February 1, 2009, 10:10 PM

I comparison shopped at the duty-free shop at the Canadian border and found that the prices on perfume/cologne were only slightly higher than at Target. Thus, if your brand is available at Target, get it there, but if it one of the less common brands only available at department stores, then you can save a little at duty free.

Posted By bellczar on February 1, 2009, 10:23 PM

Bought a bottle of Tequila in the duty free shop for $55. I have seen it once in the states and it was $89. Oh, and most important, it was fantastic. So smooth and a great flavor. Milargro Select Barrel Reserve.

Posted By jason on February 1, 2009, 11:14 PM

Duty-Free is a huge money making racket. Most prices are inflated to the extreme at airports and borders so they can make money.

Posted By jd on February 1, 2009, 11:53 PM

Duty free is usually a rip off but found a few good prices in the Netherlands. I did make a killing in the SF duty free shop 4 years ago where I got an Omega Men’s Speedmaster Automatic Day/Date Chronometer for $1500 which ran around $2500 in the non-gray market. Not only that, I got a $100 certificate to buy other stuff. I don't know if they made a mistake or what. I asked if it was gray market and Duty Free said no. In fact, I checked with Omega gave them a serial # and said it was legit and have had no problems.

However, you gots to know your prices. The Omega I wanted just happened to be discounted.

Posted By TonyK on February 2, 2009, 12:11 AM

My favorite saying "It is Duty Free and not Profit Free".

The only thing I shop at Duty Free - Alcohol & Cigarettes, which is expensive at Costco

Posted By Jay on February 2, 2009, 12:19 AM

I too am a business traveler & have learned its not much of a deal, and you often have a hassle to pick it up, carry it, etc.
.
The worst part is that many shops are unscrupulous & sell inferior products, 2nd quality, & sometimes counterfit.
i.e. Marlboros are often from foreign countries produced under license with local tobacco ... they don't taste good. Also have seen liquor that's not the real deal.
.
If its too good to be true .... lol
How can something be 50% cheaper??? It would be selling on eBay like hotcakes!!

Posted By JerryD on February 2, 2009, 12:26 AM

To answer some of the questions posed…
In the US duties for liquor variety by bottle size and proof. They are subject to Tariffs and IRT taxes. Also, in the quantities described they may even be seized...if Customs suspects they are for others. Also, you may be subject to getting a license by the US ATF for such a large importation. Even as I write this 30-40 bottles seems much more than personal.

Second you MUST declare ALL your purchases INCLUDING DUTY FREE to Customs! Failure to do so in the US may result of SEIZURE of the items and a FINE. Be honest I have seen Customs give breaks to honest people, but never to ones who insult their intelligence by falsifying a declaration. You may travel once a month… they see travelers EVERY DAY.. they know the tricks better than you do…

Most countries will not allow you re-import goods bought in their duty free. Meaning if you were leaving the US, you are allowed to purchase duty free, providing the goods you buy leave and REMAIN outside the US… If your intention is to purchase the item and return to the US… it is technically prohibited.. these items would not be considered duty-free upon your return and are treated differently you would pay duty on these items regardless if you were under your exemption or not.. good news its rarely done by people and seldom enforced. I still wouldn’t try it though.

Also, some US states (NY for example) can tax you for the goods that purchased abroad and will remain in their state. NY’s “USE” tax, requires travelers to report all purchases and pay NYS sales tax on ALL items including DUTY FREE. Yes you read this right.. and if NYS Taxation and Finance finds out.. believe me they will send you a bill..

When and doubt… ask a Customs Officer… most of them will assist you with your declaration .

Posted By Seasoned Traveler on February 2, 2009, 1:18 AM

I travel extensively between Toronto and Las Vegas, and usually buy a carton or two of Canadian cigarettes at the Duty Free shop on my way out ($53.50 versus $86-$88 Ontario retail), then bring back one carton when I return.

What most Canadian travelers don't know is that they have to pay a "health care" tax of about $17 per carton when importing cigarettes purchased outside the country, even from a Duty Free store, unless they have the "Canada Duty Paid" seal. The Canadian cigarettes sold at Canadian (and a few U.S.) Duty Free stores have the "Duty Paid" marking, and are exempt from this additional tax. An import limit of 1 carton per person still applies, though.

I stopped buying Duty Free liquor when the store at Toronto airport raised their prices. A liter of Bacardi rum went from $18 to $19, but a 1.75 liter bottle jumped from $30 to $40. Mathematically, it no longer made sense to go for the larger size. (Retail price in Ontario is about $29 and $53 respectively.) At last check, Albertson's supermarkets in Nevada was selling the 1.75 liter size for $21.69, and the gift shop at the South Point hotel in Las Vegas had it for an astounding $18.49. (Canadian residents can only bring back 1.14 liters duty-free, so make sure that you drink some while out of the country... 610 ml should suffice.)

Posted By Farnk on February 2, 2009, 6:48 AM

Some countries - notably Spain - have minimal local taxes on alcohol and cigarettes. Buying in local shops is miles cheaper than using the airport duty-free. But don't try this in the UK because there are swinging taxes on both, with cigarettes costing the earth in an attempt to discourage this beastly habit. France has quite cheap local booze, but also has steep anti-smoking taxes. Tobacco addicts wishing to stock up in Europe need to visit Andorra (which is outside the EU) or Belgium, which is a source of most of the tobacco smuggled into England. (A huge proportion of English hand rolling tobacco is exported into Belgium and then brought back by day-trippers or smugglers).

Posted By ian chandler on February 6, 2009, 8:05 AM

Soon, you will be able to check out your duty free goods online, check comparisons etc and order them for your arrival, removing a lot of the aboe objections. http://dutyfreeonarrival.com

Posted By I Smith on February 16, 2009, 6:23 PM

Speaking from a purely Canadian perspective, and as someone who worked as a Manager for one of the big Intl DF conglomerates... The only thing you will save money on is liquor and cigarettes. Fragrances are marginally cheaper. As many have noted, DF pay exorbitant rent and are a major source of non aeronautical revenue for every airport. DF get special pricing on liquor, cigarettes and fragrances from the suppliers. Then they mark it up even more than most typical retailers, they are in business to make money after all!
Comparing prices between Canada and the US is useless, the rates of duty between the two countries are drastically different. Your not comparing apples to apples. Bottom line you will save money compared to shopping in Canada.
If your travelling internationally to the Caribbean or the far east where almost everything is free of duty already you will often find the prices in the DF stores higher than in town.

So the bottom line isbuyer beware, know your prices.

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