Duty Free Shops, what's the deal

I vaguely remember this question being answered somewhere here, but my search didn’t turn up anything.

What is the deal with Duty Free shops?

Is it duty free because the space in the airport just beyond the international exit gate (or whatever you call it) is somehow not officially in any country? How did such an idea ever arise, it seems strange that you would designate some space that is internationally neutral and use it to sell cosmetics, tobacco, alcohol, and chocolates. It seems like a private company that runs the duty free shop, so it’s a wierd mixture of a commercial venture and, what, some sort of tax haven? There is something about those shops – to me – that is somehow unsavory, like kitschy Las Vegas unsavory.

They are duty free because you are not keeping the products in the country that you are buying them in. If you buy something from a duty free shop in JFK, you must have a boarding pass for a flight out of the US. Therefore, you don’t pay US duty (tarrifs) on the item since you won’t be keeping it in the US.

If your home country allows you to bring a certain amount of stuff into the country without paying import taxes, then you can buy something for considerably less than you would pay in either country.

In practice, the prices in those shops aren’t all that great, but you can get some nice deals depending on where you are and where you are going. Duties can be quite high in places.

This works the same way at US/Canada border crossings. If you are, say, coming in from Canada to the U.S. you can make purchases inside the shop - but you have have to get in your car and pick them up at a drive-thru window on a lane that leads only to the border customs checkpoint into the U.S.

I’m confused.

Say I’m allowed to bring in 3.5 oz perfume duty-free into the country. Call my a cynic, but wouldn’t the price of those 3.5 oz of perfume be maked up at the duty-free shop to the point where it would be more or less the same as it would be if I paid taxes on it?

Here’s an example (numbers are not going to be accurate). I buy 3.5 oz perfume at a regular Italian store. Price (after exchange rates): $50. When I get back to STL the customs agent sees that I don’t have a duty-free receipt, so he charges me $5 import tax. Total cost of my perfume: $55. The same bottle of perfume at the duty-free shop at the Rome airport will cost me… $55.

So unless there’s something I’m overlooking, or unless the people who run duty-free shops really are noble businessmen out to save their customers a couple of bucks… there’s just something I’m not getting.

Duty free doesn’t mean what people think it does. In the purfume example, you would buy it for $50, declare it under your personal exemption (now $800 IIRC), and pay no import tax on it. If you bought more than $800 worth of perfume, you may be charged tax on the amount over $800. Thus, you do save money, up to a point.

And you do have to declare Duty Free items (or, that is, list them as being under your $800 allowance). Don’t ever stand there and belligerantly tell a customs agent you don’t have to declare Duty Free - I saw a woman with 3 carrier bags full of Marlboros taken away after an argument to the Grey Door with no Outside Handle. :eek:

Now, the rules are different with alcohol for some odd reason, and you are also limited by the volume you can bring in, not just the value.

OK, Homie you are more or less correct because you are looking at it from a US perspective. US import duties are, by world standards, very low. I travel internationally and never buy duty free because I can buy everything cheaper in the US. However, let’s say you are a citizen of Lower Utopia which, to protect it’s perfume market, places a 50% duty on imported perfume. Suddenly, that $55 bottle of duty free perfume is pretty attractive.

There used to be some weirdness in the Intra-EU duty free system in that the allowance was per border crossing; a person travelling from London to Paris return could buy their full allowance on both legs of the journey and wander through customs at Heathrow without a care; a person travelling from London>Paris>Amsterdam>Paris>London could return home with four full allowances of duty free goods.

Sadly, this system was abolished in 1999 (it was only ever supposed to be temporary anyway, indeed it was supposed to have happened with the European common market in 1993).

However, the upside is that I can hire a van, hop over to France on the ferry and fill it full of cheap French lager and wine, then return home to blighty with nothing more than a friendly wave to Customs and Excise at Portsmouth (as long as it is for ‘personal use’ and I’m not selling the stuff back home).

Duty free frst begun in Ireland during the 1940’s. Shannon Arport (in Munster for the rugby fans) was pretty much the gateway to the USA and still was for the Irish up until 1998 when planes flying from the US to Dublin were no longer forced to land at Shannon.

