What's the deal with duty-free shopping?

Factual Questions
1

We just returned from a visit to Niagara Falls (the Canadian side) and had to stop at the duty-free shop to file paperwork to get a refund of some of the sales taxes we’d paid while in Canada (the GST, I believe… 30ish dollars so really not worth the bother). Now, I wasn’t especially tempted to load up on alcohol, cigars or perfume, but the Lindt chocolate was rather tempting though I managed to resist.

I’ve never shopped at a duty-free shop though and I guess I don’t entirely understand what the deal is. Are these items things that are not subject to Canadian (or wherever) import taxes because they don’t really stay in the country in question? Wouldn’t they theoretically be subject to taxes once you cross into the other country? And if so, is there really an overall cost savings vs. just buying them in the destination country?

2

Duty-free shopping.

3

How much you save depends, in part, on how much tax you would pay on the goods if you bought them at home. (It also depends on whether the duty-free shop has higher markups than nornal shops). So, with chocolate, you are unlikely to save anything. You are more likely to save on things like alcohol and tobacco that can be highly taxed. (And that again depends on the country or state you live in).

4

Ah, thanks! That makes sense. I’m glad I didn’t bother with that chocolate (not to mention, it would likely not have been nearly so tasty after a long day being bounced around in my car on the way home).