Duty Free Stores = Good Deal?

Is it cheaper to buy alcohol duty free?

The United States has one of the higher tax rates in the world for hard liquor to my understanding. Not only is there a federal tax on hard liquor that comes out to $2.14 per 750ml bottle of 80 proof liquor, there’s also a state level tax that varies from state to state. (ranging from no tax on hard liquor at all in New Hampshire all the way up to $35.22/gal in Washington!)

Sources:
http://www.businessinsider.com/us-taxes-on-beer-wine-and-spirits-maps-2014-2 https://www.ttb.gov/tax_audit/atftaxes.shtml

Sooooo duty free aka tax free liquor shopping has to be a good deal, right? That’s why they’re in seemingly every international airport and cruise terminal, right?

The answer is, it depends.

For you to get a good deal at duty free stores, the duty free store has to actually be passing the tax savings down to you, the consumer. In some cases, the duty free store has inflated their prices so much to the point where the tax savings is negated by the increased profit margin for the duty free store. This can especially be true with duty free stores located within airports and cruise ships. They have a captive client base (as in, people stuck in the airport in transit or people stuck on cruise ships.) And naturally, that means no competition. No competition usually means a bad deal. Granted, there are exceptions and sometimes you can find a good deal in airport duty free stores… just don’t count on it. The one consistent benefit of airport duty free stores is that they tend to carry 1L bottles of liquor and not your standard 750ml bottles. So your price per unit might be somewhat cheaper than what you might get at your neighborhood liquor store.

Well then, where can you consistently find good deals on duty free liquor? On Caribbean islands! Places like Sint Maarten, St. Kitts, and St. Thomas have duty-free shopping plazas with multiple duty free liquor stores. And since they have to compete with each other, they have excellent prices. I’ve seen a 750ml bottle of Johnnie Walker Blue Label on sale for $125 before in the Caribbean. (they’re usually ~$200!)

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Port Zante in St Kitts tends to have really good duty free liquor prices

Also of note is that U.S. Customs Rules limits an individual to 1 liter of duty free liquor per trip, so even if you find a bunch of good deals, you’re only allowed to bring back one bottle basically and the rest would be subject to taxation. The one exception that I’m aware of however is St Thomas in the U.S. Virgin Islands– from there, you’re allowed to bring back 4 liters of liquor duty free!

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Duty free shopping plaza @ the cruise terminal in Charlotte Amalie, St. Thomas

And what about everything else at duty free stores like perfume or candy? Well, you’re only saving 5~10% on your standard sales tax… so the airport mark-up easily ruins whatever savings you may have gotten from it being tax-free.

Hopefully this helps!

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