As already stated it can all depend on where you’re flying from and too. I recently flew from Paris to Boston and picked up a bottle of whiskey for $15 only to find the same bottle for pretty much the same price in the USA (the same bottle was $17 in downtown Paris). But in Ireland the exact same bottle costs $21 making it worthwhile.
The fact that you don’t use the product in the country where you buy it justifies the removal of the duty tax.
Why the Irish came up with this idea I’m not so sure. I guess it enticed forigen carriers to land in Ireland at a time when the country needed ideas to help it rebuild.
Note: My example isn’t very good seeing as duty-free shopping has been cancelled within the EU community but you get what I mean I hope.

HeyHomie, your example is flawed

Its something like this (again using made-up figures)

Pretax cost of perfume in Italy: $30
Shop markup: $10
Italian perfume duty, sales tax, etc: $10
Cost: $50

Cost in Duty free shop in Italian airport:
Pretax cost: 30$
Shop markup: 15$
Italian perfume duty, sales tax, etc: $ 0
Cost: $45.

Note, if you have to pay US import duty on something, you have to pay it regardless of whether it was bought duty free or in a normal shop abroad.

Also the rents on duty-free shops are v.high - and basically help subsidise the airport.

Here’s a helper – “Duty Free” doesn’t mean “free of duties to import into your own country” as a consumer. It means the items in the store were purchased without paying taxes to the government of jurisdiction of the store. It’s duty free to the owners, because the items won’t be staying in the country.

I always like seeing the fools buy tequila at the Mexican airport duty free shops. It costs a heck of a lot more than in Sam’s Club, and if they exceed the limited quantity they still have to pay duty on it when coming into the USA. Plus, they key being, it’s tequila. From Mexico. Where’s in not imported and there are no duties!

What I fail to understand, though, is why the tequila is only in the duty free store, which is in the secured (passenger-only) part of the airport (the one I have in mind, that is). Plus, you’re advised that you can’t open the bags until you’re on the airplane. Maybe this tequila is free of some other type of Mexican tax? In any case, I’ll admit from having bought there once or twice when I just couldn’t get to Sam’s Club (you know, the muy traditional place to buy tequila when in Mexico :)).

Domestic spirits can be taxed, sometimes heavily, even in their countries of origin. (Note, however, that I’m speaking generally here; I really know nothing about Mexican liquor taxes.) We see that kind of thing here in Canada–Canadian Club is sold at a much better price at Canadian duty-free stores than in regular Canadian liquor stores because duty-free CC carries no domestic excise taxes. Importation has nothing to do with whether the product has excise taxes added for consumption within the country.

Again, the product is sold free of duty with the understanding that you will not consume it in the country where it was purchased. If you open your package in the airport where you bought it, you could well be said to be consuming it (or planning to consume it) on Mexican soil, and thus should have paid all necessary taxes, just like anybody who bought the product and was planning to consume it while in Mexico.

The area beyond the exit controls and security checkpoint and so on is not “international” or “neutral” territory. It remains a part of the country you are leaving, and you are still subject to the laws of that country while in those areas. Thus, no opening packages of duty-free goods that have been sold specifically for export until you are actually travelling to someplace else.

This was forcibly brought home to me last month.

A while ago, our government put a 15c plastic bag charge on every plastic bag you used at whatever shop you bought anything in. So now everyone uses durable shopping bags for supermarket shopping and there are no flimsy plastic bags wafting round the streets.

In the duty free shop in Dublin airport last weekend I was buying a bottle of something or other for my hosts and I bought some perfume for me. The lady on the cash register put each purchase in a plastic bag for me. when I queried this she told me that
“Bertie (Ahern, the Taoiseach or Irish Prime Minister) doesn’t care if you are taking the bag out of the country, he just doesn’t want it littering up our country”

Nice one curly chick, I didn’t know that :slight_smile:

I neither know much about Mexican liquor taxes, but a bottle of Irish ‘Paddy’ whiskey costs about €21 in a store in Dublin. That same bottle is about €18 in the duty-free in Dublin airport. This is a pretty good bargin until you walk into a store in Paris for example where you can find the same bottle for €11 :slight_smile: