Difference Between Duty-Free & Tax-Free

A duty free shop.
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It's possible to save a good bit of money shopping when you travel outside the United States by taking advantage of duty-free and tax-free shops at airports, cruise ports and border crossings. The biggest savings are usually on tobacco products and alcoholic beverages, but with a little persistence you can get good deals on luxury goods and cosmetics as well.

A Tax by Any Name

Governments frequently impose taxes called customs duties on imported and exported goods. When you purchase items at a duty-free shop, you don't pay the country's duty. Travelers in Europe can also avoid another tax called the value-added tax. Tax-free shops are essentially duty-free shops. When you are ready to leave the country, you can apply for a refund of the VAT paid on purchases made at tax-free shops. U.S. Customs and Border Protection imposes duties if you bring back too much, even if the items were purchased duty-free. The United States duty varies according to the country, the value of what you bring back and the time you stayed. For example, the first $800 purchased in a Caribbean nation is duty-free. The duty on amounts over $800 and less than $1,800 is 3 percent. Duties on amounts over $1,800 range from 0 to 10 percent except for clothing, which can carry a duty of up to 25 percent. If you stay less than 48 hours, the exemption drops from $800 to $200. Check U.S. Customs rate schedules for duties on goods from other countries.

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