What Is Duty Free and Does It Actually Save You Money

Duty Free is where I go to spend my leftover foreign currency before flying home. Inevitably, I always wrap up my trip with 14€ or 500 rupees, which I don’t want to leave in my wallet to collect dust. The alternative is to exchange it for American dollars, but the conversion never seems to work in my favor, so I’d rather grab one last souvenir before my vacation budget comes crashing to a halt and I have to return to reality.

Personally, I like to spend the last of my foreign currency on a country-specific beauty product—whether that’s French micellar water, Fijian coconut oil or a sample of perfume you can’t get outside India. If you’re going to get a souvenir, you might as well get something you can’t find back home, right?

If you’re the type of traveler who loves to browse duty free at the airport, you’ve probably wondered if buying duty free is actually saving you money. Is it worth it to pick up a few extra duty-free souvenirs or would you have been better off shopping before you set foot in the airport? And what about purchasing alcohol, are the deals really as good as you’ve heard they are?

Let’s explore what the concept of duty free actually is, and then figure out whether it’s really helping us as consumers.

What is Duty Free?

Before we even get into duty free, let’s focus on duty. “Duty” is the tax you pay for bringing a product across international borders. Conceivably, if you buy $200 worth of wine in France and you’re bringing it back to the U.S., you might have to pay tax on it twice. You’ll pay tax on the wine in France and then pay U.S. tax for bringing it into America. However, for U.S. residents, there’s often an $800 exemption, meaning you can spend $800 outside the country (on French wine, say) and not have to pay “duty” in the U.S. even though you’re bringing the wine across international borders.

If you buy something “duty free,” it means you’re not paying taxes on it in the country where you purchased the item. So if you buy French wine at Charles de Gaulle airport in Paris, you are not paying taxes on it in France. But it could still be subject to taxes when you cross the border back into the U.S.

Does Duty Free Actually Save You Money?

All taxes aside, what about the actual duty free prices? Well, that’s where it gets interesting. Sometimes the savings is in the tax-free element and not the actual purchase price. Furthermore, duty-free prices vary widely, depending on the country and airport. Duty Free Addict is a price comparison website that tells you whether you’re really getting a deal on duty-free purchases. For example, Grey Goose is cheaper in Japan than Australia, Duty Free Addict reports. If you’re keen on saving money by shopping at duty free, you can research products you’re considering buying, and compare the prices from airport to airport (and separately compare it to the price you’d pay outside the airport).

I conducted my own price comparison as an experiment: My laptop is a 13-inch MacBook Air with 256GB of storage, and according to Duty Free Addict, it’s cheapest at the Singapore airport for $1,121, and most expensive at Japanese airports for $1,312. At duty-free airports in the U.S., it’s $1,295. At the Apple Store I went to in Glendale, CA it was $1,199. But I paid $113.91 in taxes that I might not have paid if I bought the MacBook Air duty-free at the airport.

What are the Best Duty-Free Deals?

Typically, liquor and tobacco products are the best deals simply because they are subject to the highest taxes. Keep in mind that this doesn’t necessarily mean the price of the alcohol is lower at the duty-free shop than it is at your local supermarket (or the supermarket in the Bahamas, or wherever you’re traveling). But you may save money if you’re buying large quantities of alcohol or tobacco and not paying the country-specific taxes. To put the savings in perspective, the liquor tax in the state of California is 6%. So if I run to the liquor store and buy $100 worth of wine, I’m paying $6 in tax. If I bought that same $100 of wine at the duty-free shop at LAX before my flight, I could save that $6.

There are also occasionally better deals depending on the countries you’re traveling to and from. As we now know, when you enter the U.S. from most countries, you enjoy a tax exemption of $800 on souvenirs you purchased. So you can splurge on wine at the French duty-free shop, and not pay tax on it in France or in the U.S. (as long as you’ve spent less than $800).

However, if you’re coming back to the U.S. from the U.S. Virgin Islands, you can bring $1,600 worth of island goods back without paying taxes on it. According to The New York Times, “You may include up to five liters of alcoholic beverages in your duty-free exemption, as long as one of them is a product of the U.S. Virgin Islands, Guam or American Samoa.”

In other words, there are some nuances that allow you to save more depending on where you’re traveling to and from and what you’re buying. But for the most part, as we saw with the laptop example, your best bet is simply to do a price comparison before you buy. Because while, in theory, duty-free shopping might be “saving you money,” in practice, it really does vary from airport to airport and country to country.