What is Duty Free Shopping?

We are often asked to explain the concept of duty free shopping. In brief, a duty is a tax or charge levied by a city or country.

Some cities or countries elect to charge a duty on foreign made products coming into their location. In other cases, cities or countries choose to levy duties only on selected types or quantities of products – most often, liquor, tobacco and perfume. In the United States, all foreign-made products are dutiable.

The locations which charge duties may also select one or more retailers to whom they grant the special privilege of offering dutiable goods “duty free” if the goods are not consumed or used inside the location. Retailers bid for the exclusive privilege of offering these non-duty goods and the location awards the contract for a designated period of time.

Usually, duty free concessions are operated as airport stores: the traveling public can depart with their purchases without using or consuming them at the location. In some cases, off-airport stores are included in these concessions. Departing customers select and purchase goods at the off-airport store, such as a DFS Galleria, and the merchandise is delivered to them at their airport departure gate when they leave. Giving customers the opportunity to shop off airport in their leisure time often results in higher sales. Since both the location and the duty free retailer benefit from higher sales, such off-airport stores have become an increasingly desirable segment of the duty free business.